Keeping politicians' hands off the Net & everything else related to technology
Another year in the books for the Technology Liberation Front. Many developments unfolded in 2015 in the technology world and we covered much of it (on TLF and in other outlets). The most popular posts this year revolved around the Internet of Things, privacy, unlicensed spectrum, and municipal and public broadband networks. Thanks for reading, and enjoy the year in review. Continue reading →
This article originally appeared at techfreedom.org
On December 15, the European Commission announced that it had reached agreement with the European Parliament and the Council on a new EU Data Protection regulation. The new regulation, which is not yet public, has been under negotiation since January 2012, and would replace Europe’s 1995 Data Protection directive, which left implementation up to nation states.
“Europe has a collective insecurity complex about the Internet,” said Berin Szoka, President of TechFreedom. “The problem isn’t that Europeans aren’t innovative, but that Europe’s most innovativeusually leave the gray continent to start web businesses in the U.S., where innovation doesn’t require permission. Now, it seems, European governments have thrown in the towel: instead of trying to stop the digital brain drain by making Europe more open to innovation, they’re cracking down on the data flows that drive web companies. Their hodgepodge of new measures will prove either crippling, counter-productive or utterly unworkable.”
“The worst idea is banning young teens from using social media without parental consent,” continued Szoka. “We already know that kids 13 and under simply lie about their age to get access to the sites they want to use. Teens will do the same, making the promise of parental control utterly illusory. That, in turn will undermine social media platforms’ efforts to offer age-appropriate experiences for their users. The only way to avoid this will be to age-verify all users, which means tyingeveryone’s Internet use to a verified identity — in short, ending online anonymity. Similarly, the ‘right to be forgotten’ sounds great, but in practice, means giving users a right to censor speech about them they don’t like.”
“The new regulations will harm startups most,” concluded Szoka. “Allowing fines of up to 4% of a company’s global revenue will make all companies reluctant to experiment with new offerings that unsettle established norms. From Google’s Street View to Facebook’s NewsFeed, yesterday’s ‘creepy’ has proved to be today’s ‘awesome.’ Now, that line will be drawn by bureaucrats rather than consumers. Ironically, it’s established, American companies that will be most able to deal with the burden of compliance — which is why, of course, these heavy-handed regulations will no doubt be enforced arbitrarily. Regulatory discretion will be used as a tool of digital protectionism — yet another way for regulators to vent their frustration as Europe falls further and further behind Silicon Valley. Ordinary Europeans will be told that only tougher measures will bridge the gap, and Europe’s sad spiral of digital self-destruction will go on, and on, and on…”
Throughout the year, I collect some of the more notable tech policy-related essays that I’ve read and then publish an end-of-year list here. (Here, for example, are my end-of-year lists from 2014 and 2013.) So, here are some of my favorite essays and editorials from 2015. (Note: They are just in chronological order. No ranking here.)
This article originally appeared at techfreedom.org
WASHINGTON D.C. — Yesterday, the Federal Trade Commission announced that it had reached a settlement with Wyndham Hotels over charges that the company had “unreasonable” data security. In 2009, Russian hackers stole customer information, including credit card numbers, from Wyndham hotel systems. The company initially refused to settle an FTC enforcement action, becoming the first to challenge the FTC’s approach to data security in federal court. The FTC has used a decade of settlements with dozens of companies to establish fuzzy de facto standards for data security. In August, the Third Circuit denied Wyndham’s appeal of the district court’s decision to let the case proceed.
“The FTC has, once again, avoided having a federal court definitively answer fundamental questions about the constitutionality of the FTC’s approach to data security,” said Berin Szoka, President of TechFreedom, which joined an amicus brief in the case. “The FTC will no doubt claim the Third Circuit vindicated its approach, but all the court really said was that Wyndham’s specific practices may have been unfair. Indeed, the appeals court agreed with Wyndham that the FTC’s so-called ‘common law of consent decrees’ cannot provide the ‘fair notice’ required by the Constitution’s Due Process clause. This implied that the FTC needs to do much more to guide companies on what ‘reasonable’ data security would be. By settling the case, the FTC avoided having the district court resolve those questions.”
“It’ll take years for another case to work its way through the courts,” explained Szoka. “LabMD’srecent victory before the FTC’s chief administrative law judge is encouraging, and may allow a federal court to weigh in on the requirements of Section 5’s amorphous unfairness standard, if the full Commission overrules the ALJ. But that case focuses more on how the FTC weighs costs and benefits in each enforcement action than on the issue of how much guidance it provides guidance to industry.”
