A few days ago, the big news in the telecom world was that President Obama again ordered federal agencies to share and sell their spectrum to expand commercial mobile broadband use. This effort is premised on the fact that agencies use their gifted airwaves poorly while demand for mobile broadband is surging. While the presidential memorandum half-heartedly supports clearing out agencies from some bands and selling it off, the focus of the memo is shared access, whereby federal agencies agree to allow non-federal users to use the same spectrum bands with non-interfering technologies.

The good news is that there is no mention of PCAST’s 2012 recommendation to the president to create a 1000 MHz “superhighway” of unlicensed federal spectrum accessed by sensing devices. This radical proposal would replace the conventional clearing-and-auction process with a spectrum commons framework reliant on unproven sensing technologies. Instead of consumers relying on carriers’ spectrum for mobile broadband, this plan would crudely imitate (in theory) wifi on steroids, where devices would search out access over a huge portion of valuable spectrum, avoiding federal users. Its omission in the recent memo likely means the unlicensed superhighway won’t be pursued.

Still, this doubling-down on other forms of dynamic spectrum sharing is unfortunate for several reasons. First, it mostly entrenches the disastrous status quo by acceding to federal agencies’ claims that they can’t be safely moved. Giving federal agencies free spectrum decades ago was a costly mistake that needs to be corrected through pricing and through clearing. By throwing their hands up and saying that clearing and auctioning federal spectrum is too difficult and sharing is the best alternative, the administration condemns us to suffer for the sins of our fathers.

Second, sharing, as envisioned in the memo, will not be accomplished quickly or extensively. Whatever technologies come out of this–there are several options, which only adds research delays–will be constrained by what interference risks the agencies accept. Engineering tests and simulations cannot answer this question; it is an economic and political question, and the economics is very distorted as it is. Federal agencies and particularly the military are very jealous of their spectrum. And who can blame them, since their wireless systems are often used for communications and training exercises that, if not directly protecting the lives of civilians, employees, and soldiers, are an important component of preparation for combat. But this jealousy means agencies are not good at sharing wireless bandwidth.

For “sharing skeptics,” UWB’s experiences illuminates our concerns. Ultrawideband (UWB) is a wireless low-power technology used for radar and data services and, beginning in 1989, its proponents sought regulatory approval to share federal spectrum for UWB commercial applications. UWB uses huge portions of spectrum but is very low power–transmissions from a cellphone are millions of times more powerful than UWB transmissions. Even then, UWB applicants were subjected to a process that can only be described as Kafka-esque as it went–for 13 years–agency to agency, submitting filings and completing interference tests, attempting to show that the technology would not threaten federal operations, before it finally got approval. Indicative of agency foot-dragging, a UWB manufacturer noted,

It took NTIA nearly a year to obtain internal sign off by government users of spectrum to approve with conditions the requests for waivers submitted by [UWB] companies. This despite the fact that the devices . . . were lifesaving instruments for public safety and law enforcement personnel, and all 2500 devices requested, if operating together in a single room, would emit less than one quarter the power of a cell phone.

That same UWB applicant made over 100 trips to DC in 6 years and spent millions of dollars to push his technology. Another large UWB company backed by Intel went out of business in the meantime. To be clear, the technologies contemplated in the memo are different from UWB, but UWB is not alone and the institutional resistance will be the same for future sharing technologies. There will be extensive tests, frequent denials, delays, and billions of dollars of continued waste of underused federal spectrum.

I have no doubt the heads of NTIA and DoD favor making mobile broadband more available to consumers. But it is also their duty to ensure that military and federal systems work well all the time. Given these two priorities (faster mobile downloads of cat videos versus public safety and military training), guess which one the NTIA and agencies will favor? What probability of service disruption will federal agencies tolerate? The answer–as we’ve seen in previous sharing attempts–is vanishingly small. That means if any technologies are approved for sharing on federal bands–a process that will take years–they will be likely constrained by very conservative technical criteria and low-power operations.

The memo’s best recommendation is exploring “incentives” (that is, pricing) for federal agencies to relinquish spectrum. Blair Levin–who worked on the FCC’s 2010 National Broadband Plan–voiced support for creating a “GSA for spectrum” at a Washington Post forum this week, and hopefully this sentiment will become a priority. Until agencies are paying market prices for this valuable resource, attempts to force agencies to share are bound to run into these problems since there is no way to analyze the economic tradeoffs.

But a GSA for spectrum is a long ways off and I suspect the regulatory risks and delays in the interim, combined with the poor economics of the permitted technologies, will scare away most investment. Whatever does emerge will be a poor substitute for the robust wireless networks we see everyday on our smartphones using exclusively licensed commercial spectrum, which is why the memo’s focus on sharing–not clearing and auctioning–is sorry news.

For more on proposals for reclaiming federal spectrum through clearing and auctioning, please see my hot-off-the-presses Mercatus working paper.

Declan McCullagh, chief political correspondent for CNET and former Washington bureau chief for Wired News, discusses recent leaks of NSA surveillance programs. What do we know so far, and what more might be unveiled in the coming weeks? McCullagh covers legal challenges to the programs, the Patriot Act, the fourth amendment, email encryption, the media and public response, and broader implications for privacy and reform.

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Related Links

• Snowden: NSA snoops on U.S. phone calls without warrants, McCullagh
• Snowden: Feds can’t plug leaks by ‘murdering me’, McCullagh
• Feds: Power grid vulnerable to cyber threats, McCullagh

Today I had the great pleasure of moderating a panel discussion at a conference on the “Virtual Economy” hosted by Thomson Reuters and the International Center for Missing and Exploited Children. On my panel were representatives from the Bitcoin Foundation, the Tor Project, and the DOJ, and we had a lively discussion about how these technologies can potentially be used by criminals and what these open source communities might be able to do to mitigate that risk.

The bottom line message that came out of the panel (and indeed every panel) is that the Tor and Bitcoin communities do not like to see the technologies they develop put to evil uses, and that they are more than willing to work with policymakers and law enforcement to the extent that they can. On the flip side, the message to regulators was that they need to be more open, inclusive, and transparent in their decision making if they expect cooperation from these communities.

I was therefore interested in the keynote remarks delivered by Jennifer Shasky Calvery, the Director of the Treasury Department’s Financial Crimes Enforcement Network. In particular, she addressed the fact that since there have been several enforcement actions against virtual currency exchangers and providers, the traditional banking sector has been wary of doing business with companies in the virtual currency space. She said:

I do want to address the issue of virtual currency administrators and exchangers maintaining access to the banking system in light of the recent action against Liberty Reserve. Again, keep in mind the combined actions by the Department of Justice and FinCEN took down a $6 billion money laundering operation, the biggest in U.S. history.

We can understand the concerns that these actions may create a broad-brush, reaction from banks. Banks need to assess their risk tolerance and the risks any particular client might pose. That’s their obligation and that’s what we expect them to do.

And this goes back to my earlier points about corporate responsibility and why it is in the best interest of virtual currency administrators and exchangers to comply with their regulatory responsibilities. Banks are more likely to associate themselves with registered, compliant, transparent businesses. And our guidance should help virtual currency administrators and providers become compliant, well-established businesses that banks will regard as desirable and profitable customers.

While it’s true that FinCEN’s March guidance provides clarity for many actors in the Bitcoin space, it is nevertheless very ambiguous about other actors. For example, is a Bitcoin miner who sells for dollars the bitcoins he mines subject to regulation? If I buy those bitcoins, hold them for a time as an investment, and then resell them for dollars, am I subject to regulation? In neither case are bitcoins acquired to purchase goods or services (the only use-case clearly not regulated according to the guidance). And even if one is clearly subject to the regulations, say as an exchanger, it takes millions of dollars and potentially years of work to comply with state licensing and other requirements. My concern is that banks will not do business with Bitcoin start-ups not because they pose any real criminal risk, but because there is too much regulatory uncertainty.

My sincere hope is that banks do not interpret Ms. Shasky Calvery’s comments as validation of their risk-aversion. Banks and other financial institutions should be careful about who they do business with, and they certainly should not do business with criminals, but it would be a shame if they felt they couldn’t do business with an innovative new kind of start-up simply because that start-up has not been (and may never be) adequately defined by a regulator. Unfortunately, I fear banks may take the comments to suggest just that, putting start-ups in limbo.

Entrepreneurs may want to comply with regulation in order to get banking services, and they may do everything they think they have to in order to comply, but the banks may nevertheless not want to take the risk given that the FinCEN guidance is so ambiguous. I asked Ms. Shasky Calvery if there was a way entrepreneurs could seek clarification on the guidance, and she said they could call FinCEN’s toll-free regulatory helpline at (800) 949–2732. That may not be very satisfying to some, but it’s a start. And I hope that any clarification that emerges from conversations with FinCEN are made public by the agency so that others can learn from it.

All in all, I think today we saw the first tentative steps toward a deeper conversation between Bitcoin entrepreneurs and users on the one hand, and regulators and law enforcement on the other. That’s a good thing. But I hope regulators understand that it’s not just the regulations they promulgate that have consequences for regulated entities, it’s also the uncertainty they can create through inaction.

Ms. Shasky Calvery also said:

Some in the press speculated that our guidance was an attempt to clamp down on virtual currency providers. I will not deny that there are some troublesome providers out there. But, that is balanced by a recognition of the innovation these virtual currencies provide, and the financial inclusion that they might offer society. A whole host of emerging technologies in the financial sector have proven their capacity to empower customers, encourage the development of innovative financial products, and expand access to financial services. And we want these advances to continue.

That is a welcome sentiment, but those advances can only continue if there are clear rules made in consultation with regulated parties and the general public. Hopefully FinCEN will revisit its guidance now that the conversation has begun, and as other regulators consider new rules, they will hopefully engage the Bitcoin community early in order to avoid ambiguity and uncertainty.

Over at The Umlaut, I try to articulate why even people who have “nothing to hide” should be concerned about NSA surveillance:

I have no doubt that Prism is a helpful tool in combatting terrorism and enforcing the law, as the Obama administration claims. But ubiquitous surveillance doesn’t just help enforce the law; it changes the kinds of laws that can be enforced. It has Constitutional implications, not just because it violates the Fourth Amendment, which it does, but because it repeals a practical barrier to ever greater tyranny.

Read the whole thing, and pass it on.

The Department of Justice has suddenly reversed course from its previous findings that mobile providers who lack spectrum below 1 GHz can become “strong competitors” in rural markets and are “well-positioned” to drive competition locally and nationally. Those supporting government intervention as a means of avoiding competition in the upcoming incentive auction attempt to avoid these findings by highlighting misleading FCC statistics, including the assertion that Verizon owns “approximately 45 percent of the licensed MHz-POPs of the combined [800 MHz] Cellular and 700 MHz band spectrum, while AT&T holds approximately 39 percent.”

Sprint Nextel Corporation (Sprint Nextel) recently sent a letter to the Federal Communications Commission (FCC) signed by Dick Thornburgh, a former US Attorney General who is currently of counsel at K&L Gates, expressing his support for the ex parte submission of the Department of Justice (DOJ) that was recently filed in the FCC’s spectrum aggregation proceeding. The DOJ ex parte recommends that the FCC “ensure” Sprint Nextel and T-Mobile obtain a nationwide block of mobile spectrum in the upcoming broadcast incentive auction. In his letter of support on behalf of Sprint Nextel, Mr. Thornburgh states he believes the DOJ ex parte “is fully consistent with its longstanding approach to competition policy under Republican and Democratic administrations alike.”

Mr. Thornburgh is mistaken. The principle finding on which the DOJ’s new recommendation is based – that the FCC should adopt an inflexible, nationwide restriction on spectrum holdings below 1 GHz – is clearly inconsistent with the DOJ’s previous approach to competition policy in the mobile marketplace. Both the FCC and the DOJ have traditionally found that there is no factual basis for making competitive distinctions among mobile spectrum bands in urban markets, and the DOJ has distinguished among mobile spectrum bands only in rural markets.

In its 2006 complaint against the merger of Alltel and Western Wireless, the DOJ found that, in rural markets with relatively low population densities, it cost more to achieve broad mobile coverage using 1.9 GHz PCS spectrum, which made it less likely that providers with PCS spectrum would deploy in those markets. Based on that finding, the DOJ concluded that additional mobile entry would be difficult in certain rural markets in which the combined firm would own all available 800 MHz Cellular spectrum – the only mobile spectrum below 1 GHz that was available on a nationwide basis at that time.

