June 2012

Delaware looks ready to become the second state after Nevada to authorize Internet poker as a gambling bill was approved this week by the state senate 14-6 with one senator abstaining.

In the wake of the Department of Justice’s Dec. 23, 2011 memo that for all intents and purposes said there were no federal statutes prohibiting intrastate online wagering on anything save sports, several states. Including Iowa, New Jersey and California, have started moving on legislation that would permit Internet poker, other casino games, and online purchasing of lottery tickets for residents and visitors inside their borders.

Poker players across the country would welcome the chance to play online once more. The Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006 did not make Internet poker illegal outright, but by prohibiting U.S. banks from conducting transactions with off-shore gaming sites, made it extremely difficult for U.S. players to open or maintain accounts with legitimate sites such as Bovada, Bodog and PartyPoker.

With legislation moving along, most gaming industry analysts see Internet poker becoming a reality in at least one or two states by the end of this year.

While the topic of online gambling is still controversial, poker is just one more place where the Internet has had an impact. Before the World Wide Web, you either had to live in Nevada or New Jersey (even in states that had casino gambling, not every casino had a card room) to play regularly. For most who did play, poker was a friendly diversion within a family or social circle.

In broadening poker’s appeal, the Internet also changed the nature of the game. These changes fully manifested themselves when Chris Moneymaker won the main event of World Series of Poker (WSOP) in 2003. Moneymaker was the first world champion to have qualified for the tournament at on line site. The WSOP was the first major live tournament he played. The bulk of his experience and expertise was acquired through online play.

In honor of developments in Delaware and elsewhere, and keeping in mind that the main event of the 2012 World Series of Poker begins July 7, and because it’s Friday afternoon, let’s look at four ways the Internet has changed poker significantly from the game your parents knew. For our purposes here, we will keep things in the context of Texas Hold ‘Em, today’s most popular poker game.

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This may be the best speech by a regulator that you will read in your entire life. Federal Communications Commission (FCC) Commissioner Robert McDowell delivered an address in Rome today entitled, “The Siren Call of “Please Regulate My Rival”: A Recipe for Regulatory Failure.” I highly recommend it (and not just because I’m cited in it!) It is infused with important insights about the ugly downsides of excessive regulation of technology markets.

McDowell is an astute student of regulatory history and he documents how, despite the best of intentions, economic regulation has often been turned into a tool that industry exploits for their own narrow interests. Sadly, examples of such “regulatory capture” are rampant, as I have documented here before. McDowell notes that many telecom and media companies “suffer from the ‘please regulate my rival’ malady of an industry that has been regulated too much and for too long.  History is replete with such scenarios,” he says, “and the desire for more regulation for competitors always ends badly for the incumbent regulated industry in the form of unintended and harmful consequences.” That is exactly right.

I strongly encourage you to read the entire speech, but if you only have time to read one thing, make it the powerful and poetic closing paragraphs, which I have reprinted below:

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So, as I write this, I’m watching a House Commerce “Future of Video” hearing and I am trying to figure out if I’m the only person who was alive and watching television in the 1970s. I mean, come on, doesn’t anyone else remember the era of the Big 3 and meager viewing options?! Well, for those who forget, here were some of your TV viewing options this day in history, June 27, 1972. Read it and weep (and then celebrate the cornucopia of viewing riches we enjoy today in a world of over 900 video channels + the Internet).

 

In his syndicated column yesterday, Leonard Pitts, Jr. bemoaned the decision by the New Orleans Times-Picayune to cut back its print edition to three days a week, and attacked the sentiment, most recently expressed by former Alaska Gov. Sarah Palin, who might herself been quoting Matt Drudge, that the Internet allows “every citizen to be a reporter and take on the powers that be.”

Pitts immediately attacks the comment on the basis of its source, Palin. Then he wanders further from the point by conjuring the truly unpleasant conditions under which reporters, Picayune staffers no doubt among them, labored to ensure news got out in the weeks following Hurricane Katrina’s devastation of the Gulf Coast.