“It’s high time Congress reasserted itself here,” concluded Szoka. “The FTC has demonstrated little willingness to change from within, and we can’t wait for the courts to address these questions. Congress needs to put the FTC on sounder footing across the board — from data security to privacy and other consumer protection issues. Far from hamstringing the agency, requiring better explanation of what the law requires and weighing of costs and benefits would actually help consumers — both by promoting better business practices and by avoiding FTC actions that end up harming consumers. Such common sense reforms should be bipartisan, just as they were back in 1980, the last time Congress really checked the FTC’s vast discretion.”
Szoka is co-author, along with Geoffrey Manne and Gus Hurwitz, of the FTC: Technology & Reform Project’s initial report, “Consumer Protection & Competition Regulation in a High-Tech World: Discussing the Future of the Federal Trade Commission,” which critiques the FTC’s processes and suggests areas where the FTC, the courts and Congress could improve how the FTC applies its sweeping unfairness and deception powers in data security, privacy and other cases, especially related to technology.
The FCC’s Open Internet Order is long and complex and the challenge to it is likewise difficult to untangle. The agency regularly engages in ad hoc rulemaking that results, per Judge Posner, in “unprincipled compromises of Rube Goldberg complexity among contending interest groups viewed merely as clamoring suppliants who have somehow to be conciliated.” The Open Internet Order is no exception and therefore faces several legal vulnerabilities.
In my view, the soft underbelly of the Order is the agency’s position that ISPs are not First Amendment speakers. While courts are generally very deferential to agencies, they are not deferential on constitutional questions. Further, the court panel (two Democrat appointees, one Republican appointee), unfortunately, was not in the carriers’ favor. The major carriers, however, have focused their arguments on whether the agency should receive deference in classifying Internet access as a telecommunications service.
That said, it’s possible the major carriers could get at least a partial win with their arguments. That likelihood is increased because Alamo Broadband and Dan Berninger raised the First Amendment problems with the Order. Given the strength of the First Amendment arguments, the Court might shy away from reaching the issue of whether ISPs are speakers. Below, some thoughts on the moments during oral arguments that surprised me and what went according to predictions.
The Unexpected
A receptive ear in Judge Williams re: the First Amendment arguments. (Good for: ISPs) The First Amendment arguments went better than I’d expected. Alamo and Berninger’s counsel, Brett Shumate, argued the First Amendment issues well and had good responses for skeptical questions. Shumate found a receptive ear in Judge Williams, who seemed to understand the serious First Amendment risks posed by the Order. Williams repeatedly brought up the fact that MetroPCS a few years ago tried to curate the Internet and provide its customers free YouTube, only to face resistance from the FCC and net neutrality activists.
The other two judges were more skeptical but Shumate corrected some misconceptions. The biggest substantive objection from Srinivasan, who sounded the most skeptical of the First Amendment arguments, was that if the Court reaches the First Amendment issues, it has determined that the FCC has reasonably classified Internet access as a common carrier service. He suggested that this means the First Amendment issues mostly disappear. No, Shumate explained. Congress and the FCC can call services whatever they want. They could declare Google Search or Twitter feeds a common carrier service tomorrow and that would have zero effect on whether filtering by Google and Twitter is protected by the First Amendment. Tatel asked whether Section 230’s liability protections suggest ISPs are common carriers and Shumate corrected that misconception, a subject I have written on before.
A major FCC concession that ISPs have to option to change their offerings and escape common carrier regulation. (Good for: ISPs) Title II advocates are spinning the terse First Amendment exchanges as a victory. I’m not convinced. The reason the arguments didn’t generate more heat was because the FCC lawyer made a huge concession at the outset: ISPs that choose to filter the Internet are not covered by the Open Internet Order.
FCC lawyer: “If [ISPs] want to curate the Internet…that would drop them out of the definition of Broadband Internet Access Service.”
Judge Williams: “They have that option under the Order?”
FCC lawyer: “Absolutely, your Honor. …If they filter the Internet and don’t provide access to all or substantially all endpoints, then they drop out of the definition of [BIAS] and the rules don’t apply to them.”