In that same merger proceeding (I was the FCC Chairman’s wireless advisor at the time), the FCC refused to adopt the DOJ’s rural market distinction and instead maintained its traditional view that spectrum bands above 1 GHz are suitable for the provision of competitive services in both urban and rural markets.

Although the DOJ continued to apply its rural market distinction in subsequent merger reviews (i.e., Alltel/Midwest Wireless and AT&T/Dobson), it recognized that the distinction wasn’t reliably predictive in every rural market and was competitively irrelevant to nationwide competition. For example, in the 2008 Verizon/Alltel merger, the DOJ found that Verizon was a “strong competitor” in rural markets in which Verizon didn’t own any Cellular spectrum below 1 GHz, “because, unlike many other providers with PCS spectrum in rural areas, it has constructed a PCS network that covers a significant portion of the population.” Similarly, in its 2011 complaint against the proposed merger of AT&T and T-Mobile, the DOJ concluded that “T-Mobile in particular” was “especially well-positioned to drive competition, at both a national and local level,” in the mobile market even though T-Mobile owned very little spectrum below 1 GHz at that time.

The DOJ’s new recommendation is a sudden reverse in course from its previous findings that mobile providers who lack spectrum below 1 GHz can become “strong competitors” in rural markets and are “well-positioned” to drive competition locally and nationally.

The DOJ’s sudden reversal is particularly surprising given that the amount of spectrum below 1 GHz has increased substantially since the DOJ adopted its rural distinction in 2006. At that time, the 800 MHz Cellular band was the only spectrum band below 1 GHz that was broadband-capable and fully available on a nationwide basis. Since then, two additional sub-1 GHz spectrum bands capable of supporting mobile broadband services have become available on a nationwide basis – the 800 MHz SMR and 700 MHz bands. Sprint Nextel owns nearly all of the 800 MHz SMR band nationwide, T-Mobile acquired 700 MHz spectrum through its acquisition of MetroPCS this year, and many rural and regional mobile providers own 800 MHz Cellular and 700 MHz spectrum in rural areas across the country.

Those supporting government intervention as a means of avoiding competition in the upcoming incentive auction attempt to avoid these facts by highlighting misleading FCC statistics, including the assertion that Verizon owns “approximately 45 percent of the licensed MHz-POPs of the combined [800 MHz] Cellular and 700 MHz band spectrum, while AT&T holds approximately 39 percent.” This statistic is misleading in two respects.

First, this statistic excludes the 800 MHz SMR band, which is owned almost exclusively by Sprint Nextel. Excluding an entire spectrum band below one gigahertz from the statistical calculation creates the misleading impression that Verizon and AT&T hold a higher percentage of mobile spectrum below 1 GHz than they actually do.

Second, the FCC’s “MHz-POPs” methodology is weighted by population, which skews the resulting percentage of spectrum ownership significantly higher for companies that own spectrum in densely populated urban areas. A hypothetical using this methodology to calculate the percentage of “MHz-POPs” in the Cellular Market Areas (CMAs) covering the State of New York demonstrates just how skewed this methodology can be in the spectrum aggregation context.

Assume that “Company A” and “Company B” both own spectrum “Block X” (i.e., both companies own the same amount of spectrum in absolute terms) in different geographic areas in New York State. Specifically, assume that “Company A” owns “Block X” in geographic license area CMA001 (covering New York City and Newark, New Jersey), and “Company B” owns the same spectrum block in the other sixteen CMAs, including all six rural license areas in the state. If their spectrum holdings are calculated using the FCC’s population-weighted “MHz-POPs” methodology, “Company A” holds 70 percent of the “Block X” spectrum and “Company B” holds only 30 percent. (For an explanation of this methodology, see the “Technical Appendix” at the bottom of this post.)

As this example demonstrates, analyzing the percentage of spectrum mobile providers hold on a nationwide basis using the FCC’s “MHz-POPs” methodology is particularly misleading given the DOJ’s determination that spectrum below 1 GHz is competitively relevant only in sparsely populated rural areas. For example, if the FCC were to adopt a rule prohibiting any one mobile provider from holding 50% or more of the spectrum below 1 GHz in New York State on a “MHz-POPs” basis, “Company A” would be in violation of the rule even though it holds spectrum in only 1 market and doesn’t hold any spectrum in rural markets.

When the 800 MHz SMR band is included and spectrum holdings are evaluated on a market-by-market basis, at least four different mobile providers hold spectrum below 1 GHz in most markets – a result that wasn’t even possible in 2006 (absent nationwide spectrum disaggregation on the secondary market) when the DOJ adopted its rural distinction.

Mr. Thornburgh’s broad statements about the DOJ’s past approach to competition policy generally and the FCC’s skewed statistics are not legitimate, data-based substitutes for a detailed analysis of DOJ precedent and current spectrum holdings below 1 GHz in both urban and rural markets. A detailed analysis indicates that the DOJ’s new recommendation is not “fully consistent” with its previous approach to competition in the mobile marketplace, though it is consistent with a desire to rig the spectrum auction to favor certain competitors.

Technical Appendix

The FCC calculates “MHz-POPs” by multiplying the megahertz of spectrum held by a mobile provider in a given area by the population of that area.

The FCC also weights spectrum holdings by population using a “population-weighted average megahertz” calculation. The FCC calculates the nationwide “population-weighted average megahertz” of a mobile provider by dividing that provider’s “MHz-POPs” (as calculated above) by the US population.

The calculations for the New York State example in this blog post use “Cellular Market Areas,” which consist of Metropolitan Statistical Area (MSA) and Rural Service Area (RSA) licenses as defined by the FCC in Public Notice Report No. CL-92-40, “Common Carrier Public Mobile Services Information, Cellular MSA/RSA Markets and Counties,” DA 92-109, 7 FCC Rcd. 742 (1992). The population figures are from the 2000 U.S. Census, U.S. Department of Commerce, Bureau of the Census.

Are we as globalized and interconnected as we think we are? Ethan Zuckerman, director of the MIT Center for Civic Media and author of the new book, Rewire: Digital Cosmopolitans in the Age of Connection, argues that America was likely more globalized before World War I than it is today. Zuckerman discusses how we’re more focused on what’s going on in our own backyards; how this affects creativity; the role the Internet plays in making us less connected with the rest of the world; and, how we can broaden our information universe to consume a more healthy “media diet.”

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Related Links

• Rewire: Digital Cosmopolitans in the Age of Connection, Zuckerman
• What Ethan Zuckerman’s Rewire tells us about the internet changing our lives, Morrison
• Rewire: Rethinking Globalization in an Age of Connection Zuckerman

It was, to paraphrase Yogi Berra, déjà vu all over again.  Fielding calls last week from journalists about reports the NSA had been engaged in massive and secret data mining of phone records and Internet traffic, I couldn’t help but wonder why anyone was surprised by the so-called revelations.

Not only had the surveillance been going on for years, the activity had been reported all along—at least outside the mainstream media.  The programs involved have been the subject of longstanding concern and vocal criticism by advocacy groups on both the right and the left.

For those of us who had been following the story for a decade, this was no “bombshell.”  No “leak” was required.  There was no need for an “expose” of what had long since been exposed.

As the Cato Institute’s Julian Sanchez and others reminded us, the NSA’s surveillance activities, and many of the details breathlessly reported last week, weren’t even secret.  They come up regularly in Congress, during hearings, for example, about renewal of the USA Patriot Act and the Foreign Intelligence Surveillance Act, the principal laws that govern the activity.

In those hearings, civil libertarians (Republicans and Democrats) show up to complain about the scope of the law and its secret enforcement, and are shot down as being soft on terrorism.  The laws are renewed and even extended, and the story goes back to sleep.

But for whatever reason, the mainstream media, like the corrupt Captain Renault in “Casablanca,” collectively found itself last week “shocked, shocked” to discover widespread, warrantless electronic surveillance by the U.S. government.  Surveillance they’ve known about for years.

Let me be clear.  As one of the long-standing critics of these programs, and especially their lack of oversight and transparency, I have no objection to renewed interest in the story, even if the drama with which it is being reported smells more than a little sensational with a healthy whiff of opportunism.

In a week in which the media did little to distinguish itself, for example, The Washington Post stood out, and not in a good way.  As Ed Bott detailed in a withering post for ZDNet on Saturday, the Post substantially revised its most incendiary article, a Thursday piece that originally claimed nine major technology companies had provided direct access to their servers as part of the Prism program.

That “scoop” generated more froth than the original “revelation” that Verizon had been complying with government demands for customer call records.

Except that the Post’s sole source for its claims turned out to a PowerPoint presentation of “dubious provenance.”  A day later, the editors had removed the most thrilling but unsubstantiated  revelations about Prism from the article.  Yet in an unfortunate and baffling Orwellian twist, the paper made absolutely no mention of the “correction.”   As Bott points out, that violated not only common journalistic practice but the paper’s own revision and correction policy.

All this and much more, however, would have been in the service of a good cause–if, that is, it led to an actual debate about electronic surveillance we’ve needed for over a decade.

Unfortunately, it won’t.  The mainstream media will move on to the next story soon enough, whether some natural or man-made disaster.

And outside the Fourth Estate, few people will care or even notice when the scandal dies.  However they feel this week, most Americans simply aren’t informed or bothered enough about wholesale electronic surveillance to force any real accountability, let alone reform.  Those who are up in arms today might ask themselves where they were for the last decade or so, and whether their righteous indignation now is anything more than just that.

As Politico’s James Hohmann noted on Saturday, “Government snooping gets civil libertarians from both parties exercised, but this week’s revelations are likely to elicit a collective yawn from voters if past polling is any sign.”

Why so pessimistic?  I looked over what I’ve written on this topic in the past, and found the following essay, written in 2008, which appeared in slightly different form in my 2009 book, “The Laws of Disruption.”   It puts the NSA’s programs in historical context, and tries to present both the costs and benefits of how they’ve been implemented.  It points out why at least some aspects of these government activities are likely illegal, and what should be done to rein them in.

What I describe is just as scandalous, if not moreso, than anything that came out last week.

Yet I present it below with the sad realization that if I were writing it today–five years later–I wouldn’t need to change a single word.  Except maybe the last sentence.  And then, just maybe.

Searching Bits, Seizing Information

U.S. citizens are protected from unreasonable search and seizure of their property by their government.  In the Constitution, that right is enshrined in the Fourth Amendment, which was enacted in response to warrantless searches by British agents in the run-up to the Revolutionary War. Over the past century, the Supreme Court has increasingly seen the Fourth Amendment as a source of protection for personal space—the right to a “zone of privacy” that governments can invade only with probable cause that evidence of a crime will be revealed.

Under U.S. law, Americans have little in the way of protection of their privacy from businesses or from each other. The Fourth Amendment is an exception, albeit one that applies only to government.

But digital life has introduced new and thorny problems for Fourth Amendment law. Since the early part of the twentieth century, courts have struggled to extend the “zone of privacy” to intangible interests—a right to privacy, in other words, in one’s information. But to “search” and “seize” implies real world actions. People and places can be searched; property can be seized.

Information, on the other hand, need not take physical form, and can be reproduced infinitely without damaging the original. Since copies of data may exist, however temporarily, on thousands of random computers, in what sense do netizens have “property” rights to their information? Does intercepting data constitute a search or a seizure or neither?

The law of electronic surveillance avoids these abstract questions by focusing instead on a suspect’s expectations. Courts reviewing challenged investigations ask simply if the suspect believed the information acquired by the government was private data and whether his expectation of privacy was reasonable.

It is not the actual search and seizure that the Fourth Amendment forbids, after all, but unreasonable search and seizure. So the legal analysis asks what, under the circumstances, is reasonable. If you are holding a loud conversation in a public place, it isn’t reasonable for you to expect privacy, and the police can take advantage of whatever information they overhear. Most people assume, on the other hand, that data files stored on the hard drive of a home computer are private and cannot be copied without a warrant.

