January 2013

When the smoke cleared and I found myself half caught-up on sleep, the information and sensory overload that was CES 2013 had ended.

There was a kind of split-personality to how I approached the event this year. Monday through Wednesday was spent in conference tracks, most of all the excellent Innovation Policy Summit put together by the Consumer Electronics Association. (Kudos again to Gary Shapiro, Michael Petricone and their team of logistics judo masters.)

The Summit has become an important annual event bringing together legislators, regulators, industry and advocates to help solidify the technology policy agenda for the coming year and, in this case, a new Congress.

I spent Thursday and Friday on the show floor, looking in particular for technologies that satisfy what I coined the The Law of Disruption: social, political, and economic systems change incrementally, but technology changes exponentially.

What I found, as I wrote in a long post-mortem for Forbes, is that such technologies are well-represented at CES, but are mostly found at the edges of the show–literally. Continue reading →

Unfortunately, most consumers won’t realize that Netflix is trying to impose its costs on all Internet consumers to gain an anticompetitive price advantage against its over-the-top competitors.

At the Consumer Electronic Show two weeks ago, Netflix announced that it would block consumer access to high definition and 3D movies (HD) for customers of Internet service providers (ISPs) that Netflix disfavors. Netflix’s goal is to coerce ISPs into paying for a free Internet fast lane for Netflix content. If Netflix succeeds, it would harm Internet consumers and competition among video streaming providers. It would also fundamentally alter the economics and openness of the Internet, “where consumers make their own choices about what applications and services to use and are free to decide what content they want to access, create, or share with others.”

Ironically, Netflix’s strategy is a variant of the doomsday narrative spun by net neutrality activists over the last decade. Their narrative assumes ISPs will use their gatekeeper control to block their customers from accessing Internet content distributed by competitors. Of course, ISPs have never blocked consumer access to competitive Internet content. Now that the FCC has distorted the Internet marketplace through the adoption of asymmetric net neutrality rules, Netflix, the dominant streaming video provider, has decided to block consumer access to its content.

This may not seem like a big deal given the relatively limited HD content currently available on Netflix. But that’s about to change in a very big way. Netflix recently announced a new multi-year licensing agreement that makes it the “exclusive American subscription TV service for first run live-action and animated features from the Walt Disney Studios.” In addition to Disney-branded content (e.g., The Lion King), the deal includes content produced by Pixar (e.g., Brave), Lucasfilm (e.g., Star Wars), and Marvel (e.g., The Avengers). Netflix also announced a multi-year deal with Turner Broadcasting and Warner Bros. that includes the Cartoon Network and exclusive distribution rights to TNT’s television series Dallas. As an analyst recently told Ars Technica, “These movies, if you’ve got young kids—you’ve got to have Netflix.”

Netflix has decided to use this new market power to force ISPs to pay for its own Internet fast lane. In classic double-speak, Netflix calls its fast lane the “Netflix Open Connect” content delivery network (CDN). Though Netflix uses the word “open” to describe its CDN, it is not part of the open Internet. It is only “open” to Netflix for the delivery of its content, and it is only “open” to ISPs who connect to it on terms dictated by Netflix. Continue reading →

Daniel Lyons, assistant professor at Boston College Law School, discusses his new Mercatus Center Working Paper, “The Impact of Data Caps and Other Forms of Usage-Based Pricing for Broadband Access.” Describing the system most of us are used to as an all-you-can-eat version of internet access, Lyons explains why it might make more sense for Internet Service Providers (ISPs) to transition to usage-based pricing, a type of metered model for broadband.

According to Lyons, the fixed costs of building up a broadband network are so great that any attempt to create an equitable cost distribution that can recoup these costs forces lighter users to subsidize heavier users. These types of flat rate payment programs often can be a barrier to low-income users. Instead, Lyons advocates for a usage-based system. In response to concerns about possible anti-competitive behavior by ISPs, Lyons further proposes that enforcement of policy transparency among ISPs might be an appropriate role for government.

