The Washington Post is Human
Hey, you’d make mistakes too if you were up at 5:00 a.m. sending emails.
If It Stops Moving, Subsidize It
Naturally, now that government plans to intervene in the economy with a massive stimulus package, everyone wants their “fair” share. Robert D. Atkinson, president of the Information Technology and Innovation Foundation, is arguing for digitized health records, a smart power grid and faster broadband connections:
While creating jobs by upgrading the nation’s physical infrastructure may help in the short term, Mr. Atkinson says, “there’s another category of stimulus you could call innovation or digital stimulus — ‘stimovation,’ as a colleague has referred to it.” Although many economists believe that a stimulus package must be timely, targeted and temporary, Mr. Atkinson’s organization argues that a fourth adjective — transformative — may be the most important. Transformative stimulus investments, he said, lead to economic growth that wouldn’t be there otherwise.
A new report by the Information Technology and Innovation Foundation [to be released Wednesday] presents the case for investing $30 billion in the nation’s digital infrastructure, including health information technology, broadband Internet access and the so-called smart grid, an effort to infuse detailed digital intelligence into the electricity distribution grid.
And a Silicon Valley petition calls for a tax credit for companies that spend more than 80 percent of what they had been spending annually on information technology like computers and software.
Usually when politicians hand out targeted tax breaks or grants there are strings attached.
Free Press is already proposing that the Internet services receiving subsidies “must be an open, freely competitive platform for ideas and commerce.” There is a possibility no one would accept the subsidies to build the network Free Press envisions. Continue reading this post »
Cutting the (Video) Cord Part 3: The Growing Relevance of Internet TV
Continuing the “Cutting the (Video) Cord” series started by my PFF colleague Adam Thierer: The WSJ had two great pieces yesterday about the increasing competitive relevance of television distributed by Internet—a trend that was at the heart of an amicus brief PFF recently filed in support of C omcast’s challenge of the FCC’s 30% cap on cable ownership. The first WSJ piece declares that:
After more than a decade of disappointment, the goal of marrying television and the Internet seems finally to be picking up steam. A key factor in the push are new TV sets that have networking connections built directly into them, requiring no additional set-top boxes for getting online. Meanwhile, many consumers are finding more attractive entertainment and information choices on the Internet — and have already set up data networks for their PCs and laptops that can also help move that content to their TV sets.
The easier it is for consumers to receive traditional television programming (in addition to other kinds of video content) distributed over the Internet on their television, the less “gatekeeper” or “bottleneck” power cable distributors have over programming. So the Netflix-capable
and Yahoo-widget-capable televisions described by the WSJ piece go a long way to increasing the substitutability of what we call Internet Video Programming Distributors (IVPDs) for Multichannel Video Programming Distributors (MVPDs), such as cable, satellite television and fiber services offered by telcos such as Verizon’s FiOS.
While such televisions are only expected to reach 14% of all TV sales by 2012, one must remember that a growing number of set-top boxes (e.g., the Roku Digitial Video Player, game consoles like the Microsoft XBox 360 and Sony PlayStation 3, and TiVo DVRs) allow users to users to receive IVPD programming on their existing televisions.
As we argued in our amicus brief, the immense competitive importance of IVPDs lies not in the potential for some users to “cut the cord” to cable and other MVPDs (though that will surely happen), but in the immediate impact IVPDs have as an alternative distribution channel for programmers. In the pending D.C. Circuit case, we argue that both the FCC’s 30% cap, issued in December 2007, and the underlying portions of the 1992 Cable Act authorizing such a cap should be struck down as unconstitutional because the ready availability of IVPDs as an alternative distribution channel means that cable no longer has the “special characteristic” of gatekeeper/bottleneck power that would justify imposing such a unique burden on the audience size of cable operators. (Of course, Direct Broadcast Satellite and Telco Fiber are also eating away at cable’s share of the MVPD marketplace.)
The second WSJ piece, an op/ed, illustrates beautifully how cable operators are already losing “market power” (or at least negotiating leverage) in a very tangible way: they’re having to pay more for programming. Specifically, the Journal describes how Viacom plaid chicken with Time Warner—and won. Continue reading this post »
IE’s Browser Market Share Down by 8-10% in 2008
Microsoft’s share of the browser market across all versions of Internet Explorer has dropped, by one estimate, dropped from 78.58% in December 2007 to 68.15% in December 2008 (or by just under 8% in another estimate).