One problem with the “reasonable expectation” test is that as technology changes, so do user expectations. The faster the Law of Disruption accelerates, the more difficult it is for courts to keep pace. Once private telephones became common, for example, the Supreme Court required law enforcement agencies to follow special procedures for the search and seizure of conversations—that is, for wiretaps. Congress passed the first wiretap law, known as Title III, in 1968. As information technology has revolutionized communications and as user expectations have evolved, the courts and Congress have been forced to revise Title III repeatedly to keep it up to date.

In 1986, the Electronic Communications Privacy Act amended Title III to include new protection for electronic communications, including e-mail and communications over cellular and other wireless technologies. A model of reasonable lawmaking, the ECPA ensured these new forms of communication were generally protected while closing a loophole for criminals who were using them to evade the police. (By 2005, 92 percent of wiretaps targeted cell phones.)

As telephone service providers multiplied and networks moved from analog to digital, a 1994 revision required carriers to build in special access for investigators to get around new features such as call forwarding. Once a Title III warrant is issued, law enforcement agents can now simply log in to the suspect’s network provider and receive real-time streams of network traffic.

Since 1968, Title III has maintained an uneasy truce between the rights of citizens to keep their communications private and the ability of law enforcement to maintain technological parity with criminals. As the digital age progresses, this balance is harder to maintain. With each cycle of Moore’s Law, criminals discover new ways to use digital technology to improve the efficiency and secrecy of their operations, including encryption, anonymous e-mail resenders, and private telephone networks. During the 2008 terrorist attacks in Mumbai, for example, co-conspirators used television reports of police activity to keep the gunmen at various sites informed, using Internet telephones that were hard to trace.

As criminals adopt new technologies, law enforcement agencies predictably call for new surveillance powers. China alone employs more than 30,000 “Internet police” to monitor online traffic, what is sometimes known as the “Great Firewall of China.” The government apparently intercepts all Chinese-bound text messages and scans them for restricted words including democracy, earthquake, and milk powder.

The words are removed from the messages, and a copy of the original along with identifying information is stored on the government’s system. When Canadian human rights activists recently hacked into Chinese government networks they discovered a cluster of message-logging computers that had recorded more than a million censored messages.

Netizens, increasingly fearful that the arms race between law enforcement and criminals will claim their privacy rights as unintended victims, are caught in the middle. Those fears became palpable after the September 11, 2001, terrorist attacks and those that followed in Indonesia, London, and Madrid.  The world is now engaged in a war with no measurable objectives for winning, fought against an anonymous and technologically savvy enemy who recruits, trains, and plans assaults largely through international communication networks. Security and surveillance of all varieties are now global priorities, eroding privacy interests significantly.

The emphasis on security over privacy is likely to be felt for decades to come. Some of the loss has already been felt in the real world. To protect ourselves from future attacks, everyone can now expect more invasive surveillance of their activities, whether through massive networks of closed-circuit TV cameras in large cities or increased screening of people and luggage during air travel. The erosion of privacy is even more severe online. Intelligence is seen as the most effective weapon in a war against terrorists. With or without authorization, law enforcement agencies around the world have been monitoring large quantities of the world’s Internet data traffic. Title III has been extended to private networks and Internet phone companies, who must now insert government access points into their networks. (The FCC has proposed adding other providers of phone service, including universities and large corporations.)

Because of difficulties in isolating electronic communications associated with a single IP address, investigators now demand the complete traffic of large segments of addresses, that is, of many users. Data mining technology is applied after the fact to search the intercepted information for the relevant evidence.

Passed soon after 9/11, the USA Patriot Act went much further. The Patriot Act abandoned many of the hard-fought controls on electronic surveillance built into Title III. New “enhanced surveillance procedures” allow any judge to authorize electronic surveillance and lower the standard for warrants to seize voice mails.

The FBI was given the power to conduct wiretaps without warrants and to issue so-called national security letters to gag network operators from revealing their forced cooperation. Under a 2006 extension, FBI officials were given the power to issue NSLs that silenced the recipient forever, backed up with a penalty of up to five years in prison.

Gone is even a hint of the Supreme Court’s long-standing admonitions that search and seizure of information should be the investigatory tool of last resort.

Despite the relaxed rules, or perhaps inspired by them, the FBI acknowledged in 2007 that it had violated Title III and the Patriot Act repeatedly, illegally searching the telephone, Internet, and financial records of an unknown number of Americans. A Justice Department investigation found that from 2002 to 2005 the bureau had issued nearly 150,000 NSLs, a number the bureau had grossly under-reported to Congress.

Many of these letters violated even the relaxed requirements of the Patriot Act. The FBI habitually requested not only a suspect’s data but also those of people with whom he maintained regular contact—his “community of interest,” as the agency called it. “How could this happen?” FBI director Robert Mueller asked himself at the 2007 Senate hearings on the report. Mueller didn’t offer an answer.

Ultimately, a federal judge declared the FBI’s use of NSLs unconstitutional on free-speech grounds, a decision that is still on appeal. The National Security Agency, which gathers foreign intelligence, undertook an even more disturbing expansion of its electronic surveillance powers.

Since the Constitution applies only within the U.S., foreign intelligence agencies are not required to operate within the limits of Title III. Instead, their information- gathering practices are held to a much more relaxed standard specified in the Foreign Intelligence Surveillance Act. FISA allows warrantless wiretaps anytime that intercepted communications do not include a U.S. citizen and when the communications are not conducted through U.S. networks. (The latter restriction was removed in 2008.)

Even these minimal requirements proved too restrictive for the agency. Concerned that U.S. operatives were organizing terrorist attacks electronically with overseas collaborators, President Bush authorized the NSA to bypass FISA and conduct warrantless electronic surveillance at will as long as one of the parties to the information exchange was believed to be outside the United States.

Some of the president’s staunchest allies found the NSA’s plan, dubbed the Terrorist Surveillance Program, of dubious legality. Just before the program became public in 2005, senior officials in the Justice Department refused to reauthorize it.

In a bizarre real-world game of cloak-and-dagger, presidential aides, including future attorney general Alberto Gonzales, rushed to the hospital room of then-attorney general John Ashcroft, who was seriously ill, in hopes of getting him to overrule his staff. Justice Department officials got wind of the end run and managed to get to Ashcroft first. Ashcroft, who was barely able to speak from painkillers, sided with his staff.

Many top officials, including Ashcroft and FBI director Mueller, threatened to resign over the incident. President Bush agreed to stop bypassing the FISA procedure and seek a change in the law to allow the NSA more flexibility. Congress eventually granted his request.

The NSA’s machinations were both clumsy and dangerous. Still, I confess to having considerable sympathy for those trying to obtain actionable intelligence from online activity. Post-9/11 assessments revealed embarrassing holes in the technological capabilities of most intelligence agencies worldwide. (Admittedly, it also revealed repeated failures to act on intelligence that was already collected.) Initially at least, the public demanded tougher measures to avoid future attacks.

Keeping pace with international terror organizations and still following national laws, however, is increasingly difficult. For one thing, communications of all kinds are quickly migrating to the cheaper and more open architecture of the Internet. An unintended consequence of this change is that the nationalities of those involved in intercepted communications are increasingly difficult to determine.

E-mail addresses and instant-message IDs don’t tell you the citizenship or even the location of the sender or receiver. Even telephone numbers don’t necessarily reveal a physical location. Internet telephone services such as Skype give their customers U.S. phone numbers regardless of their actual location. Without knowing the nationality of a suspect, it is hard to know what rights she is entitled to. The architecture of the Internet raises even more obstacles against effective surveillance. Traditional telephone calls take place over a dedicated circuit connecting the caller and the person being called, making wiretaps relatively easy to establish. Only the cooperation of the suspect’s local exchange is required.

The Internet, however, operates as a single global exchange. E-mails, voice, video, and data files—whatever is being sent is broken into small packets of data. Each packet follows its own path between connected computers, largely determined by data traffic patterns present at the time of the communication.

Data may travel around the world even if its destination is local, crossing dozens of national borders along the way. It is only on the receiving end that the packets are reassembled.

This design, the genius of the Internet, improves network efficiency. It also provides a significant advantage to anyone trying to hide his activities. On the other hand, NSLs and warrantless wiretapping on the scale apparently conducted by the NSA move us frighteningly close to the “general warrant” American colonists rejected in the Fourth Amendment. They were right to revolt over the unchecked power of an executive to do what it wants, whether in the name of orderly government, tax collection, or antiterrorism.

In trying to protect its citizens against future terror attacks, the secret operations of the U.S. government abandoned core principles of the Constitution. Even with the best intentions, governments that operate in secrecy and without judicial oversight quickly descend into totalitarianism. Only the intervention of corporate whistle-blowers, conscientious government officials, courts, and a free press brought the United States back from the brink of a different kind of terrorism.

Internet businesses may be entirely supportive of government efforts to improve the technology of policing. A society governed by laws is efficient, and efficiency is good for business. At the same time, no one is immune from the pressures of anxious customers who worry that the information they provide will be quietly delivered to whichever regulator asks for it. Secret surveillance raises the level of customer paranoia, leading rational businesses to avoid countries whose practices are not transparent.

Partly in response to the NSA program, companies and network operators are increasingly routing information flow around U.S. networks, fearing that even transient communications might be subject to large-scale collection and mining operations by law enforcement agencies. But aside from using private networks and storing data offshore, routing transmissions to avoid some locations is as hard to do as forcing them through a particular network or node.

The real guarantor of privacy in our digital lives may not be the rule of law. The Fourth Amendment and its counterparts work in the physical world, after all, because tangible property cannot be searched and seized in secret. Information, however, can be intercepted and copied without anyone knowing it. You may never know when or by whom your privacy has been invaded. That is what makes electronic surveillance more dangerous than traditional investigations, as the Supreme Court realized as early as 1967.

In the uneasy balance between the right to privacy and the needs of law enforcement, the scales are increasingly held by the Law of Disruption. More devices, more users, more computing power: the sheer volume of information and the rapid evolution of how it can be exchanged have created an ocean of data. Much of it can be captured, deciphered, and analyzed only with great (that is, expensive) effort. Moore’s Law lowers the costs to communicate, raising the costs for governments interested in the content of those communications.

The kind of electronic surveillance performed by the Chinese government is outrageous in its scope, but only the clumsiness of its technical implementation exposed it. Even if governments want to know everything that happens in our digital lives, and even if the law allows them or is currently powerless to stop them, there isn’t enough technology at their disposal to do it, or at least to do it secretly.

So far.

This post is a parody of “Dialogue Concerning the Two Chief World Systems” written by Galileo Galilei in 1632, which attempted to prove that the earth revolves around the sun (the Copernican system). Although the Copernican system was ultimately proven to be scientifically correct, Galileo was convicted of heresy and his book was placed on the Index of Forbidden Books for more than two hundred years.

Galileo’s book was written as a dialogue between three characters, Salviati, who supported Galileo’s view, Simplicio, who believed the universe revolves around the earth (the Ptolemaic system), and Sagredo, an open-minded person with no established position. In this parody, Salviati supports the use of actual or de facto guard bands between broadcast and mobile services, Simplicio supports the FCC’s competing guard band proposals in the 600 MHz and 700 MHz bands, and Sagredo remains open-minded.

INTERLOCUTORS

Salviati, Sagredo, Simplicio

SALVIATI. We resolved to meet today and discuss the differences in the FCC’s approach to the potential for harmful interference between broadcast and mobile services in the 600 MHz band on the one hand and the lower 700 MHz band on the other.

To prevent harmful interference between broadcast and mobile services in the 600 MHz band, the FCC has proposed separating these services with guard bands in which neither service would be allowed to operate. To make this easier to understand, let us use this tablet to illustrate the FCC’s proposed 600 MHz band plan and other such matters as they arise during our discussion.

The FCC adopted a very different approach to this issue in the 700 MHz band. Rather than require a spectral guard band between broadcast and mobile services, the FCC created geographic exclusion zones to protect broadcast services from the potential for harmful interference from mobile services in the lower 700 MHz A Block.

The FCC considered imposing additional limitations to protect mobile services in the A Block from broadcast services in Channel 51, but ultimately decided to provide A Block licensees with the flexibility to account for harmful interference through their own business plans, services, and facilities.