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Here’s a thought experiment. Let’s say you believe the Internet economy needs more regulation to guard against potential privacy violations or what you regard as excessive data aggregation. Further, you believe that no amount of self-regulation, social norms, market pressure, education, empowerment, or anything else could possibly substitute for regulation. I know there are a lot of people out there today who feel this way. Regardless of the merits of such claims, here’s my question for you: Do the ends (enhanced privacy protections) justify any means (regulation at any and every level of government)? For example, what would you think about having all 50 states creating their own Privacy Offices or Data Protection Bureaus that issued regulations or recommendations about Internet best practices?

What got me thinking about this was this new blog post by Parker Higgins of EFF, “California Attorney General Releases Mobile Privacy Recommendations.” In the essay, Higgins showers praise on California Attorney General Kamala D. Harris, who just released a document (“Privacy on the Go“) that lays out a long set of privacy “best practices” for mobile app developers. Higgins writes:

EFF applauds this important step forward, and congratulates the California Attorney General on a thorough and clearly written explanation of the importance of mobile privacy and how developers can deliver. It’s true that as technology changes, the specific needs and guidelines for companies will need to adapt. We could well see a time when these principles do not adequately protect the rights and needs of consumers. However, right now these principles represent a huge step forward — going beyond existing law in a way that improves transparency, accountability, and choice for users of mobile devices.

Regardless of the merits of the principles and recommendations contained in that report — and I agree that many of them are quite sensible best practices that industry should be following — I can’t help but wonder whether it is wise for EFF to be cheering on state-based Internet meddling so openly. Continue reading →

In her new book, Captive Audience, Susan Crawford makes the same argument that the lawyers for AT&T made in Judge Harold H. Greene’s courtroom in response to the government’s antitrust complaint beginning in 1981, i.e., that telephone service was a “natural monopoly.”  In those days, AT&T wanted regulation and hated competition, which is the same as Crawford’s perspective with respect to broadband now.  Here is what she said today on the Diane Rehm Show:

Diane Rehm: “Is regulation the next step?”

Susan Crawford: “It always has been for these industries, because it really doesn’t make sense to have more than one wire into our homes.  It is a very expensive thing to install; once it’s there, it has to be kept up to the highest level of maintenance, it has to allow for lots of competition at the retail level—across this wholesale facility—and it has to be available to consumers at reasonable cost.  That kind of result isn’t produced by the marketplace; it doesn’t happen by magic, because … when you can divide markets, and cooperate, you’re not going to come up with the best solution for consumers.

In her book, Crawford candidly says that “America needs to move to a utility model” for broadband … and “stop treating this commodity as if it were a first-run art film…”

It’s time for a stroll down memory lane.

Continue reading →

Gabriella Coleman

Gabriella Coleman, the Wolfe Chair in Scientific and Technological Literacy in the Art History and Communication Studies Department at McGill University, discusses her new book, “Coding Freedom: The Ethics and Aesthetics of Hacking,” which has been released under a Creative Commons license.

Coleman, whose background is in anthropology, shares the results of her cultural survey of free and open source software (F/OSS) developers, the majority of whom, she found, shared similar backgrounds and world views. Among these similarities were an early introduction to technology and a passion for civil liberties, specifically free speech.

Coleman explains the ethics behind hackers’ devotion to F/OSS, the social codes that guide its production, and the political struggles through which hackers question the scope and direction of copyright and patent law. She also discusses the tension between the overtly political free software movement and the “politically agnostic” open source movement, as well as what the future of the hacker movement may look like.

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We don’t expect news reports to exhibit the tightest legal reasoning, of course, but Sunday’s New York Times story on location privacy made a runny omelet of some important legal issues relating to privacy.

The starting point is United States v. Jones, a case the Supreme Court decided last January. The Court held that government agents violated the Fourth Amendment when they attached a GPS tracking device to a vehicle without a warrant and used it to determine the location of a suspect for four weeks. Location information can be revealing.