[IE's] share dropped from 69.77% in November to 68.15% in December. [During the same period,] Firefox gained more than half a point and ended up at 21.34%, Safari approaches the [10%] hurdle with 7.93% and Chrome came in at 1.04%, the first time Google was able to cross the 1% mark.
This is particularly interesting:
Since IE6 is used primarily within corporations, its market share is much higher during the week than it is on weekends. As a result, all other browsers gain on weekends and especially during a holiday. Because of that circumstance, Net Applications noted that the December numbers should be taken with a grain of salt. However, it is worth the note that IE6 achieved … market share numbers of about 28% during the week and about 21% on weekends in early 2008. In December, these numbers were down to about 20% during the week and 15% on weekends.
So, Microsoft still has an established base among corporate users, where IT administrators generally prevent employees from installing new applications (including browsers) and the sysadmins often don’t roll out alternative browsers across a corporate network for any one of several possible reasons, including:
- They just don’t want to bother having to install, regularly upgrade and support another piece of software;
- They may overestimate the security vulnerability of such alternative browsers compared to Internet Explorer;
- The crustier sysadmins may not realize that today’s browsers are not only free for individual users, but also for corporate users–unlike the old Netscape Navigator; and
- Corporate intranets may be designed for IE, in which case rolling out an alternative browser might cause confusion among less tech-savvy employees.
Microsoft may still have an advantage that could be considered “unfair,” but so what? Continue reading this post »
AWS-3 Spectrum Plan Version 2.0: Unfiltered, but Still a Train Wreck
The FCC’s much-maligned proposal to create a free, filtered wireless broadband network seemed all but dead earlier this week after FCC Chairman Kevin Martin stated in an interview with Broadcast & Cable that the proposal’s chances of surviving a full FCC vote were “dim.”
Now, Ars reports that Kevin Martin has changed his mind about the filtering requirements, caving in to pressure from an array of interest groups to drop the smut-free provisions from the plan. These “family-friendly” rules, which would have mandated that the network filter any content deemed unsuitable for a five-year-old, ended up acting as a lightning rod for critics across the ideological spectrum, and raised serious First Amendment concerns (as Adam and Berin have argued on several occasions).
Even with the smut-free rules having been removed, the proposal remains a very bad idea. Setting aside 25 mhz of the airwaves—a $2 billion chunk of spectrum—to blanket the nation with free wireless broadband (as defined by the FCC) would mean less spectrum available for more robust services. At a time when wireless firms are experimenting with a number of strategies for monetizing the airwaves, allowing a single firm’s business model—especially one that many experts have suggested is simply not viable—to reign over other, more effective models would hurt consumers who yearn for more than basic broadband service.
The case for setting spectrum aside for free wireless broadband is predicated on the myth that there exists an elusive “public interest” that the marketplace is unable to maximize. We’ve heard the same line many times before. It goes something like this: The forces of competition that we rely upon to allocate finite resources in nearly every other sector of the economy are incapable of fulfilling consumer needs when it comes to broadband. Washington DC intellectuals have figured out that the public really wants a free nationwide wireless network—yet this amazing concept has been blocked by evil incumbents that are bent on denying consumers the services they most desire.
No Neutrality Regulation in 2009
I’m in the mood for making bold predictions, so I predict (with fingers crossed) that we won’t see neutrality regulation passed in 2009. I want to say right away that this is more of a hope than a assessment of the regulation’s political chances, but it’s a hope worth sharing.
Over at OpenMarket.org, the blog of the Competitive Enterprise Institute, I have spelled out my reasons for thinking that neutrality regulation won’t pass and why I think market-enforced neutrality would be a much more robust system for keeping the Net thriving.
At Chamber of Commerce Event, IP Attachés Take Hard-Line Position On Overseas IP Enforcement
My piece about the U.S. Chamber of Commerce event last Friday on U.S. intellectual property attachés giving a report, and taking a hard line, on the enforcement of U.S. intellectual property, overseas, is now live on ip-watch.org.
Here’s the first couple of paragraphs:
WASHINGTON, DC - Nations ranging from Brazil to Brunei to Russia are failing to properly protect the intellectual property assets of US companies and others, and international organisations are not doing enough to stop it, seven IP attachés to the US Foreign and Commercial Service lamented recently.
Meanwhile, an industry group issued detailed recommendations for the incoming Obama administration’s changes to the US Patent and Trademark Office.