As a result, the 3GPP defined two LTE band classes for paired spectrum in the lower 700 MHz band:

• Band Class 17, which uses the A Block as a de facto guard band separating mobile services in the lower 700 MHz B and C Blocks from broadcast services in Channel 51; and

• Band Class 12, which has no guard band.

A group of A Block licensees subsequently filed a petition asking the FCC to initiate a rulemaking proceeding to require that all devices operating on paired commercial spectrum in the 700 MHz band be capable of operating on all paired frequencies in the band and also to suspend authorization of 700 MHz devices that are incapable of operating on all such frequencies. Last year the FCC initiated a rulemaking proceeding to evaluate whether the lower 700 MHz B and C Blocks would experience harmful interference, and to what degree, if the FCC were to impose an interoperability mandate.

It would appear that the FCC has since answered the first question, whether eliminating the de facto guard band in 3GPP Band Class 17 would cause harmful interference, by proposing 6 MHz guard bands between broadcast and mobile services in the 600 MHz band.

SIMPLICIO. The 600 MHz band uses different frequencies than the 700 MHz band, and different frequencies have different characteristics. The FCC has often adopted different rules for different frequency bands. If the potential for harmful interference between broadband mobile services were similar in both bands, the FCC would not have omitted that fact.

SAGREDO. You might at least add, “if it had occurred to the FCC to consider the question.” If the FCC were to consider it, could the FCC plausibly conclude that the potential for harmful interference between broadcast and mobile services is substantially different in the 600 MHz band?

SALVIATI. Your question seems to me most excellent. Though I grant that the FCC adopts spectrum rules on an ad hoc basis, I feel no compulsion to grant that the arbitrary distinctions of FCC process confer legitimacy on question of physics. Whether the potential for harmful interference is substantially the same in the 600 MHz and 700 MHz bands is a question amenable to answer only by demonstrative science, not speculation regarding past FCC actions and current omissions.

Neither the FCC nor the industry has adduced any evidence that the potential for harmful interference varies substantially between the 600 MHz and 700 MHz bands. To the contrary, the available evidence indicates that the potential for harmful interference in these bands is substantially similar due their relatively close proximity within the electromagnetic spectrum and the fact that the phenomena responsible for interference between broadcast and mobile services are not frequency dependent.

SIMPLICIO. I do not mean to join the number of those who are too curious about the mysteries of physics. But as to the point at hand, I reply that licensees in the A Block are asking the FCC to impose an interoperability mandate for competitive reasons. AT&T, who owns spectrum in the lower 700 MHz B and C Blocks, has deployed only Band Class 17, which excludes the A Block. Licensees in the A Block must use Band Class 12, which is not supported by AT&T. That is preventing A Block licensees from taking advantage of AT&T’s economies of scale for purchasing devices and roaming on its network. This seems to be conclusive evidence that AT&T excluded Band Class 12 from its B and C Block devices to raise the costs of its rivals, a form of anticompetitive behavior.

SAGREDO: I do not claim to comprehend the mysteries of physics, but I have some knowledge of the laws governing competition. The law does not penalize a company merely for being successful in the marketplace – it prohibits only anticompetitive behavior that is “unreasonable” or “wrongful.” The fact that AT&T’s decision to deploy Band Class 17 may incidentally raise its rivals’ costs is irrelevant if AT&T had legitimate business reasons to make that decision.

SALVIATI. Exactly so, which brings us full circle. Whether AT&T had legitimate reasons to deploy Band Class 17 depends on the laws of physics. If deploying Band Class 12 has the potential to cause harmful interference to the B and C Blocks, AT&T’s decisions to deploy Band Class 17 cannot be considered anticompetitive.

SIMPLICIO. What about the expectations of the A Block licensees? Band Class 17 was not proposed to the 3GPP until after the 700 MHz auction was completed. It seems legitimate to me that the FCC honor their expectation that all licensees would deploy Band Class 12.

SALVIATI. Another question answers yours. Did the FCC require or even encourage the deployment of interoperable devices in the 700 MHz band?

SIMPLICIO. You already know the answer. The FCC clearly said licensees could make their own determinations respecting the services and technologies they deploy in the band so long as they comply with the FCC’s technical rules. What does that have to do with the expectations of the A Block licensees?

SALVIATI. It demonstrates that the ostensible expectations of the A Block licensees were unreasonable. The FCC’s rules clearly gave B and C block licensees the absolute right to eschew deploying Band Class 12, and it was reasonably foreseeable that B and C Block licensees would exercise that right given the potential for harmful interference inherent in Band Class 12. Based on the FCC’s rules, the ostensible expectation of the A Block licensees is more reasonably categorized as a blind hope or a calculated risk. On average, the A Block licensees paid less than half the price the B Block licensees paid for the same amount of spectrum. If the B Block licensees had decided to deploy Band Class 12, the A Block licensees would have enjoyed access to maximal economies of scale while the B Block licensees suffered from the same interference potential at twice the price. If not, the A Block licensees knew that they could still deploy Band Class 12 on their own at half the price.

SIMPLICIO. You say the A Block licensees could still deploy Band Class 12 systems in their spectrum, but they say they cannot deploy without AT&T’s help. Why should I favor your position over theirs?

SALVIATI. Experience proves my position is correct. US Cellular, one of the A Block licensees who petitioned the FCC in this matter, has already deployed Band Class 12 in its A Block spectrum.

SAGREDO. I cannot without great astonishment – I might say without great insult to my intelligence – hear it said that something cannot be done that has already been done. I submit that I am better satisfied with your discourse than that of the A Block licensees in respect to the competitive and economic issues. But my knowledge is insufficient to reach my own conclusion regarding the physics. Perhaps AT&T was acting unreasonably when it chose to use the A Block as a de facto guard band to protect its operations in the C and B Blocks from harmful interference.

SALVIATI. That is the question Simplicio dreads. He knows that, if the FCC answers that question in the affirmative, it cannot establish guard bands in the 600 MHz band. The law governing the 600 MHz band provides that “guard bands shall be no larger than is technically reasonable to prevent harmful interference between licensed services outside the guard bands.” It can hardly be technically reasonable to require a 6 MHz guard band in the 600 MHz band while finding it was technically unreasonable for AT&T to treat the 6 MHz A Block as a de facto guard band given the evidence that the interference potential is substantially the same.

SAGREDO. Let us close our discussions for the day. The honest hours being past, I think Simplicio might like to contemplate this question during our cool ones. Tomorrow I shall expect you both so that we may continue the discussions now begun.

Today, the Obama administration announced 5 executive actions it is taking and 7 legislative proposals it is making to address the problem of patent trolls. While these are incremental steps in the right direction, they are still pretty weak sauce. The reforms could alleviate some of the litigation pressure on Silicon Valley firms, but there’s a long way to go if we want to have a patent system that maximized innovation.

The proposals aim to reduce anonymity in patent litigation, improve review at the USPTO, give more protection to downstream users, and improve standards at the International Trade Commission, a venue which has been gamed by patent plaintiffs. These are all steps worth taking. But they’re not enough. The White House’s press release quotes the president as saying that “our efforts at patent reform [i.e. the America Invents Act, passed in 2011] only went about halfway to where we need to go.” Presumably the White House believes these steps will take us the rest of the way there.

But the problem with computer-enabled patents isn’t merely that they result in a lot of opportunistic litigation, though they do. The problem is that almost every new idea is actually pretty obvious, in the sense that it is “invented” at the same time by lots of companies that are innovating in the same space. Granting patents in a field where everyone is innovating in the same way at the same time is a recipe for slowing down, not speeding up, innovation. Instead of just getting on with the process of building great new products, companies have to file for patents, assemble patent portfolios, license patents from competitors who “invented” certain software techniques a few months earlier, deal with litigation, and so on. A device like a smartphone requires thousands of patents to be filed, licensed, or litigated.

If we really want to speed up innovation, we need to take bolder steps. New Zealand recently abolished software patents by declaring that software is not an invention at all. It would be terrific if the White House would get behind that kind of bold thinking. In the meantime, we’ll have to watch closely as the Obama administration’s executive actions are implemented and its legislative recommendations move through Congress. I hope for the best, but for now I’m not too impressed.

Few dispute that mobile carriers are being squeezed by the relative scarcity of radio spectrum. This scarcity is a painful artifact of regulatory decisions made decades ago, when the regulators gave valuable spectrum away for free to government agencies and to commercial users via so-called “beauty contests.” As more Americans purchase tablets and smartphones (as of a year ago, smartphones comprise a majority of phone plans in the US), many fear that consumers will be hurt by higher prices, stringent data limits, and less wireless innovation.

In the face of this demand, freeing up more airwaves for mobile broadband became a bipartisan effort and many scholars and policymakers have turned their hungry eyes to the ample spectrum possessed by federal agencies, which hold around 1500 MHz of the most valuable bands. The scholarly consensus–confirmed by government audits–is that federal agencies use their spectrum poorly. Because many licensees use spectrum under the old rules (free spectrum) and use it inefficiently, President Obama directed the FCC and NTIA to find 500 MHz of spectrum for mobile broadband use by 2020.

I recently published a Mercatus working paper surveying plans that encourage federal agencies to economize on their use of radio spectrum, with the ultimate goal of auctioning cleared spectrum to the highest bidders (probably mobile broadband service providers given consumer needs). In my research, interviewees pointed to two problems with reclaiming federal spectrum: (a) there is no effective process to get federal users (especially the powerful Department of Defense) to turn over spectrum, and (b) federal users don’t pay market prices for spectrum, resulting in inefficient use and billions of dollars of value annually wasted.

I’ll note two of the promising spectrum management plans here. As for improving the process of quickly getting federal spectrum auctioned off, there is a bill, promoted by Sen. Kirk and Rep. Kinzinger, to “BRAC the spectrum.” BRAC (the Base Realignment and Closure procedure), as Jerry Brito documents, was a move by Congress in 1988 to successfully accomplish the politically difficult task of closing military bases. BRAC-ing the spectrum would mean the congressional creation of a commission with the authority to clear federal users out of their spectrum. All spectrum-clearing decisions by this commission during its tenure would stand, absent a disapproving joint resolution from Congress. The identified spectrum could be auctioned off within a few years and the proceeds could be used to move the federal systems to other bands, with the remainder going to the Treasury.

The second proposal I highlight is the creation of a GSA-like agency that controls federal spectrum. This proposal, from Thomas Lenard, Lawrence White, and James Riso, would accomplish the second goal of making federal users pay substantial fees for their spectrum. The federal government pays market rates for many important inputs–tanks, carriers, land, etc.–so why is spectrum free? The GSA, the authors explain, owns real estate and buildings and it leases those to federal agencies. Just as paying rent forces federal agencies to economize on building size and amenities, a “GSA for spectrum” would lease spectrum to agencies, hopefully preventing the sort of waste currently seen in federal bands.

I’m probably the first TLF author to favor the creation of 2 new federal agencies in a post (hopefully not my last!), but these proposals may be necessary given the damaging status quo. Federal waste of spectrum assets isn’t disputed and the consumer benefits of freeing up spectrum are obvious. The fight lies primarily between powerful interest groups and affected congressional committees, some of whom will see their constituent oxen gored (DoD, defense contractors, technology firms). Given the urgent needs, it’s foolish to continue to do nothing.

David Garcia, post doctoral researcher at the Swiss Federal Institute of Technology and co-author of Social Resilience in Online Communities: The Autopsy of Friendster, discusses the concept of social resilience and how online communities, like Facebook and Friendster, withstand changes in their environment.

Garcia’s paper examines one of the first online social networking sites, Friendster, and analyzes its post-mortem data to learn why users abandoned it.

Garcia goes on to explain how opportunity cost and cost benefit analysis can affect a user’s decision whether or not to remain in an online community.

Download

Related Links

• Social Resilience in Online Communities: The Autopsy of Friendster, Garcia, Mavrodiev, Schweitzer
• An autopsy of a dead social network, The Physics arXiV Blog
• Researchers conduct ‘autopsy’ of dead social network Friendster, Solon

Alexander Howard has put together this excellent compendium of comments on Mike Rosenwald’s new Washington Post editorial, “Will the Twitter Police make Twitter boring?” I was pleased to see that so many others had the same reaction to Rosenwald’s piece that I did.

