Archives for February 2005
2005 Economic Report of the President
Y’all should check out chapter 6 of the annual report of the Council of Economic Advisors, which is on Innovation and the Information Economy. The CEA issued the report this month, but I haven’t read much on it, other than a recent PFF blog posting.
The report has a good discussion on contestability theory in telecom:
However, natural monopoly does not necessarily mean economic regulation is needed to protect consumers from monopoly prices. While natural monopoly means that competition in the field is unlikely to arise, there could still be vigorous competition for the field–that is, competition among firms to attain the position of monopolist.
I’ve never thought there was anything “natural” about having one company be the phone service provider for the entire country.
Choosing the Greater Evil
Isn’t it great to see that there are so many people looking out for us?
Maybe not. Maybe that’s why we call those folks busybodies.
Leading lights of the technorati are calling a feature in Google’s new Toolbar a “strategic mistake” and a “bet the company decision.” Others, more simply, call it “evil” (well, he works for Microsoft) and directly opposed to Google’s code of conduct.
They bemoan a new Toolbar feature, AutoLink, that turns unlinked but standardized data–such as addresses, ISBNs, package tracking numbers, and VINs–into hyperlinks that point to Google-affiliated services. When you use the new Toolbar, plain-text addresses, for example, link directly to (the excellent) Google Maps.
Critics are saying this is too reminiscent of Microsoft’s stillborn smart tags concept, which would have, for example, linked ticker symbols to MSN finance. Internet protestors got Microsoft to back down from offering the feature.
One critic, a tech entrepreneur, wrote that he could only live with Google’s AutoLink “If this was an open tool, where the data sets I was using to tag the content were advertising free and not tied to the tool vendor.”
In other words, he could only accept it if it included difficult-to-implement functionality that would be lost on the vast majority of users. And many are even less accepting.
To their credit, most critics this time around aren’t crying “antitrust,” but that’s only because it’s not Microsoft. Some, however, do imply that there may be a role for the government here:
Google is to the Web what Microsoft is to PCs–the operating system everyone uses to search. It has nearly the same lock on consumers’ share of mind…And millions use the Google Toolbar. They shouldn’t get away with what Microsoft was unable to.
The truth is, this sort of functionality has been around for years, but only to the tech elite. For someone in the know, it’s not too hard to install a filtering proxy like Privoxy, write and debug a few regex matching rules, and modify (just on their own computers) any page on the Web in any way.
Now regular users who couldn’t tell a regex pattern from gibberish have a choice, too: install the new Google Toolbar.
This week’s busybody pushback is the same sort of reaction we’ve seen in response to every half-innovative feature that Google’s offered in recent years, from its Adwords advertising program to advertising-supported Gmail. Oddly enough, the tech elite still seem to respect the company’s technological prowess and innovation. They’re wary, however, that Google intends to profit from these services, no matter how much upside they offer users in the process. For too many, the idea of government intervention is only a step or two away, users be damned.
But here’s the thing: wrongheaded as they are, the critics are right to seize on the idea of regulation. There is simply no other way to keep a user from exercising the freedom that he now has to modify any data on his own computer. Web browsers have always made it trivially easy to change the color of all hyperlinks or enlarge text a bit. Newer browsers can, effectively, rewrite pages to block pop-ups or halt Flash animations. Hyperlinking regimented data isn’t too much of a step forward, really.
So what’s next? Expect the argument to heat up in the coming months, as the same tech-elite busybodies are in a preemptive snit over RSS news aggregators displaying ads beside bloggers’ entries and their fear may become a reality soon. Maybe the Toolbar episode is just a warm up for that inevitable fight.
In the end, though, isn’t it bizarre that so many paranoid souls would campaign for government restrictions on what you can do with data that’s on your own computer?
(Thanks to James and Adam for inviting me to post and to PJ for setting things up.)
Update: After days of linking to others’ criticisms, Dave Winer weighs in. His chief complaint:
In 2005, adding links to a page is not different from adding to or changing the words on the page. It’s as if a machine editor had license to change our meaning or intent, without our permission, without disclosing to the reader that it was doing so, because it’s impossible to know which links were added by the author and which were added by Google.
And it’s even worse than it appears. AutoLink “opens the door for Microsoft,” worries Winer.
But if AutoLink is what users want, isn’t that a good thing?