The problems in other nations extend from Brazil’s failure to issue patents for commercially significant inventions by US inventors, to an almost-complete piracy-based economy in Brunei, to an only-modest drop in the rate of Russian piracy from 65 percent to 58 percent.
The attachés, speaking at an event organised by the US Chamber of Commerce and its recently beefed-up Global Intellectual Property Center (GIPC), blasted the record of familiar intellectual property trouble zones like Brunei, Thailand and Russia.
But the problems extend to the attitudes and omissions of major trading partners like Brazil, India and even well-developed European nations, said the attachés.
[more at http://www.ip-watch.org/weblog/index.php?p=1387....]
Lessig on Building a Better Bureaucrat
Before commenting on Lawrence Lessig’s latest call to abolish the Federal Communications Commission (he issued a similar call for the FCC’s abolition earlier this year, which I commented on here), let’s recall what Tim Lee posted yesterday about “Real Regulators“:
Too many advocates of regulation seem to have never considered the possibility that the FCC bureaucrats in charge of making these decisions at any point in time might be lazy, incompetent, technically confused, or biased in favor of industry incumbents. That’s often what “real regulators” are like, and it’s important that when policy makers are crafting regulatory scheme, they assume that some of the people administering the law will have these kinds of flaws, rather than imagining that the rules they write will be applied by infallible philosopher-kings.
Ironically, Prof. Lessig — who typically defends many forms of high-tech regulation like Net neutrality and online content labeling — is essentially agreeing with Tim’s critique of bureaucracy. But Lessig seems to ignore the underlying logic of Tim’s critique and instead imagines that we need only reinvent bureaucracy in order to save it. But I’m getting ahead of myself. First, let’s hear what Lessig proposes.
In a Newsweek column this week entitled “Reboot the FCC,” Lessig argues that the FCC is beyond saving because, instead of protecting innovation, the agency has succumb to an “almost irresistible urge to protect the most powerful instead.” Consequently, he continues:
The solution here is not tinkering. You can’t fix DNA. You have to bury it. President Obama should get Congress to shut down the FCC and similar vestigial regulators, which put stability and special interests above the public good. In their place, Congress should create something we could call the Innovation Environment Protection Agency (iEPA), charged with a simple founding mission: “minimal intervention to maximize innovation.” The iEPA’s core purpose would be to protect innovation from its two historical enemies–excessive government favors, and excessive private monopoly power.
As was the case with his earlier call to “blow up the FCC,” I am tickled to hear Lessig call for shutting down an agency that many of us have been fighting against for the last few decades. (Here’s a 1995 blueprint for abolishing the FCC that I contributed to, and here’s PFF’s recent “DACA” project to comprehensively reform and downsize the agency.)
But is Lessig really calling for the same sort of sweeping regulatory reform and downsizing that others have been calling for? And has he identified the real source of the problem that he hopes to correct? I don’t think so. There are 3 basic problems with the argument Lessig is putting forward in his essay. I will address each in turn.
The 12 Days of Christmas
Real Regulators
Don’t miss Jim Harper’s excellent post on the strange way people have responded to the failures of regulation on wall street. In a Meet the Press exchange, we learn that people reported Bernie Madoff’s suspicious books to the SEC, which chose not to do anything about it. And it was agreed around the table that the Madoff affair debunks “the idea that wealthy individuals and ‘sophisticated’ institutional investors don’t need the protection of government regulators.” “There’s no question we need a real regulator,” says CNBC’s Erin Burnett.
The problem is that we had a “real regulator.” Ponzi schemes and dishonest bookkeeping are already illegal. Had the SEC been so motivated, it had all the authority it needed to investigate Madoff’s books, discover the problems, and shut his firm down. In a rational world, this would be taken as a cautionary tale about the dangers of assuming that regulators will be vigilant, competent, or interested in defending the interests of the general public rather than those with political clout. Instead, we live in a bizarro world in which people believe that the SEC’s failure to do its job is an illustration of the need to give agencies like the SEC more power.
We of course see the same sort of confusion in debates over regulation of the technology sector. For example, the leading network neutrality proposals invariably wind up placing a significant amount of authority in the hands of the FCC to decide the exact definition of network neutrality and to resolve complex questions about what constitutes a network neutrality violation. Too many advocates of regulation seem to have never considered the possibility that the FCC bureaucrats in charge of making these decisions at any point in time might be lazy, incompetent, technically confused, or biased in favor of industry incumbents. That’s often what “real regulators” are like, and it’s important that when policy makers are crafting regulatory scheme, they assume that some of the people administering the law will have these kinds of flaws, rather than imagining that the rules they right will be applied by infallible philosopher-kings.