For the life of me, I cannot understand how anyone can equate counter-speech with “Twitter Police,” but that’s essentially what Rosenwald does in his essay. The examples he uses in his essay are exactly the sort of bone-headed and generally offensive comments that I would hope we would call out and challenge robustly in a deliberative democracy. But when average folks did exactly that, Rosenwald jumps to the preposterous conclusion that it somehow chilled speech. Stranger yet is his claim that “the Twitter Police are enforcing laws of their own making, with procedures they have authorized for themselves.” Say what? What laws are you talking about, Mike? This is just silly. These people are SPEAKING not enforcing any “laws.” They are expressing opinions about someone else’s (pretty crazy) opinions. This is what a healthy deliberative democracy is all about, bud!

Moreover, Rosenwald doesn’t really explain what a better world looks like. Is it one in which we all just turn a blind eye to what many regard as offensive or hair-brained commentary? I sure hope not!

I’m all for people vigorously expressing their opinions but I am just as strongly in favor of people pushing back with opinions of their own. You have no right to be free of social sanction if your speech offends large swaths of society. Speech has consequences and the more speech it prompts, the better.

” . . . the cooperative process envisioned by the National Broadband Plan is at risk of shifting to the traditionally contentious band plan process that has delayed spectrum auctions in the past.”

The National Broadband Plan proposed a new way to reassign reallocated spectrum. The Plan noted that, “Contentious spectrum proceedings can be time-consuming, sometimes taking many years to resolve, and incurring significant opportunity costs.” It proposed “shifting [this] contentious process to a cooperative one” to “accelerate productive use of encumbered spectrum” by “motivating existing licensees to voluntarily clear spectrum through incentive auctions.” Congress implemented this recommendation through legislation requiring the FCC to transition additional broadcast spectrum to mobile use through a voluntary incentive auction process rather than traditional FCC mandates.

Among other things, the FCC’s Notice of Proposed Rulemaking initiating the broadcast incentive auction proceeding proposed a “lead” band plan approach and several alternative options, including the “down from 51” approach. An overwhelming majority of broadcasters, wireless providers, equipment manufacturers, and consumer groups rejected the “lead” approach and endorsed the alternative “down from 51” approach. This remarkably broad consensus on the basic approach to the band plan promised to meet the goals of the National Broadband Plan by accelerating the proceeding and motivating voluntary participation in the auction.

That promise was broken when the FCC’s Wireless Bureau unilaterally decided to issue a Public Notice seeking additional comment on a variation of the FCC’s “lead” proposal as well as a TDD approach to the band plan. The Bureau issued this notice over the objection of FCC Commissioner Ajit Pai, who issued a separate statement expressing his concern that seeking comment on additional approaches to the band plan when there is a “growing consensus” in favor of the “down from 51” approach could unnecessarily delay the incentive auction. This statement “peeved” Harold Feld, Senior Vice President at Public Knowledge, who declared that there is no consensus and that the “down from 51” plan would be a “disaster.” As a result, the cooperative process envisioned by the National Broadband Plan is at risk of shifting to the traditionally contentious band plan process that has delayed spectrum auctions in the past.

Consumer groups, including Public Knowledge, acknowledged the consensus

Mr. Feld’s “pique” with Commissioner Pai’s view that the “down from 51” approach had become the “consensus framework” for the 600 MHz band plan is surprising. According to Mr. Feld, Sprint, Microsoft, and the Public Interest Spectrum Coalition (PISC) objected to the “down from 51” approach. As support for this position, Mr. Feld cited reply comments filed by the PISC, a coalition that includes, among others, Public Knowledge.

Contrary to Mr. Feld’s assertion, however, the PISC reply comments support Commissioner Pai’s view. The PISC reply comments expressly state that there is a “consensus in favor of a 51-down band plan with a duplex gap,” which is “supported as technically superior by virtually all major industry commenters.”

To be sure, after Commissioner Pai issued his statement, Mr. Feld met with the Wireless Bureau to state for the record that there is no consensus support for the “down from 51” approach. Prior to that meeting, however, Public Knowledge had not expressed that view.

Why has Mr. Feld suddenly become so vehemently opposed to the “down from 51” approach?

“Down from 51” would not reduce revenue

Mr. Feld claims that the “down from 51” approach embraced by the broadcasters and “so many carriers and equipment manufacturers” would be an “absolute disaster” for that very reason – i.e., most of the industry supports it. In Mr. Feld’s view, the fact that the overwhelming majority of industry participants support the “down from 51” approach is evidence that they are “colluding” to reduce auction revenue.

Although the service rules and auction revenue are to some extent interdependent, insofar as band plans are concerned, wireless providers have far greater incentives to promote spectral and operational efficiency than to reduce auction prices. The costs of building and operating wireless networks are significantly higher than the one-time costs of acquiring spectrum at auction, and consumer demand for wireless broadband capacity is rapidly increasing. Given these facts, no rational wireless provider has an incentive to promote a band plan designed to reduce auction revenue.

In any event, Mr. Feld’s theory that the “down from 51” approach could reduce revenue by making too much spectrum available is irrelevant to the band plan issue. Even assuming his theory is correct, the FCC’s other proposed approaches to the band plan, none of which “cap” the amount of spectrum that would be accepted in the reverse auction, would run the same risk. Similarly, Mr. Feld’s proposed solution of limiting the amount of spectrum accepted in the reverse auction could be applied to any approach to the band plan, including “down from 51.”

“Down from 51” is not anticompetitive

Mr. Feld claims that the “down from 51” approach is anticompetitive because, in his view, wireless providers that lack spectrum below 1 GHz “are the only ones capable of using the downlink spectrum, and even then only if they bid exclusively on the supplementary downlinks.” According to Mr. Feld, this means such providers will bid only on the downlink spectrum and leave the paired spectrum to Verizon and AT&T even though, in his view, providers that lack spectrum below 1 GHz are the ones that “most need” uplink spectrum.

Of course, if this were true, it would be irrational for any wireless provider to join Verizon and AT&T in supporting the “down from 51” approach. Yet, T-Mobile, the only nationwide provider that lacks nationwide spectrum below 1 GHz, is a signatory to the “Joint Accord” supporting the “down from 51” approach, an approach that is also supported by rural and regional providers.

Given the current state of the record, a finding based on Mr. Feld’s hypothesis would require the FCC to assume that wireless providers generally behave irrationally when developing band plans – an assumption so absurd it would fail even the most deferential application of the Chevron standard for judicial review.

“Down from 51” is not inefficient

Mr. Feld claims the “down from 51” approach is spectrally inefficient because it “maximizes the total number of guard bands” while retaining a duplex gap.

To the contrary, the “down from 51” approach proposed by the FCC would require the minimum total number of guard bands while retaining a duplex gap: one.

If enough spectrum is cleared to place the guard band adjacent to Channel 37 as proposed by T-Mobile, the “down from 51” approach would also minimize the amount of spectrum that must be allocated to guard bands. This specific version of the “down from 51” approach would require a total of only 4 MHz of guard band spectrum while providing 10 MHz of protection against interference (6 MHz in Channel 37 plus an additional 4 MHz yielded by broadcasters in the reverse auction).

In comparison, the “down from 51 reversed” approach proposed by the Wireless Bureau in the Public Notice would require at least two guard bands.

If the FCC intends to maximize spectral efficiency by minimizing the total number of guard bands, it will not adopt the “down from 51 reversed” approach proposed by the Wireless Bureau. That is why the FCC proposed to place the 600 MHz uplink band adjacent to the lower 700 MHz uplink band in the “lead” proposal in its Notice of Proposed Rulemaking.

A TDD approach is inefficient

Mr. Feld claims that a “down from 51 TDD” approach would make “maximum use” of spectrum above Channel 37 because it would eliminate the duplex gap required for FDD deployments. He neglects to mention, however, that a TDD approach would require an additional guard band that would be the same or substantially similar in size to the FDD duplex gap in the “down from 51″ approach. Compare the FCC’s “down from 51” approach with the Wireless Bureau’s “down from 51 TDD” approach:

As I’ve noted previously, the switching times inherent in LTE TDD systems also produce latency and reduce coverage – issues that would be exacerbated in rural deployments in the 600 MHz band. LTE TDD operates in two modes: a 10-millisecond mode (more latency, but more coverage) and a 5-millisecond mode (less latency, but less coverage). In the 10-millisecond mode, LTE TDD is generally not suitable for the streaming applications that stress mobile networks the most (e.g., video chat applications). In the 5-millisecond mode, LTE TDD is generally suitable for streaming applications, but suffers from significantly reduced coverage. According to Qualcomm, in a coverage-limited system using the same frequency, TDD requires 31 to 65 percent more base stations than FDD to maintain the same throughput.

This doesn’t mean that TDD technologies have no role to play in the wireless marketplace. In the absence of channel aggregation opportunities, TDD is the only choice when paired spectrum is unavailable. It can also be used to enhance capacity when coverage is not the delimiting factor.

The primary driver behind LTE TDD deployment generally, however, appears to be Chinese industrial policy, not spectral efficiency. After China’s TDD-based SCDMA technology failed to gain traction internationally, it focused its efforts on developing a TDD version of LTE that would be backward compatible with its SCDMA standard and expand China’s technological influence globally. As a result, China became the primary promoter of the LTE TDD standard and a major owner of the standard’s essential patents (i.e., Huawei states that it leads the world in essential LTE patents). Based on likely deployment scenarios in the 600 MHz band, an FCC-mandated TDD approach would benefit Chinese patent holders, not American consumers.

The Public Notice Should Not Have Been Issued by the Bureau

Finally, Mr. Feld accused Commissioner Pai of “poisoning” the rulemaking process by calling attention to the Wireless Bureau’s disregard for his role as a Commissioner. Mr. Feld portrayed the Public Notice as a routine matter, but as a former Chief of the Wireless Bureau, I know that Bureaus do not circulate routine items to the Commissioners. A Bureau typically circulates an item to the Commissioners with a waiting period only when its authority to issue the item at the Bureau-level is unclear. If a Commissioner objects to the issuance of the item at the Bureau level, established practice requires that it be submitted to the Commission for a vote.

In my experience, the Bureau’s decision to ignore Commissioner Pai’s objection was, at a minimum, a serious breach of comity and established protocol. If anything “poisoned” the process in this instance, it was the Bureau’s insistence on issuing a Public Notice on authority delegated to it by the Commission over the objection of a Commissioner.

Conclusion

The surest path to “disaster” in this proceeding is for the FCC to take the incentives out of the incentive auction. The Bureau’s insistence on pushing an approach that most broadcasters, wireless providers, and equipment manufacturers don’t support is more likely to deter participation in the auction than incent it. It is the industry – not the Wireless Bureau – that ultimately must agree to risk its capital in the auction and deploy new wireless infrastructure. If the Wireless Bureau’s preferred approach wins and, as a result, the industry declines to participate in the auction, everyone loses.

In mid-April, the Federal Trade Commission (FTC) requested comments regarding “the consumer privacy and security issues posed by the growing connectivity of consumer devices, such as cars, appliances, and medical devices” or the so-called “Internet of Things.” This is in anticipation of a November 21 public workshop that the FTC will be hosting on the same issue.

These issues are finally starting to catch the attention of the public and policymakers alike with the rise of wearable computing, remote home automation and monitoring technologies, smart grids, autonomous vehicles and intelligent traffic systems, and so on. The Internet of Things represents the next great wave of Internet innovation, but it also represents the next great battleground in the field of Internet policy.

I filed comments with the FTC today in this proceeding and made a few simple points about why they should proceed cautiously here. A summary of my filing follows.

Avoiding a Precautionary Principle for the Internet of Things

First, while it is unclear where the FTC is heading with this proceeding—or for that matter, whether this even a formal proceeding at all—the danger exists that it represents the beginning of a regulatory regime for a new set of information technologies that are still in their infancy. Fearing hypothetical worst-case scenarios about the misuse of some IoT technologies, some policy activists and policymakers could seek to curb or control their development.

Policymakers should avoid acting on those impulses. Simply put, the Internet of Things—like the Internet itself—should not be subjected to a precautionary principle, which would impose preemptive, prophylactic restrictions on this rapidly evolving sector to guard against every theoretical harm that could develop. Preemptive restrictions on the development of the Internet of Things could retard technological innovation and limit the benefits that flow to consumers.