“Some advocacy groups view location tracking by mobile apps and ad networks as a parallel, warrantless commercial intrusion,” says the story. A location privacy bill forthcoming from Senator Al Franken (D-MN) “suggests that consumers may eventually gain some rights over their own digital footprints.”

Jones was about government agents—their freedom of action specifically disabled by the Fourth Amendment—invading a recognized property right (in one’s car) to gather data. There is little analogy to location tracking by mobile devices, apps, and networks, which are privately provided, voluntarily adopted, and which violate no recognized right. Indeed, their tracking provides various consumer benefits. The Times piece equivocates between the government’s failure to get a legally required search warrant in Jones and uses of data that some may feel “unwarranted,” in the sense of being “uncalled for under the circumstances.”

The first line of Larry Downes’ new Cato Policy Analysis, “A Rational Response to the Privacy ‘Crisis’,” could have been written for the Times‘ sloppy analogy:

“What passes today as a ‘debate’ over privacy lacks agreed-upon terms of reference, rational arguments, or concrete goals,” Downes says. The paper examines how the “creepy factor” permeates privacy debates rather than crisp thinking and clear-headed examination.

It’s not that location tracking doesn’t generate legitimate privacy concerns. It does. People don’t know how location information is collected and used. They don’t always know how to stop its collection. And the future consequence of location information collected today is unclear. But the capacity of private actors to harm individuals with location data is limited. Their incentive to do so is even smaller. And avoiding location tracking is simply done (at significant costs to convenience).

As Downes’ piece illustrates, we’ve seen this kind of debate before, and we’ll see it again: A particular innovation spurs privacy concerns and a backlash (whipped by legislators and regulators). A negotiation between consumers and industry, facilitated by the news media, advocates, and a variety of other actors, produces the way forward. As often as not, the way forward is a partial or complete embrace of the technology and its benefits. Plenty of times, the threat never materializes (see pervasive RFID).

Downes explores the legal explanation for what happens when consumers adopt new technologies that use personal information to produce custom content and services—this question of “rights over … digital footprints.” He finds that licensing is the best explanation for what is happening. When consumers use the many online services available to them, they license data that they might otherwise control.

The legal framework Downes puts forward sets the stage for iterative, contract-based development of rules for how data may be used in the information economy. It cuts against top-down dictates like Franken’s proposal to regulate future technologies today, knowing so little of how technology or society will develop.

Ultimately, no legislature can resolve the deep and conflicted cultural issues playing out in the privacy debate. Downes characterizes that debate as revealed tension between Americans’ Davey Crockett side—the privacy-protective frontiersmen—and our collective Puritanism. We are participants in and parts of a very watchful society.

It’s worth a read, Larry Downes’s “A Rational Response to the Privacy ‘Crisis’.”

I have been a critic of the Federal Trade Commission’s investigation into Google since it was a gleam in its competitors’ eyes—skeptical that there was any basis for a case, and concerned about the effect on consumers, innovation and investment if a case were brought.

While it took the Commission more than a year and a half to finally come to the same conclusion, ultimately the FTC had no choice but to close the case that was a “square peg, round hole” problem from the start.

Now that the FTC’s investigation has concluded, an examination of the nature of the markets in which Google operates illustrates why this crusade was ill-conceived from the start. In short, the “realities on the ground” strongly challenged the logic and relevance of many of the claims put forth by Google’s critics. Nevertheless, the politics are such that their nonsensical claims continue, in different forums, with competitors continuing to hope that they can wrangle a regulatory solution to their competitive problem.

The case against Google rested on certain assumptions about the functioning of the markets in which Google operates. Because these are tech markets, constantly evolving and complex, most assumptions about the scope of these markets and competitive effects within them are imperfect at best. But there are some attributes of Google’s markets—conveniently left out of the critics’ complaints— that, properly understood, painted a picture for the FTC that undermined the basic, essential elements of an antitrust case against the company. Continue reading →