More on News Spin-offs
A couple of quick follow-ups to my last post: first, a commenter points out that Career Builder is an example of a successful spin-off from a major media company. (Actually, from three media companies; I bet having ownership by multiple companies helped insulate the company from any one firm’s internal politics). So it appears that the spin-off model can work.
Second, the always-interesting Tom Lee points to the Washington Post’s online operation as an example of the spin-off model. This is a really interesting example because it’s closer to the core of the WaPo’s business than Career Builder is to Gannett’s. And by all accounts, it was relatively successful. I’m pretty sure I’ve read multiple people comment that the Post is a local newspaper with a national website, which is precisely what you’d want a successful spin-off news organization to do.
The problem is that washingtonpost.com is nowhere close to being a free-standing organization. They get tremendous benefit from having access to content from the print Post, and while I haven’t looked at their business model in any detail, I’d be willing to bet that there’s massive cross-subsidy going on. That makes it a better website, but the problem is that it relieves the web side of the business of the need to come up with new, lower-cost methods for generating news. Which means that if and when the print side hits an iceberg, the online side won’t be able to stand on its own.
The News Innovator’s Dilemma
Having recently read The Innovator’s Dilemma, it’s worth pointing out that the discussion Ezra Klein and Matt Yglesias are having about the decline of newspapers is a classic illustration of the principles Clayton Christensen laid out a decade ago. Internet news is a classic disruptive technology. At its outset, it was simple, dirt cheap, and in many ways inferior to established journalism. But it improved over time, and once it began to rival traditional journalistic outfits in quality around the middle of this decade, the “dirt cheap” part of the equation began to dominate. When your competition can produce a roughly comparable product for a small fraction of the cost, your days are numbered.
But here’s the really important point that Christensen made that is often missed in these kinds of discussions: it’s often close to impossible for an organization built around an older technology to retool for a new, disruptive one because their cost structures just don’t allow it. The New York Times is an expensive place to run. It’s got writers, editors, typesetters, delivery trucks, an ad sales force, a big building, travel budgets, and so forth. In order to recoup those costs, they have to make a certain amount of revenue per unit of output. The institutional structure of the New York Times makes it almost impossible for it to produce news the way TPM Muckraker or Ars Technica do. The need to make payroll and cover their rent makes it almost mandatory for them to focus on their traditional core competencies because even as those markets shrink they still offer better margins than the emerging businesses.
Matt’s suggestion of launching NYTList a decade ago illustrates the point well. It’s true that in the long run this probably would have made the Times more money. But in the short run this would have been a truly wrenching transition. At a time when other papers were enjoying fat margins from their classified business, the Times would find more and more of its classified customers switching to the new version. It would have had to start laying off the classified staff and trimming other parts of the budget to cover the lost revenue. And it would have been a huge gamble. It was far from obvious in 2000 that Craigslist would be as big as it has become. So yes, theoretically an enlightened NYT manager could have foreseen the growth of Craig’s List and countered it. But in practice doing so would have required super-human foresight and determination, and an extremely deferential board of directors.
Christensen’s conclusion is that the only way to avoid this grim fate is to spin off an independent subsidiary that can pursue new markets without worrying about fat profit margins or cannibalization of existing product lines. GM’s spin-off of Saturn in the 1980s is a good example of this model. This is still an extremely difficult thing to pull off. It takes a CEO with the foresight to see what’s coming and the political capital within the firm to shield the spin-off from the parent company’s politics. I’m not aware of any high-profile newspaper firms that attempted this, but I’m not sure we can really blame the newspaper managers. It’s a really hard thing to pull off. Christensen was only able to find a handful of firms—in any industry—that pulled it off successfully, and the CEOs who did it almost all said that it was one of the most difficult things they did as managers.