In other words, to the maximum extent possible, the default position toward new forms of technological innovation such as the Internet of Things should be innovation allowed, or what Paul Ohm, who recently joined the FTC as a Senior Policy Advisor, refers to as an “anti-Precautionary Principle.” This policy norm is better captured in the well-known Internet ideal of “permissionless innovation,” or the general freedom to experiment and learn through trial-and-error experimentation. As I noted in a recent essay here:

Wisdom is born of experience, including experiences involving risk and the possibility of mistakes and accidents. Patience and openness to permissionless innovation represent the wise disposition toward new technologies not only because it provides breathing space for future entrepreneurialism, but also because it provides an opportunity to observe both the evolution of societal attitudes toward new technologies and how citizens adapt to them.

Adaptation Is Not Just Possible but Likely

Which leads to the next major point I make in my filing: Humans adapt! The more I study the history of various technological innovations the more I find the same story unfolding: again and again society has found ways to adapt to new technological changes by employing a variety of coping mechanisms or new social norms. In fact, we see a common cycle of initial resistance, gradual adaptation, and then eventual assimilation of new technologies into society. (I previously outlined this cycle in my law review article, “Technopanics, Threat Inflation, and the Danger of an Information Technology Precautionary Principle.”)

I offer several specific examples of this process in action—from the rise of the telephone and the camera to RFID and Gmail. I argue that these examples should give us hope that we will also find ways of adapting to the challenges presented by the rise of the Internet of Things.

Norms Evolve and “Regulate”

Third, my filing discusses how societal norms evolve in response to new technologies and even come to “regulate” acceptable use of those technologies. Law tends to regulate in sweeping ways and then get locked in. Social norms and technological etiquette, by contrast, flexibly evolve in unique ways over time.

Some of these norms or social constraints are more “top-down” and formal in nature in that they are imposed by establishments or organizations in the form of restrictions on technologies. In other cases, these norms or social constraints are purely bottom-up and group-driven. I offer examples of both types of norms in my filing.

Other Remedies Exist or Will Develop as Needed

Finally, I argue in my filing that policymakers should exercise restraint and humility in the face of uncertain change and address harms that develop—if they do at all—after careful benefit-cost analysis of various remedies. I note that many federal and state laws already exist that could address perceived harms associated with these technologies.

And let’s be clear: some misuses and harms will develop, just as they have for every other information technology ever invented. But, to reiterate, we have generally not preemptive applied precautionary regulation to each and every new information technology based on the potential threat of some misuses developing. Instead, we have allowed experimentation and innovation to take place largely unimpeded and then relied on a combination of education, user empowerment, various social norms and coping mechanisms, and then targeted laws as needed after serious harms were demonstrated. That same approach should govern the Internet of Things.

If we succumb to the opposite impulse and apply a “Mother May I?” permissioned approach to the Internet of Things—with innovation only being allowed after regulators deem those technologies “safe” or “acceptable”—then we risk derailing the next great wave of Internet-based innovation. The implications for America’s consumers and our global competitiveness could not be more profound. The result will be fewer services, lower quality goods, higher prices, diminished economic growth, and a decline in the overall standard of living.

Hopefully the FTC is not going down that path with this proceeding or its forthcoming workshop on the Internet of Things. But stay tuned. This set of issues is expanding rapidly and promises to produce heated privacy, security, and safety debates for many years to come.

Please read my filing for more details. I’ve also embedded it below.

Comments of Adam Thierer Mercatus Center in FTC Internet of Things Proceeding (June 2013)

This week at CTIA 2013, FCC Commissioner Jessica Rosenworcel presented ten ideas for spectrum policy. Though I don’t agree with all of them, she articulated a reasonable vision for spectrum policy that prioritizes consumer demand, incorporates market-oriented solutions, and establishes transparent goals and timelines. Commissioner Rosenworcel’s principled approach stands in stark contrast to the intellectually bankrupt incentive auction recommendation offered by the Department of Justice last month.

Commissioner Rosenworcel clearly defines three simple goals for a successful incentive auction:

• Raising enough revenue to support the nation’s first interoperable, wireless broadband public safety network;
• Making more broadband spectrum available through policies that are attractive to broadcasters; and
• Providing fair treatment to those broadcasters who do not wish to participate in the auction.

All three goals are consistent with consumer demand for wireless broadband services, the market-oriented reassignment of broadcast spectrum envisioned by the National Broadband Plan, and the will of Congress.

In comparison, the DOJ’s recommendation focuses on only one goal: Subsidizing two particular companies – Sprint Nextel and T-Mobile – to ensure they obtain spectrum in the auction. The DOJ claims these subsidies are necessary to promote competition. But, there is a substantial difference between fair government policies that promote competition generally and a policy of favoring foreign-owned companies over their domestic competitors.

Unfortunately, the DOJ is not alone in its belief that bestowing government benefits on favored companies is a legitimate goal in a free society. Some members of the House Commerce Committee believe the DOJ’s past merger reviews provide “a solid factual and analytical basis” for its current recommendation to the FCC.

The fatal flaw in this theory is that the DOJ’s recommendation to the FCC is inconsistent with the factual findings and analysis of the DOJ in its past merger reviews. As I’ve noted previously, in its complaint against the AT&T/T-Mobile merger, the DOJ found that, “due to the advantages arising from their scope and scale of coverage,” Sprint Nextel and T-Mobile are “especially well-positioned to drive competition” in the wireless industry. That finding doesn’t provide any factual or analytical basis whatsoever to conclude that Sprint Nextel and T-Mobile require special government treatment in the incentive auction in order to compete with Verizon and AT&T.

That’s why the DOJ recommendation relies on an irrational and discriminatory presumption that Verizon and AT&T are using spectrum less efficiently than Sprint Nextel and T-Mobile. A speculative presumption doesn’t require the DOJ to admit its own deceit. It merely requires audacity.

In an era when government officials routinely revise the facts to suit their preferred outcomes and disclaim responsibility for the actions of the agencies they’re charged with leading, Commissioner Rosenworcel’s speech required intellectual bravery and political courage. Her ideas deserve a fair hearing.

My colleague Eli Dourado brought to my attention this XKCD comic and when tweeting it out yesterday he made the comment that “Half of tech policy is dealing with these people”:

The comic and Eli’s comment may bit a bit snarky, but something about it rang true to me because while conducting research on the impact of new information technologies on society I often come across books, columns, blog posts, editorials, and tweets that can basically be summed up with the line from that comic: “we should stop to consider the consequences of [this new technology] before we …”  Or, equally common is the line: “we need to have a conversation about [this new technology] before we…”

But what does that really mean? Certainly “having a conversation” about the impact of a new technology on society is important. But what is the nature of that “conversation”? How is it conducted? How do we know when it is going on or when it is over?

Generally speaking, it is best to avoid guessing as to motive when addressing public policy arguments. It is better to just address the assertions or proposals set forth in someone’s work and not try to determine what motivates it or what other ulterior motives may be driving their reasoning.

Nonetheless, I can’t help but think that sometimes what the “we-need-to-have-a-conversation” crowd is really suggesting is that we need to have a conversation about how to slow or stop the technology in question, not merely talk about its ramifications.

I see this at work all the time in the field of privacy policy. Many policy wonks craft gloom-and-doom scenarios that suggest our privacy is all but dead. I’ve notice a lot more of this lately in essays about the “Internet of Things” and Google Glass in particular. (See these recent essays by Paul Bernal and Bruce Schneier for good examples). Dystopian dread drips from almost every line of these essays.

But, after conjuring up a long parade of horribles and suggesting “we need to have a conversation” about new technologies, authors of such essays almost never finish their thought. There’s no conclusion or clear alternative offered. I suppose that in some cases it is because there aren’t any easy answers. Other times, however, I get the feeling that they have an answer in mind — comprehensive regulation of new technologies in question — but that they don’t want to come out and say it because they think they’ll sound like Luddites. Hell, I don’t know and, again, I don’t want to guess as to motive. I just find it interesting that so much of the writing being done in this arena these days follows that exact model.

But here’s the other point I want to make: I don’t think we’ll ever be able to “have a conversation” about a new technology that yields satisfactory answers because real wisdom is born of experience. This is one of the many important lessons I learned from my intellectual hero Aaron Wildavsky and his pioneering work on risk and safety. In his seminal 1988 book Searching for Safety, Wildavsky warned of the dangers of the “trial without error” mentality — otherwise known as the precautionary principle approach — and he contrasted it with the trial-and-error method of evaluating risk and seeking wise solutions to it. Wildavsky argued that:

The direct implication of trial without error is obvious: If you can do nothing without knowing first how it will turn out, you cannot do anything at all. An indirect implication of trial without error is that if trying new things is made more costly, there will be fewer departures from past practice; this very lack of change may itself be dangerous in forgoing chances to reduce existing hazards … Existing hazards will continue to cause harm if we fail to reduce them by taking advantage of the opportunity to benefit from repeated trials.

This is a lesson too often overlooked not just in the field of health and safety regulation, but also in the world of information policy and this insight is the foundation of a filing I will be submitting to the FTC next week in its new proceeding on the “Privacy and Security Implications of the Internet of Things.” In that filing, I will note that, as was the case with many other new information and communications technologies, the initial impulse may be to curb or control the development of certain Internet of Things technologies to guard against theoretical future misuses or harms that might develop.

Again, when such fears take the form of public policy prescriptions, it is referred to as a “precautionary principle” and it generally holds that, because a given new technology could pose some theoretical danger or risk in the future, public policies should control or limit the development of such innovations until their creators can prove that they won’t cause any harms.

The problem with letting such precautionary thinking guide policy is that it poses a serious threat to technological progress, economic entrepreneurialism, and human prosperity. Under an information policy regime guided at every turn by a precautionary principle, technological innovation would be impossible because of fear of the unknown; hypothetical worst-case scenarios would trump all other considerations. Social learning and economic opportunities become far less likely, perhaps even impossible, under such a regime. In practical terms, it means fewer services, lower quality goods, higher prices, diminished economic growth, and a decline in the overall standard of living.

For these reasons, to the maximum extent possible, the default position toward new forms of technological innovation should be innovation allowed. This policy norm is better captured in the well-known Internet ideal of “permissionless innovation,” or the general freedom to experiment and learn through trial-and-error experimentation.

Stated differently, when it comes to new information technologies such as the Internet of Things, the default policy position should be an “anti-Precautionary Principle.” Paul Ohm, who recently joined the FTC as a Senior Policy Advisor, outlined the concept in his 2008 article, “The Myth of the Superuser: Fear, Risk, and Harm Online.” “Fear of the powerful computer user, the ‘Superuser,’ dominates debates about online conflict,” Ohm argued, but this superuser is generally “a mythical figure” concocted by those who are typically quick to set forth worst-case scenarios about the impact of digital technology on society. Fear of such superusers and the hypothetical worst-case dystopian scenarios they might bring about prompts policy action, since “Policymakers, fearful of his power, too often overreact by passing overbroad, ambiguous laws intended to ensnare the Superuser but which are instead used against inculpable, ordinary users.” “This response is unwarranted,” Ohm says “because the Superuser is often a marginal figure whose power has been greatly exaggerated.”

Ohm gets it exactly right and he could have cited Wildavsky on the matter, who noted that, “’Worst case’ assumptions can convert otherwise quite ordinary conditions… into disasters, provided only that the right juxtaposition of unlikely factors occur.” In other words, creative minds can string together some random anecdotes or stories and concoct horrific-sounding scenarios for the future that leave us searching for preemptive to solutions to problems that haven’t even developed yet.

Unfortunately, fear of “superusers” and worst-case boogeyman scenarios are already driving much of the debate over the Internet of Things. Most of the fear and loathing involves privacy-related dystopian scenarios that envision a miserable panoptic future from which there is no escape. And that’s about the time the authors suggest “we need to have a conversation” about these new technologies — by which they really mean to suggest we need to find ways to put the genie back in the bottle or smash the bottle before the genie even gets out.

But how are we to know what the future holds? And even to the extent some critics believe they possess a techno-crystal ball that can forecast the future, why is it seemingly always the case that none of those possible futures involves humans gradually adapting and assimilating these new technologies into their lives the way they have countless times before? In my FTC filing next week, I will document examples of that process of initial resistance, gradual adaptation, and then eventual assimilation of various new information technologies into society. But I have already developed a model explaining this process and offering plenty of examples in my recent law review article, “Technopanics, Threat Inflation, and the Danger of an Information Technology Precautionary Principle,” as well as in this lengthy blog post, “Who Really Believes in ‘Permissionless Innovation’?”