This admission seriously undermines the purposes of the Order. The FCC is stating outright that ISPs have the option to filter and to avoid the rules. That seems to mean that Comcast’s Stream Internet protocol television service, where it is curating streaming TV programs, is not covered by the rules. If Facebook’s Free Basics or a similar service launched in the US giving free, limited access to the Web, that is not covered by the Order. Finally, this means that the many broadband packages that offer family-friendly filtering are outside of the FCC’s rules. It’s not clear how much remains to be regulated since all ISPs reserve the right to filter content and each filters at least some content.
Judge Tatel directing most questioning. (Good for: wash) Many view Judge Tatel as the “swing vote” but I was surprised at the relative quiet from Williams and Srinivasan. Tatel was the most inquisitive, by my listening. He was much more skeptical of some of the FCC’s arguments regarding interconnection than I expected but also more skeptical of the First Amendment arguments than I expected.
Little discussion of Chevron Step 0. (Good for: FCC) Many on the free-market side wanted to make this case about Chevron Step 0 and the notion that Title II is too economically and socially significant to warrant deference. Unfortunately, at oral argument there was very little discussion of Chevron Step 0.
The Expected
Focus on agency discretion. (Good for: FCC) The judges generally seem to see this as a straightforward Chevron case and the questions focused on Chevron Step 1, whether there is ambiguity in the statute about “offering telecommunications” for the FCC to interpret. As expected, the FCC did fairly well in their arguments because these technical issues are very hard to untangle.
On Chevron Step 2, whether the reinterpretation of “telecommunications service” to include Internet access was reasonable, the US Telecom attorney was strong. He leaned heavily on the fact that in Section 230, which amends the Communications Act, Congress announces a national policy that the Internet and specifically Internet access services, should remain “unfettered by Federal regulation.” That would seem to preclude the FCC from using, at the very least, its most powerful regulatory weapon–common carriage–against Internet access providers. Even if “telecommunications service” is ambiguous, he stated, it was unreasonable to include Internet access in that definition.
Focus on whether mobile broadband can be properly classified under Title II. (Benefit: ISPs) As many commentators have noted, the idea that the traditional phone network and the mobile broadband network can be classified as the same interconnected network is far-fetched. Each judge seemed very skeptical of the FCC’s argument and Tatel suggested there was a lack of adequate notice.
Srinivasan pointed out that striking down the wireless rules and maintaining the wireline rules would mean that using the same tablet in different areas of your house would lead to different regulatory treatment, depending on whether you’re on the cellular broadband network or Wifi. Title II supporters think this is pretty clever gotcha but communications law already abounds with seemingly absurd FCC- and court-created legal distinctions. (The FCC invents its own absurd distinction and offers vastly different regulatory treatment for DNS operated by an ISP v. DNS operated by literally anyone else.)
Conclusion
Predictions about major regulatory cases are notoriously difficult. I’ve read (and made) enough predictions about big court cases to know that prognosticators almost always get it wrong. If that’s the case, at least consider one thought-provoking outcome: the rules are largely struck down because the FCC provided inadequate notice on most of the major issues of classification.
If the rules, in contrast, were sustained under Chevron and judged to have had adequate notice, the Court would likely need to confront the First Amendment issues. I don’t think Tatel and Srinivasan, especially, want to rule on these hard constitutional questions. The judges must know the Supreme Court has, as Prof. Susan Crawford says, an “absolutist approach” to the First Amendment that protects speakers of all kinds. Sustaining the rules means the FCC risks a loss on First Amendment grounds on appeal that would nearly eliminate the ability of the FCC to regulate the Internet. For that reason, and because of the notice problems, the Court may strike down the rules on notice and comment grounds, thereby preserving the ability of the FCC to take a fourth bite at the apple.
I wanted to draw your attention to this important address on online platform regulation by Alex Chisholm, the head of UK’s Competition and Markets Authority. That’s the non-ministerial department in the UK responsible for competition policy issues. Chisholm delivered the address on October 27th at the Bundesnetzagentur conference in Bonn. It’s a terrific speech that other policymakers would be wise to read and mimic to ensure that antitrust and competition policy decisions don’t derail the many benefits of the Information Revolution.
“Today, as regulators, we have the responsibility but also the great historical privilege of playing an influential role in the deployment throughout the economy of the latest of these defining technological eras,” Chisholm began. “As regulators, we must try to minimise the inevitable mismatch between how we’ve done things before and the opportunities and risks of the new,” he argued.