One night I had the distinct honor of sleeping in an RV in the parking lot of the Sun Herald in Gulfport, Miss., part of an army of journalists who had descended on the beleaguered city to help its reporters get this story told. The locals wore donated clothes and subsisted on snack food. They worked from a broken building in a broken city where the rotten egg smell of natural gas lingered in the air and homes had been reduced to debris fields, to produce their paper. Shattered, cut off from the rest of the world, people in the Biloxi-Gulfport region received those jerry-rigged newspapers, those bulletins from the outside world, the way a starving man receives food.

Yet nothing in this rather self-important prose tells us what’s so irreplaceable about printed newspapers as a platform for news delivery. Instead, we get a straw man.

Palin’s sin–and she is hardly alone in this–is to consider professional reporters easily replaceable by so-called citizen journalists like Drudge. Granted, bloggers occasionally originate news. Still, I can’t envision Matt Drudge standing his ground in a flooded city to report and inform.

One can say the same thing about Bill Maher, Keith Olbermann or Wolf Blitzer. Yet, come the next disaster, there’s no reason not to expect the same dedication from a handful of individuals who are driven to place themselves in the middle of an adverse, if not outright dangerous, event just to document first-hand what is happening. Only this time they have the cheap video cameras, battery operated laptops and cellphones with wireless Internet connections. The news will get out.

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On Wednesday morning, the U.S. House of Representatives Energy & Commerce Subcommittee on Communications and Technology will hold a hearing on “The Future of Video.”

As we Tech Liberators have long argued on these pages (12345, 6, 7), government’s hands have been all over the video market since its inception, primarily in the form of the FCC’s rulemaking and enforcement enabled by the Communications Act. While the 1996 Telecommunications Act scrapped some obsolete video regulations, volumes of outdated rules remain law, and the FCC wields vast and largely unchecked authority to regulate video providers of all shapes and sizes. Wednesday’s hearing offers members an excellent opportunity to question each and every law that enables governmental intervention—and restricts liberty in—the television market.

It’s high time for Congress to free up America’s video marketplace and unleash the forces of innovation. Internet entrepreneurs should be free to experiment with novel approaches to creating, distributing, and monetizing video content without fear of FCC regulatory intervention. At the same time, established media businesses—including cable operators, satellite providers, telecom companies, broadcast networks and affiliates, and studios—should compete on a level playing field, free from both federal mandates and special regulatory treatment.

The Committee should closely examine the Communications and Copyright Acts, and rewrite or repeal outright provisions of law that inhibit a free video marketplace. Adam Thierer has chronicled many such laws. The Committee should, among other reforms, consider:

Here’s to the success of Sen. Jim DeMint, Rep. Steve Scalise, and other members of Congress who are working to achieve real reform and ensure that the future of video is bounded only by the dreams of entrepreneurs.

Tyler Cowen [asks on his blog today](http://marginalrevolution.com/marginalrevolution/2012/06/today-is-probably-a-funny-blogging-day.html):

>By the way, didn’t it just [come out in](http://www.washingtonpost.com/world/national-security/us-israel-developed-computer-virus-to-slow-iranian-nuclear-efforts-officials-say/2012/06/19/gJQA6xBPoV_story.html) *The Washington Post* that the United States helped attack Iran with Flame, Stuxnet and related programs? If they did this to us, wouldn’t we consider it an act of war? Didn’t we just take a major step toward militarizing the internet? Doesn’t it seem plausible to you that the cyber-assault is not yet over and thus we face immediate questions looking forward? Won’t somebody fairly soon try to do it to us? Won’t it encourage substitution into more dangerous biological weapons?

Those are good questions. Let’s take them in turn.

**If they did it to us, would we consider it an act of war?** I tend to agree with [Franz-Stefan Gady's perspective](http://www.huffingtonpost.com/franzstefan-gady/the-cyberwar-hoax_b_1549927.html) that Stuxnet should not be considered an act of war. One of the most overlooked aspects of the great reporting done by the NYT and WaPo uncovering the details of Stuxnet is that the U.S. did not “hack in” to Iran’s nuclear facilities from thousands of miles away. Instead it [had to rely on Israel's](http://jerrybrito.org/post/24193112996/nyt-reveals-the-backstory-on-stuxnet) extensive intelligence apparatus to not only understand the target, but to deliver the worm as well. That is, humans had to physically infiltrate Iran’s operations to engage in the spying and then the sabotage.