In sum, the most important “conversations” we have about new technologies are the ones we have every day as we interact with those new technologies and with each other. Wisdom is born of experience, including experiences involving risk and the possibility of mistakes and accidents. Patience and an openness to permissionless innovation represent the wise disposition toward new technologies not only because it provides breathing space for future entrepreneurialism, but also because it provides an opportunity to observe both the evolution of societal attitudes toward new technologies and how citizens adapt to them.

Just FYI… The American Enterprise Institute (AEI) is looking for a full-time Program Manager for its new project focused on Internet, communications, and technology policy. The job description can be found online here and is pasted down below:

# # #

The American Enterprise Institute seeks a full-time Program Manager for its new project focused on Internet, communications, and technology policy.

This project will advance policies to encourage innovation, competition, liberty, and growth, creating a positive agenda centered on the political economy of creative destruction. The Program Manager will work closely with the Program Director in the development and day-to-day management of the project; conducting research; developing a new blog website; commissioning monographs and reports; and coordinating events.

Additionally, the Research Program Manager is expected to:

• Be a strong writer, capable of drafting and editing funding proposals, research and opinion articles, marketing materials, and correspondence
• Provide research and administrative support for the program director on various technology policy initiatives, as required
• Be capable of managing numerous projects, initiatives, conferences, and deadlines simultaneously, without oversight
• Contribute original writing and research to AEI research programs
• Be well-versed in Internet and communications policy and capable of proposing new ideas for conferences, initiatives, and projects

The ideal candidate for this position will combine an outstanding academic record with experience working in a technology and communications policy environment with extensive project-management responsibilities, and excellent writing, research and communications skills. BA in economics, or related degree required. The candidate should have a demonstrated interest in a wide range of policy topics and should have a strong grasp of Washington institutions and current events. Applicants should be flexible, creative, and have proven time-management and writing skills.

If interested, please submit an online application to www.aei.org/jobs, complete with a cover letter, resume, transcripts, and 500-word writing sample.

It’s not the culmination–that will come soon–but a major step in work I direct at the Cato Institute to improve government transparency has been achieved. I’ll be announcing and extolling it Wednesday at the House Administration Committee’s Legislative Data and Transparency conference. Here’s a quick survey of what we’ve been doing and the results we see on the near horizon.

After president Obama’s election in 2008, we recognized transparency as a bipartisan and pan-ideological goal at an event entitled: “Just Give Us the Data.” Widespread agreement and cooperation on transparency has held. But by the mid-point of the president’s first term, the deep-running change most people expected was not materializing, and it still has not. So I began working more assiduously on what transparency is and what delivers it.

In “Publication Practices for Transparent Government” (Sept. 2011), I articulated ways the government should deliver information so that it can be absorbed by the public through the intermediary of web sites, apps, information services, and so on. We graded the quality of government data publication in the aptly named November 2012 paper: “Grading the Government’s Data Publication Practices.”

But there’s no sense in sitting around waiting for things to improve. Given the incentives, transparency is something that we will have to force on government. We won’t receive it like a gift.

So with software we acquired and modified for the purpose, we’ve been adding data to the bills in Congress, making it possible to learn automatically more of what they do. The bills published by the Government Printing Office have data about who introduced them and the committees to which they were referred. We are adding data that reflects:

• What agencies and bureaus the bills in Congress affect;

• What laws the bills in Congress effect: by popular name, U.S. Code section, Statutes at Large citation, and more;

• What budget authorities bills include, the amount of this proposed spending, its purpose, and the fiscal year(s).

We are capturing proposed new bureaus and programs, proposed new sections of existing law, and other subtleties in legislation. Our “Deepbills” project is documented at cato.org/resources/data.

This data can tell a more complete story of what is happening in Congress. Given the right Web site, app, or information service, you will be able to tell who proposed to spend your taxpayer dollars and in what amounts. You’ll be able to tell how your member of Congress and senators voted on each one. You might even find out about votes you care about before they happen!

Having introduced ourselves to the community in March, we’re beginning to help disseminate legislative information and data on Wikipedia.

The uses of the data are limited only by the imagination of the people building things with it. The data will make it easier to draw links between campaign contributions and legislative activity, for example. People will be able to automatically monitor ALL the bills that affect laws or agencies they are interested in. The behavior of legislators will be more clear to more people. Knowing what happens in Washington will be less the province of an exclusive club of lobbyists and congressional staff.

In no sense will this work make the government entirely transparent, but by adding data sets to what’s available about government deliberations, management and results, we’re multiplying the stories that the data can tell and beginning to lift the fog that allows Washington, D.C. to work the way it does–or, more accurately, to fail the way it does.

At this point, data curator Molly Bohmer and Cato interns Michelle Newby and Ryan Mosely have marked up 75% of the bills introduced in Congress so far. As we fine-tune our processes, we expect essentially to stay current with Congress, making timely public oversight of government easier.

This is not the culmination of the work. We now require people to build things with the data–the Web sites, apps, and information services that can deliver transparency to your door. I’ll be promoting our work at Wednesday’s conference and in various forums over the coming weeks and months. Watch for government transparency to improve when coders get a hold of the data and build the tools and toys that deliver this information to the public in accessible ways.

Gina Keating, author of Netflixed: The Epic Battle for America’s Eyeballs, discusses the startup of Netflix and their competition with Blockbuster.

Keating begins with the history of the company and their innovative improvements to the movie rental experience. She discusses their use of new technology and marketing strategies in DVD rental, which inspired Blockbuster to adapt to the changing market.

Keating goes on to describe Netflix’s transition to internet streaming and Blockbuster’s attempts to retain their market share.

Download

Related Links

• Netflixed: The Epic Battle for America’s Eyeballs, Keating
• Gina Keating’s New Book about the Rise of Netflix, Babayan
• ‘Netflixed,’ Book by Gina Keating, Describes CEO Reed Hastings As a Nasty Boss’ Liedtke

Tim Lee is right. The Electronic Frontier Foundation post announcing its decision to accept Bitcoin is strange.

“While we are accepting Bitcoin donations,” the post says, “EFF is not endorsing Bitcoin.” (emphasis in original)

They’ve been using dollars over there without anyone inferring that they endorse dollars. They’ve been using various payment systems with no hint of endorsement. And they use all kinds of protocols without disclaiming endorsement—because they don’t need to.

Someone at EFF really doesn’t like Bitcoin. But, oh, how wealthy EFF would be as an institution if they had held on to the Bitcoin they were originally given. I argued at the time it refused Bitcoin that it was making a mistake, not because of the effect on its bottom line, but because it showed timidity in the face of threats to liberty.

Well, just in time for the Bitcoin 2013 conference in San Jose (CA) this weekend, EFF is getting on board. That’s good news, but it’s not as good as the news would have been if EFF had been a stalwart on Bitcoin the entire time. I have high expectations of EFF because it’s one of the great organizations working in the area of digital liberties.

The International Association of Privacy Professionals (IAPP) has been running some terrific guest essays on its Privacy Perspectives blog lately. (I was honored to be asked to submit an essay to the site a few weeks ago about the ongoing Do Not Track debate.) Today, the IAPP has published one of the most interesting essays on the so-called “right to be forgotten” that I have ever read. (Disclosure: We’ve written a lot here about this issue here in the past and have been highly skeptical regarding both the sensibility and practicality of the notion. See my Forbes column, “Erasing Our Past on the Internet,” for a concise critique.)

In her fascinating and important IAPP guest essay, archivist Cherri-Ann Beckles asks, ”Will the Right To Be Forgotten Lead to a Society That Was Forgotten?” Beckles, who is Assistant Archivist at the University of the West Indies, powerfully explains the importance of archiving history and warns about the pitfalls of trying to censor history through a “right to be forgotten” regulatory scheme. She notes that archives “protect individuals and society as a whole by ensuring there is evidence of accountability in individual and/or collective actions on a long-term basis. The erasure of such data may have a crippling effect on the advancement of a society as it relates to the knowledge required to move forward.”

She concludes by arguing that:

From the preservation of writings on the great pharaohs to the world’s greatest thinkers and inventors as well as the ordinary man and woman, archivists recognise that without the actions and ideas of people, both individually and collectively, life would be meaningless. Society only benefits from the actions and ideas of people when they are recorded, preserved for posterity and made available. Consequently, the “right to be forgotten” if not properly executed, may lead to “the society that was forgotten.”

Importantly, Beckles also stresses the importance of individual responsibility and taking steps to be cautious about the digital footprints they leave online. “More attention should instead be paid to educating individuals to ensure that the record they create on themselves is one they wish to be left behind,” she notes. “Control of data at the point of creation is far more manageable than trying to control data after records capture.”

Anyway, read the whole essay. It is very much worth your time.

Frontline relied on the DOJ foreclosure theory to predict that the lack of eligibility restrictions in the 700 MHz auction would “inevitably” increase prices, stifle innovation, and reduce the diversity of service offerings as Verizon and AT&T warehoused the spectrum. In reality, the exact opposite occurred.

The DOJ recently recommended that the FCC rig the upcoming incentive auction to ensure Sprint Nextel and T-Mobile are winners and Verizon and AT&T are losers. I previously noted that the DOJ spectrum plan (1) inconsistent with its own findings in recent merger proceedings and the intent of Congress, (2) inherently discriminatory, and (3) irrational as applied. Additional analysis indicates that it isn’t supported by economic theory or FCC factual findings either.

Economic Theory

The Phoenix Center published a paper with an economic simulation that exposes the fundamental economic defect in the foreclosure theory underlying the DOJ recommendation. The DOJ implicitly recognizes that the “private value” of spectrum (the amount a firm is willing to pay) equals its “use value” (derived from using spectrum to meet consumer demand) plus its “foreclosure value” (derived from excluding its use by rivals). In its application of this theory, however, the DOJ erroneously presumes that Verizon and AT&T would derive zero use value from the acquisition of additional spectrum – a presumption that is inconsistent with the FCC findings that prompted the auction.

The Phoenix Center notes that all firms – including Sprint Nextel and T-Mobile – derive a foreclosure value from the acquisition of spectrum due to its scarcity. When considering the benefits to consumers, it is the comparative use value of the spectrum for each provider that is relevant. If the use value of the spectrum to Verizon and AT&T exceeds that of Sprint Nextel and T-Mobile, economic theory says Verizon and AT&T would maximize the potential consumer benefits of that spectrum irrespective of its foreclosure value.

Of course, determining the differing use values of spectrum to particular firms is what spectrum auctions are for, which brings the DOJ’s argument full circle: If government bureaucrats at the DOJ and the FCC could accurately assess the use values of spectrum, we wouldn’t need to hold spectrum auctions in the first place.

The circularity of the DOJ theory explains its reliance on an unsubstantiated presumption that Sprint Nextel and T-Mobile have the highest use value for the spectrum. If the DOJ had instead (1) conducted a thorough factual investigation, (2) analyzed the resulting data to assign bureaucratic use values for the spectrum to each of the four nationwide mobile providers, and (3) compared the results to determine that Verizon and AT&T had lower use values, the DOJ would have engaged in the same failed “comparative hearing” analysis that Congress intended to avoid when it authorized spectrum auctions. Given the Congressional mandate to auction spectrum yielded by the broadcasters, the FCC cannot engage in a comparative process to pick winners and losers, and it certainly cannot substitute an unsubstantiated presumption for an actual comparative process in order to avoid the legal prohibition.

FCC Factual Findings

The foreclosure theory and DOJ presumption are also inconsistent with the auction experience and current factual findings of the FCC. The DOJ foreclosure theory has been presented to the FCC before and has proved invalid by the market.

When the FCC was developing rules for the 700 MHz auction in 2007, Frontline Wireless sought preferential treatment using the same foreclosure theory as the DOJ. Frontline submitted a paper (prepared by Stanford professors of economics and management) that relied on the same types of information and reached the same conclusion as the DOJ – that Verizon and AT&T were dominant “low-frequency” wireless incumbents with “strong incentives” to acquire and warehouse 700 MHz spectrum, and that their participation in the 700 MHz auction must be limited in order to “promote competition” and prevent “foreclosure.” Frontline predicted that, if Verizon and AT&T were not prevented from bidding in the 700 MHz auction, it would “inevitably lead to higher prices, stifled innovation, and reduced diversity of service offerings.”