He continued on to specify three recommendations for those crafting policy on this front: Continue reading →
On October 7th I appeared on a webinar hosted by Prof. Barry Umansky and Ball State’s Digital Policy Institute about the FCC’s Title II case before the DC Circuit Court of Appeals, US Telecom Association v. FCC. The other panelists were Andrew Schwartzman of Georgetown University and Stuart Brotman of Harvard Law School and the Brookings Institution. Check it out, but here’s a brief summary of our hour-long discussion. Continue reading →
This article originally appeared at techfreedom.org
Today, the House voted to extend key, but narrow, privacy rights to citizens of “covered countries.” The Judicial Redress Act, passed by a voice vote, would allow the Attorney General to work with other federal agencies to determine countries whose citizens can enforce their data protection rights in U.S. courts under the Privacy Act of 1974. Since that statute specifically exempts sensitive issues regarding law enforcement and national security, extending Privacy Act rights to citizens of selected countries poses no significant concerns.
“Today, the House took one small step toward repairing America’s tarnished image on data privacy,” said Berin Szoka, President of TechFreedom. “Since the Snowden disclosures, our government’s inaction on surveillance reform has provoked an international crisis — one that could lead to a European blockade of American Internet companies.”
Two weeks ago, in the Schrems case, the European Court of Justice struck down the Safe Harbor agreement that has, since 2000, allowed U.S. companies to receive and use data about European citizens. Lack of redress rights for Europeans is among the chief reasons why the ECJ found that the Commission had failed to update its finding that U.S. privacy protections were “adequate.”
Without a new agreement, U.S. companies will be at the mercy of each and every European Data Protection Authority, which, under Schrems, can now decide how to regulate cross-border data flows. This burden will likely fall heaviest on U.S. tech startups, who can ill afford this risk. If the Digital Protection Authorities (DPAs) start cracking down, American companies may simply decide to forego the European market, or to split their services into two pieces that don’t allow users to interact — especially new companies that haven’t yet launched their services. That, in turn, could mean a regionalization of what has, until now, been an inherently global medium.
“Passage of the Judicial Redress Act is ‘table stakes’ for the U.S.,” continued Szoka. “Without it, the State Department will have no credibility at the bargaining table in negotiating with the Europeans over a replacement for Safe Harbor. However, Privacy Act rights are necessary but not sufficient: Congress will need to move on to other privacy reforms immediately, starting with ensuring that law enforcement must obtain a warrant before accessing stored data of both American and European citizens. Congress will also need to finish the surveillance reforms it started with USA FREEDOM, specifically regarding Section 702.”
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We can be reached for comment at media@techfreedom.org. See more of our work on privacy, especially:
Last Friday I attended a fascinating conference hosted by the Duke Law School’s Center for Innovation Policy about television regulation and competition. It’s remarkable how quickly television competition has changed and how online video providers are putting pressure on old business models.
I’ve been working on a project about competition in technology, communications, and media and one chart that stands out is one that shows increasing competition in pay television, below. Namely, that cable providers have lost nearly 15 million subscribers since 2002. Cable was essentially the only game in town in 1990 for pay television (about 100% market share). Yet today, cable’s market share approaches 50%. This competitive pressure accounts for some cable companies trying to merge in recent years.
Much of this churn by subscribers was to satellite providers but it’s the “telephone” companies providing TV that’s really had a competitive impact in recent years. Telcos went from about 0% market share in 2005 to 13% in 2014. This new competition can be tied to Congress finally allowing telephone companies to provide TV in 1996. However, these new services didn’t really get started until a decade ago when 1) digital and IP technology improved, and 2) the FCC made it clear by deregulating DSL ISPs that telephone companies could expect a market return for investing in fiber broadband nationwide.
UPDATE:
And below is market share data going back ten more years to 1994 using FCC data, which uses a slightly different measurement methodology (hence the kink around 2003-2004). I’ve also omitted market share of Home Satellite Dish (those large dishes you sometimes see in rural areas). Though HSD has negligible market share today, it had a few million subscribers in the mid-1990s. I may add HSD later.
The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.
Quick Thoughts on FAA’s Proposed Drone Registration System
by Adam Thierer on October 19, 2015 · 1 comment
Here are some quick initial reactions on the proposed registration rules: Continue reading →