Espionage [is not an act of war](http://legal-dictionary.thefreedictionary.com/espionage) under international law. Nations expect and tolerate espionage as an inevitable political practice. Spies are sometimes prosecuted criminally when caught, sometimes traded for other spies, and often simply expelled from the country. Sabotage I’m less certain about, but I think it inhabits a similar space as espionage: frowned up, prosecuted criminally, but not an act of war *per se*. (I’ve been trying to find the answer to that question in vein, so if any international law experts would like to send me the answer, I’d appreciate it.)

So what do we have with Flame? It’s essentially spying, albeit in a frighteningly efficient manner. But, it’s not act of war. Stuxnet is similarly not an act of war if we assume sabotage is not. There’s little difference between Stuxnet and a spy infiltrating Natanz and throwing a wrench into the works. Stuxnet is just the wrench. Now, it’s key to point out what makes Stuxnet political sabotage and not terrorism, and that is that there were no deaths, much less civilian deaths.

**Did we take a big step in militarizing the Internet? Won’t somebody fairly soon try to do it to us?** Well, it’s already happening and it’s been happening for years. U.S. government networks are very often the subject of espionage–and maybe even sabotage–by foreign states. If something feels new about Stuxnet, it’s that for the first time we have definitive attribution to a state. As a result, the U.S. loses moral high ground when it comes to cybersecurity, and if someone doing it to the U.S. gets caught, they will be able to say, “You started it.” But they’re already doing it. Not that it’s necessarily a good thing, but the militarization of cyberspace is not just inevitable, it’s been [well underway](http://en.wikipedia.org/wiki/United_States_Cyber_Command) for some time.

Finally, Tyler asks, **Won’t it encourage substitution into more dangerous biological weapons?** The answer to that, I think, is a definitive no. “Cyber weapons” arecompletely different from biological weapons and even chemical or conventional, and certainly nuclear. For one thing, they are [nowhere near](http://jerrybrito.org/post/23994462855/the-united-states-is-more-secure-than-washington-wants) [as dangerous](http://jerrybrito.org/post/23994472311/how-scary-was-the-white-houses-cyber-simulation-for). No one has ever died from a cyber attack. Again, short of already being in a shooting war, these capabilities won’t be employed beyond espionage and surgical sabotage like Stuxnet.

That raises the question, however, if we’re in a shooting war with a Lybia or a Syria, say, will they resort to cyber? Perhaps, but as Thomas Rid has pointed out, the more destructive a “cyber weapon” the more [difficult and costly](http://jerrybrito.org/post/23994467276/why-anonymous-will-never-be-able-to-take-down-the-power) it is to employ. Massively so. This is why it’s probably only the U.S. at this point who has the capability to pull off an operation as difficult as Stuxnet, and then only with the assistance of Israel’s existing traditional intelligence operation. Neither al Qaeda, nor Anonymous, nor even Iran will be able to carry out an operation on the same level as Stuxnet any time soon.

So, Tyler, you can sleep well. For now at least. ;o) Yes, we should have a national discussion about what sorts of weapons we want our government employing, and what sort of authorization and oversight should be required, but we should not panic or think we’re a few keystrokes away from Armageddon. The more important question to me is, [why does one keeps $2.85 million in bitcoin?](http://jerrybrito.org/post/25726774959/someone-is-holding-2-85-million-in-bitcoins)

Thanks to TLFers Jerry Brito and Eli Dourado, and the anonymous individual who leaked a key planning document for the International Telecommunication Union’s World Conference on International Telecommunications (WCIT) on Jerry and Eli’s inspired WCITLeaks.org site, we now have a clearer view of what a handful of regimes hope to accomplish at WCIT, scheduled for December in Dubai, U.A.E.

Although there is some danger of oversimplification, essentially a number of member states in the ITU, an arm of the United Nations, are pushing for an international treaty that will give their governments a much more powerful role in the architecture of the Internet and economics of the cross-border interconnection. Dispensing with the fancy words, it represents a desperate, last ditch effort by several authoritarian nations to regain control of their national telecommunications infrastructure and operations

A little history may help. Until the 1990s, the U.S. was the only country where telephone companies were owned by private investors. Even then, from AT&T and GTE on down, they were government-sanctioned monopolies. Just about everywhere else, including western democracies such as the U.K, France and Germany, the phone company was a state-owned monopoly. Its president generally reported to the Minster of Telecommunications.