Companies are not big people. They change much more slowly than individual people do. And anyone suggesting that a firm should do things in a new way—even the guy at the top—is going to face strong pressures from traditionalists who want to continue doing things the old way. And in the short run, the traditionalists are almost always right. The old way of doing things is almost always going to be more profitable in the short run. So although I think those who predicted the newspaper industry’s decline are entitled to a certain amount of smugness, I think it’s absolutely not fair excoriate the managers who failed to move more decisively to address the problem. With the benefit of 20/20 hindsight, it’s easy to come up with scenarios that would have turned out better. But from an ex ante perspective, these trends were far from clear, and the people making the decisions were under tremendous pressure to continue the status quo.
Government Spending in XBRL?
Mark Cuban probably didn’t know how much he’d rev up the hypocrisy meter when he suggested that the government should report its own spending and other financial information in XBRL. The SEC recently announced that it would require public companies to do their financial reporting in the format.
Having the government do it to is a GREAT idea.
And it will take years for that to happen.
Why? Because releasing information in a usable form is like releasing power. Agencies and bureaucrats aren’t in the business of giving away power.
I won’t lay predictions because the idea is so good that it may catch a head of steam, unify the transparency community, and get high-level attention in the administration. But barring that, it will be a cold day (today happens to be a cold day) when the government adopts XBRL. Until then, the hypocrisy meter is rising.
ICANN’s gTLD Proposal Hits a Wall: Now What?
Mike Palage, the first Adjunct Fellow at PFF’s Center for Internet Freedom, just published the following piece on the PFF blog.
ICANN’s plan to begin accepting applications for new generic top-level domains (gTLDs) in mid-2009 may have been derailed by last week’s outpouring of opposition from the global business community and the United States Government (USG). Having been involved with ICANN for over a decade and having served on its Board for three years, I’ve never seen such strong and broad opposition to one of ICANN’s proposals.
This past June, the ICANN Board directed its staff to draft implementation guidelines based upon the policy recommendations of the Generic Names Supporting Organization (GNSO) that ICANN should allow more gTLDs such as .cars to supplement existing gTLDs such as .com. In late October, the ICANN staff released a draft Applicant Guidebook detailing its proposal. The initial public forum on this proposal closed on December 15-with over 200 comments filed online.
In its December 18 comments, the USG questioned whether ICANN had adequately addressed the “threshold question of whether the consumer benefits outweigh the potential costs.” This stinging rebuke from the Commerce Department merely confirms the consensus among the 200+ commenters on ICANN’s proposal: ICANN needs to do more than merely rethinking its aggressive time-line for implementing its gTLD proposal or tweaking the mechanics of the proposal on the edges. Instead, ICANN needs to go back to the drawing board and propose a process that results in a responsible expansion of the name space, not merely a duplication of it.
Kids, Video Games, Fantasy, & Imagination
My Kid is the Man of Steel! ... in his mind.
Regular readers will recall my great interest in video games and the public policy debates surrounding efforts to regulate “violent” games in particular. One thing I bring up in almost every essay I write on this subject is how fears about kids and video games are almost always overblown and that kids can typically separate fantasy from reality. Nonetheless, kids have active imaginations and adults sometimes fear that which they cannot understand or appreciate. Friendly mentoring and open-minding parenting can go a long way to encouraging kids to make smart choices and understand where to draw lines, whereas efforts to demonize video games and youth culture almost always backfire.
Anyway, what got me thinking about all this again was an entertaining column in today’s Washington Post by Ron Stanley (”Who Needs a TV to Play Video Games“), which describes the author’s experiences with his nephew when they played out video game-like scenarios using traditional toys and household items. It’s a wonderful piece worth reading in its entirety, but here’s the key takeaway that I’d like to discuss:
There was no evidence that television and video games had stifled the kids’ creativity. Nor was there any evidence that technology had made them smarter than earlier generations. They simply had a different frame of reference, one that included video games and computers as well as ponies, pet stores and sword fights. Children play with the tools at hand, and they’re great at thinking metaphorically — at imagining that a landspeeder is a sentient robot or that a stick is a gun or that salt-and-pepper shakers are a bride and groom or that a card table is a horse’s stable.
They’re also geniuses at figuring out simple mechanics. My 6-year-old nephew had to explain to me that miniature low-rider cars don’t roll very well on carpet and will flip over more than if racing on hardwood floors. Novice that I was, I was choosing cars that looked the coolest. And they are geniuses at intuiting rules and systems, and at re-creating these rules and systems in their own play. Children who play lots of card games will invent their own card games. Children who play lots of board games will invent their own board games. And children who play lots of video games will invent their own video-game-like games when they don’t have access to the game controllers.
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