Protecting Digital Property With Intellectual Contract
Digital rights management is technical term for digital packaging. It is also a digital contract. An article I published earlier this week talks about the future of digital content that draws from both property and contract law. We should not be scared by contract law’s growing role in copyright. Nor should we attempt to provide affirmative consumer rights as a sort of public policy exception to certain contractual provisions. I write:
Most consumers would welcome the benefit of a DRM contractual bargain, but only if they perceive that the agreement is fair. What is a fair bargain in the marketplace and what is “fair use” according to copyright law are much different, though not necessarily conflicting, concepts. The legal conception of fair use is a loose definition that is a defense to infringement, often associated with free speech such as for criticism or parody. Fair use, in a colloquial sense, is often used as a proxy for consumer expectations and preferences–the desirability for backup copies, transfer to different hardware devices, etc.
Consumer expectations of “fair use” that extend beyond criticism, news reporting, etc. should also be defined by contract, not property law. Competition in the digital content market will dictate that consumer preferences be met.
Adam’s entry indicates that the market is working to utilize DRM with P2P and that the result will be pro-consumer. After all, a government that is big enough to provide affirmative content rights is big enough to restrict content (see the entry by James on broadcast censorship).
Will Broadband Carriers Block VoIP?
VoIP provider Vonage is up in arms about a certain telecom carrier apparently attempting to block customer access to their services. See this Washington Post article for the details.
Before everyone runs to the FCC asking for broadband regulation, let me offer a few thoughts on this matter…
New Cato study on DRM & P2P
Last August I posted big rant about “Is DRM the Devil? The Debate over Digital Rights Management, Trusted Computing and Fair Use in Copyright Law.” In it, I mentioned a forthcoming Cato Institute study by Michael Einhorn and Bill Rosenblatt entitled, “Peer-to-Peer Networking and Digital Rights Management: How Market Tools Can Solve Copyright Problems.” Well, I’m happy to say that it’s finally out!
In this paper, Einhorn and Rosenblatt demonstrate that DRM and P2P can be quite complementary and that innovative market mechanisms that can help alleviate many copyright concerns are currently blossoming.
Einhorn and Rosenblatt argue that “Government should protect the copyrights of content owners but simultaneously allow the free market to determine potential synergies, responses, and outcomes that tap different P2P and DRM business models. In particular, market operations are greatly preferable to government technology controls,” they note.
Their paper outlines the many innovative business models and technological solutions already being deployed in the marketplace proving that, contrary to what many critics on both sides of this debate argue, a well-functioning marketplace is currently at work.
I encourage you to download and read this important new study:
http://www.cato.org/pub_display.php?pub_id=3670
Merger Mania and the Nature of Network Competition
There’s been a lot of hand-wringing going on in the media and in Washington this week over the announced mergers of SBC-AT&T and Verizon-MCI. The Chicken Little crowd is out in force with their claims that the sky is going to fall on consumers should these mergers go forward.
The problem here is that too many people are still thinking about telecommunications in 1980s terms. We still talk about “local” versus “long-distance” providers as if they are distinct sectors. This is just silly. We have been witnessing the rapid death of what we used to call the long-distance sector. The rise of the wireless industry long ago decimated the long-term viability of long-distance sector. Consumers have always desired simple, flat-rate pricing for all their communications services and that’s what wireless gives them. With everyone now thinking in terms of buckets of minutes, it was only a matter of time before long distance was shown the door by most customers.
Broadcast Indecency: More Regulation Not the Answer
Congress is voting this week on increasing penalties for indecency on the airwaves. Heritage has just released this paper on why its a bad idea.
The conclusion: “Ultimately, the solution to offensive programming lies not with policymakers but with individual consumers and families. Parents and others unhappy with what they see on the television have available to them weapons more powerful than has any congressman. Like other businesses, broadcasters respond to their customers. Complaints to broadcasters and to the advertisers that support them can be effective. But the most powerful weapons consumers wield are their own remote controls. As conservatives know well, the best regulation comes not from government but from individuals making choices for themselves. Rather than look to Washington for answers, we should look to our own thumbs.”
What’s a Landline, Professor?
On Capitol Hill and at the FCC’s headquarters in SW Washington, a debate is still going on as to whether cell phones are a substitute for old-fashioned landline service. But at American University in NW Washington that debate is just about over: the university has announced that there would be no landlines in dorm rooms starting this fall. The Washington Post has a good story on this, detailing the triumph of wireless at AU and other college campuses around the country. AU’s experience also says a lot about why AT&T and MCI are being folded up. According the the Post story, while AU made hundreds of thousands on long-distance service five years ago, the school last semester made… $1,109.
Another Telecom Shoe Drops: Verizon Buys MCI
The timing was eerily reminiscent of the SBC-AT&T merger announcement two weeks ago. A weekend of speculation and negotiation, followed by an early morning announcement of the merger. This time, the happy couple was Verizon and MCI, with MCI being purchased for $6.7 billion. Its still early to gauge the reaction, but so far the news has been met with a loud yawn. The stock markets barely moved, and the political reaction has so far been muted. That’s for good reason–although the merger looks to be a good one for consumers, as well as the firms involved, it really just confirms changes long underway in telecom, rather than setting any radically new direction.