Since most phone companies were large state agencies, the ITU, as a UN organization, could wield a lot of clout in terms of telecom standards, policy and governance–and indeed that was the case for much of the last half of the 20th century. That changed, for nations as much as the ITU, with the advent of privatization and the introduction of wireless technology. In a policy change that directly connects to these very issues here, just about every country in the world embarked on full or partial telecom privatization and, moreover, allowed at least one private company to build wireless telecom infrastructure. As ITU membership was reserved for governments, not enterprises, the ITU’s political influence as a global standards and policy agency has since diminished greatly. Add to that concurrent emergence of the Internet, which changed the fundamental architecture and cost of public communications from a capital-intensive hierarchical mechanism to inexpensive peer-to-peer connections and the stage was set for today’s environment where every smartphone owner is a reporter and videographer. Telecommunications, once part of the commanding heights of government control, was decentralized down to street level.

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When it comes to the UN exerting greater control over Internet governance, all of us who follow Internet policy in the U.S. seem to be on the same page: keep the Internet free of UN control. Many folks have remarked how rare this moment of agreement among all sides–right, left, and center–can be. And Congress seized that moment yesterday, [unanimously approving](http://techdailydose.nationaljournal.com/2012/06/house-committee-votes-to-preve.php) a bi-partisan resolution calling on the Secretary of State to “to promote a global Internet free from government control[.]”

However, below the surface of this “Kumbaya moment,” astute observers will have noticed quite a bit of eye-rolling. Adam Thierer and I wrote [a piece](http://www.theatlantic.com/technology/archive/2012/06/a-note-to-congress-the-united-nations-isnt-a-serious-threat-to-internet-freedom-151-but-you-are/258709/) for *The Atlantic* pointing out the obvious fact that when a unanimous Congress votes “to promote a global Internet free from government control,” they are being hypocrites. That’s a pretty uncontroversial statement, as far as I can tell, but of course no one likes a skunk at the garden party. Continue reading →

Count me among those who are rolling their eyes as the Department of Justice initiates an investigation into whether cable companies are using data caps to strong-arm so-called “over-the-top” on-demand video providers like Netflix, Walmart’s Vudu and Amazon.com and YouTube.

The Wall Street Journal reported last week that DoJ investigators “are taking a particularly close look at the data caps that pay-TV providers like Comcast and AT&T Inc. have used to deal with surging video traffic on the Internet. The companies say the limits are needed to stop heavy users from overwhelming their networks.”

Internet video providers like Netflix have expressed concern that the limits are aimed at stopping consumers from dropping cable television and switching to online video providers. They also worry that cable companies will give priority to their own online video offerings on their networks to stop subscribers from leaving.

Here are five reasons why the current anticompetitive sturm und drang is an absurd waste of time and might end up leading to more harm than good.

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This morning, the Secretary-General of the ITU, Hamadoun Touré, [gave a speech at the WCIT Council Working Group](http://www.itu.int/en/osg/speeches/Pages/2012-06-20.aspx) meeting in Geneva in which he said,

> It has come as a surprise — and I have to say as a great disappointment — to see that some of those who have had access to proposals presented to this working group have gone on to publicly mis-state or distort them in public forums, sometimes to the point of caricature.

> These distortions and mis-statements could be found plausible by credulous members of the public, and could even be used to influence national parliaments, given that the documents themselves are not officially available — in spite of recent developments, **including the leaking of Document TD 64.**

> As many of you surely know, a group of civil society organizations has written to me to request public access to the proposals under discussion.

> **I would therefore be grateful if you could consider this matter carefully, as I intend to make a recommendation to the forthcoming session of Council regarding open access to these documents, and in particular future versions of TD 64.**

> I would also be grateful if you would consider the opportunity of conducting an open consultation regarding the ITRs. I also intend to make a recommendation to Council in this regard as well.
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