E-Waste Exposed: Why It’s OK to Throw Your Computer Away
Is there an “e-waste” crisis? WIth tens of millions of PCs becoming obsolete each year, there’s been a lot of hand-wringing about where they (and other obsolete electronics) are going to end up. Under pressure from environmental groups, policymakers from Europe to California have passed (or are considering) laws to solve the supposed problem: ranging from consumer recycling fees, to “green design” mandates, to “extended producer liabiity” laws requiring manufacturers to collect and recycle their used equipment.
Halftime Report: Viewers Complain to FCC About Boredom
FoxSports.com reports today that the FCC has once again received complaints about the Super Bowl. This time the complaints were about boredom. Seems some people were pretty disappointed with Paul McCartney (formerly of “Wings” and another band), compared to the excitement of Janet Jackson last year.
Of course, Fox goes on to disclose that only two such complaints were actually received. So it’s less than representative of the country as a whole. But then again, the same might be said for the thousands of FCC complaints ginned up by the Parent’s Television Council last year. Getting censorship right just isn’t as easy as it seems.
FCC Budget Increases Again
The President’s Budget includes $304 million for the FCC in fiscal year 2006. That’s an increase from $281 million appropriated for this year. Number from past years (using FCC Change Analysis data):
2004 - $274 million
2003 - $268 million
2002 - $245 million
So if this budget amount goes through, we will have a 24% increase in the FCC budget from five years ago. The FCC’s press release lists some run-of-the-mill reasons why an increase is needed for FY2006 - salaries, benefits, office space, enhancing electronic filing systems. But it also mentions one reason that should ruffle the feathers of policy folks - “to fund additional staff to assist with program oversight associated with USF audit activities.” Of course this oversight funding is needed to counteract the fraud within the universal service program, especially E-Rate fraud, and to pay for the salary of Mark Stephens, who last week was named Special Advisor for Universal Service Fund Oversight in the Wireline Competition Bureau’s Telecommunications Access Policy Division (TAPD). As Universal Service grows out of control, so does the budget needed to administer it….
Colossally Flawed Spam Study
The Robert H. Smith School of Business at the University of Maryland has released the 2004 Technology Readiness Survey. The headline they’ve chose for it is National Survey Finds 22.9 Million Hours a Week Wasted on Spam.
The headline should be National Survey Finds How Badly You Can Mess Things Up By Asking Consumers To Self-Report Online Behavior.
The methodology was to ask 1000 people various questions, including how many spam e-mails they receive and how much time they spend deleting e-mails. The average person reports receiving 18.5 e-mails, and the average person reports spending 2.8 minutes in a typical day deleting spam.
Now do the math.
According to this survey, the average person spends 9.08 seconds deleting each spam they receive.
Try looking at a spam e-mail for nine seconds. You can’t do it. You know it’s spam in the first second - the first two if you’re slow. You can delete it in another second - another two if you’re slow.
My guess - just a guess, not the product of expensive, useless survey research - is that they have overestimated the impact and cost of spam by at least 100%.
Until they come up with a more reliable survey method, we know nothing more about the cost of spam than we did before this survey was done.
SOTU Pt. 2: The Power of Positive Thinking
The Internet’s absence from the President’s State of the Union address, noted here yesterday, didn’t escape our friends at the Progress and Freedom Foundation either. In comments yesterday, PFFer Kyle Dixon mused hopefully that “the speech did not quite vow to continue such policies as the FCC’s efforts to promote investment and innovation in digital technologies by minimizing regulation. But it did not rule out those policies either.”
It’s only February, but Kyle gets my vote already for “Glass Half Full Statement of the Year.”
Actually, Kyle makes some good points, even if he himself admits he is stretching far for good news. See his full piece here.
Municipal Wireless as Unfair Competition
While much of the rest of the world is privatizing state-owned enterprises, there’s a growing movement here in the U.S. for local municipalities to get into the business of broadband. This is a testy issue that draws visceral responses over the proper role of government, property rights, and democracy itself. But the focus of my contribution to the publication released by the New Millennium Reach Council concludes that public sector competitors have a form of “home field advantage” that discourages entry from private firms.
I didn’t include a discussion on the hybrid municipal approach in the report but I wish I did. Some municipalities take a hybrid approach - they build the networks and sell wholesale access to private firms or they outsource to firms that then manage the customer relationship. But these are still a second-best solution.
Utah’s government-backed multi-city fiber project, UTOPIA, has promoted its model of private competition combined with public ownership of facilities by analogizing it to an airport.
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