The FCC rejected Frontline’s foreclosure theory. The FCC concluded that, “given the number of actual wireless providers and potential broadband competitors, it [was] unlikely that [incumbents] would be able to behave in an anticompetitive manner as a result of any potential acquisition of 700 MHz spectrum.”

The last five years have proven that the FCC was correct. Though Verizon and AT&T acquired significant amounts of unfettered 700 MHz spectrum, the auction results have not led to the “higher prices, stifled innovation, and reduced diversity of service offerings” predicted by Frontline. In its most recent mobile competition report, the FCC reported that:

• Verizon used its 700 MHz spectrum to deploy a 4G LTE network to more than 250 million Americans less than four years after Verizon’s 700 MHz licenses were approved (i.e., it didn’t warehouse the spectrum).

• Mobile wireless prices declined overall in 2010 and 2011, and the price per megabyte of data declined 89% from the 3^rd quarter of 2008 – a few months before Verizon received its 700 MHz licenses – to the 4^th quarter of 2010 (i.e., industry prices decreased).

• The number of subscribers to mobile Internet access services more than doubled from year-end 2009 to year-end 2011 (i.e., industry output increased).

• Prepaid services are growing at the fastest rate, and new wholesale and connected device services are growing significantly (i.e., providers continued to provide new and diverse service offerings).

• Market concentration has remained essentially unchanged since 2008 (the population weighted average of HHIs increased from 2,842 in 2008 to 2,873 in 2011 – a change of only 1 percent).

Remember: Frontline relied on the DOJ foreclosure theory to predict that the lack of eligibility restrictions in the 700 MHz auction would “inevitably” increase prices, stifle innovation, and reduce the diversity of service offerings as Verizon and AT&T warehoused the spectrum. In reality, the exact opposite occurred. Verizon and AT&T did not warehouse the spectrum, industry prices decreased while output increased, diverse new service offerings exhibited the strongest growth, and market concentration remained essentially unchanged. And, while competition thrived, consumers reaped the benefits.

So, why would the DOJ make the same failed argument for the 600 MHz auction (other than crony capitalism)? Some might say, “Even the boy who cried wolf was right once.” But, even if one were inclined to give the DOJ the benefit of the doubt, the theoretical possibility that the foreclosure theory could adversely impact the 600 MHz auction must be weighed against the potential harm of limiting participation in the auction.

The harm is well documented and could prove particularly problematic in this auction. A paper coauthored by Leslie Marx, who led the design team for the 700 MHz auction when she was the FCC’s Chief Economist, demonstrates that excluding Verizon and AT&T would have even more severe consequences in the incentive auction than in previous auctions.

A paper published by economists at Georgetown University’s Center for Business and Public Policy attempts to quantify the severity of these consequences. It estimates that excluding Verizon and AT&T from the auction could reduce revenues by as much as 40 percent ($12 billion) – a result that would jeopardize funding for the nationwide public safety network, reduce the amount of spectrum made available for wireless Internet services, and adversely affect more than 118,000 U.S. jobs. That is a steep price to pay for the privilege of seeing whether the boy is crying wolf again.

Timothy Ravich, a board certified aviation lawyer in private practice and an adjunct professor of law at the Florida International University School of Law and the University of Miami School of Law, discusses the future of unmanned aerial system (UAS), also known as drones.

Ravich defines what UAVs are, what they do, and what their potential non-military uses are. He explains that UAV operations have outpaced the law in that they are not sufficiently supported by a dedicated and enforceable regime of rules, regulations, and standards respecting their integration into the national airspace.

Ravich goes on to explain that Congress has mandated the FAA to integrate UAS into the national airspace by 2015, and explains the challenges the agency faces. Among the novel issues domestic drone use raises are questions about trespass, liability, and privacy.

Download

Related Links

• The Integration of Unmanned Aerial Vehicles into the National Airspace, Ravich
• Domestic Drones are Coming your Way, Brito
• Making airspace available for ‘permissionless innovation,’ Technology Liberation Front

As the “real-world” continues its inexorable march toward our all-IP future, the FCC remains stuck in the mud fighting the regulatory wars of yesteryear, wielding its traditional weapon of bureaucratic delay to mask its own agenda.

Late last Friday the Technology Transitions Policy Task Force at the Federal Communications Commission (FCC) issued a Public Notice proposing to trial three narrow issues related to the IP transition (the transition of 20^th Century telephone systems to the native Internet networks of the 21^stCentury). Outgoing FCC Chairman Julius Genachowski says these “real-world trials [would] help accelerate the ongoing technology transitions moving us to modern broadband networks.” Though the proposed trials could prove useful, in the “real-world”, the Public Notice is more likely to discourage future investment in Internet infrastructure than to accelerate it.

First, the proposed trials wouldn’t address the full range of issues raised by the IP transition. As proposed, the trials would address three limited issues: VoIP interconnection, next-generation 911, and wireless substitution. Though these issues are important, the FCC proposals omit the most important issue of all – the transition of the wireline network infrastructure itself. As a result, they would yield little, if any, data about the challenges of shutting down the technologies used by the legacy telephone network.

Second, the proposed trials are unlikely to yield significant new information. As Commissioner Pai noted in his statement last week, all three issues are already being trialed in the “real-world” by the industry, consumers, and state regulators.

Finally, and perhaps most importantly, all three issues are already the subject of ongoing FCC proceedings and don’t raise any new issues (e.g., issues that would implicate FCC regulatory forbearance).

If the FCC truly wanted to accelerate the transition to all-IP infrastructure, why would it propose studies of three limited issues that it is already addressing? I expect the FCC was unwilling to propose a comprehensive trial that could jeopardize its assertion of regulatory jurisdiction over the Internet, especially its potential authority to impose Title II regulations if it loses the net neutrality case pending in the DC Circuit. The language in the Public Notice indicates it is no coincidence that the narrow issues the FCC intends to study do not implicate its forbearance authority or (at least directly) the scope of its jurisdiction. For example, the Public Notice states that VoIP interconnection involves, among other things, “pricing” and “quality of service” issues, and that the FCC wants to structure any trial to provide it with “data to evaluate which policies may be appropriate” for VoIP interconnection. This language clearly indicates that the FCC is contemplating Title II pricing regulation of VoIP interconnection.

The Public Notice also seeks additional comment on the more comprehensive approach to the IP transition originally proposed by Commissioner Ajit Pai in July 2012, but in a way that sends all the wrong signals to investors.

When Commissioner Pai proposed the establishment of a Task Force for the IP transition nine months ago, his intent was the removal of regulatory barriers to infrastructure investment, including unpredictability at the FCC. He suggested that the FCC send a clear signal that new IP networks built in competitive markets will not be subject to “broken, burdensome economic regulations” designed for monopoly telephone networks.

Last Friday’s Public Notice does just the opposite. It signals that even the worst excesses of legacy telephone regulation are still an option for the Internet. Specifically, the Public Notice “invites” telephone companies that are interested in comprehensive trials to submit a comprehensive plan listing, at a minimum:

(1) all of the services currently provided by the carrier in a designated wire center that the carrier would propose to phase out; (2) estimates of current demand for those services; and (3) what the replacement for those services would be, including current prices and terms and conditions under which the replacement services are offered.

It is telling that none of these enumerated questions are aimed at the potential technical issues posed by the IP transition (which is a forgone conclusion economically). They are aimed at economic issues relevant to the FCC’s traditional Title II price regulation of communications services.

In the nine months since Commissioner Pai began leading the IP transition, the FCC has signaled nothing more than its intent to continue bureaucratic business as usual. As the “real-world” continues its inexorable march toward our all-IP future, the FCC remains stuck in the mud fighting the regulatory wars of yesteryear, wielding its traditional weapon of bureaucratic delay to mask its own agenda. There it will remain until the FCC has a Chairman with a vision for the future, not the past.

DISH Network gets another opportunity on Tuesday to plead with Congress for another Satellite Home Viewer Act reauthorization—ostensibly to protect consumers from unwarranted rate increases and program blackouts, but actually to preserve and expand DISH Network’s and DirecTV’s access to broadcast programming at regulated, below-market rates.

A couple minor provisions in the Act that have nearly outlived their original purpose are due to expire, but DISH Network is taking advantage of this opportunity to argue that  “there is much more that Congress can do to expand consumers’ access to local programming…”  DISH’s plea is an example of the narcotic effect of supposedly benign regulation intended to promote competition by giving nascent competitors a leg up.  DISH Network, in particular, has become addicted to artificially low prices for broadcast programming, and will seize any opportunity to reduce its programming costs some more through regulation.One of the problems with betting your shareowners’ company on regulation is that in politics, nothing lasts forever.  Another is that there are certain laws of economics, and they still apply.  Shareowners really ought to be on high alert for the appearance of a Beltway, State Capitol or City Hall strategy—firms that can compete and win in the marketplace have no need for regulatory advantages.

When the Act was passed, broad-beam satellite technology meant that carriers had to transmit the same programming across North America.  The carriers were given the right to retransmit distant broadcast signals from “superstations” (without first having to obtain the broadcaster’s consent) to households that could not receive an adequate over-the-air signal from any local station affiliated with a particular major network.

Spot-beam technology now allows the carriers to deliver local broadcast signals to each of the 210 corresponding local viewing areas.  And as a result of significant investment by the satellite carriers, very few households are without access to major networks or local stations.

In that sense, the Act and its progeny can be viewed as a success.  On the other hand, SNL Kagan estimates that, in 2013, programming fees received by broadcasters will represent a total of only $2.7 billion, compared to $31.5 billion for basic cable networks.  This data suggests the possibility that broadcasters are not recovering the fair market value of their programming.  If that’s the case, their ability to continue producing popular programming is in jeopardy.

DISH Network Chairman Charlie Ergen complains that broadcasters “cling to the status quo instead of meeting consumer demand and embracing new technologies and business models.”

But clearly, broadcasters are adapting to the fact that advertisers who used to underwrite the entire cost of broadcasting now have many more options that include cable networks.  It’s unrealistic to pretend we were still living in the 1970’s, when broadcasters had market power.

The facts are: (1) broadcasters are competing for their lives, and (2) broadcasters are a potent source of competition in content and delivery.  The last thing policymakers should be contemplating is forcing broadcasters to subsidize their competitors.

Under current law, satellite carriers will no longer be able to retransmit distant network signals to unserved households without first obtaining the consent of the broadcaster after Dec. 31, 2014.  Nor will broadcasters be prohibited from engaging in exclusive contracts for carriage of their signals.

As content producers, broadcasters generally have an incentive to reach as many viewers as possible by any means. But there are exceptions.  If both a professional ball club or a movie studio and a cable network or broadcaster, for example, believe it is in their mutual best interest to strike an exclusive deal, what’s wrong with allowing them to recover the full economic value of their collaborative enterprise?

If you are DISH Network and if reason prevails and your lobbyists cannot persuade Congress to prohibit exclusivity, there is a solution.  You can become the exclusive supplier of must-see content.

Consumers are best served in the long run by an efficient economy that expands prosperity, not by unholy alliances between struggling firms and policymakers.  Consumers benefit when a producer of something is permitted to obtain the full economic value of his or her product, because then they will produce more of it and look for ways to improve it.

So far, no one has demonstrated that consumers will be harmed if these expiring provisions—which are quite narrow in scope—are allowed to sunset.  The reality is that satellite carriers pay market-based rates for cable networks but don’t want to pay market-based rates for broadcast programming.  The simple fact is DISH Network is receiving a subsidy, and if Congress preserves it that is corporate welfare.

Check out how tribal villagers in parts of India are establishing a basic right that we take for granted. Using GPS and satellite imagery, they’re marking out the plots of land that they have lived on, unrecognized, for decades, and they’re making it their property.

The project is described here, and you can noodle around and find plots that they’ve mapped out here.

Earlier this year, Ryan Radia and I spilled a lot of ink on these pages critiquing the various “cell phone unlocking” bills that were introduced in reaction to a successful White House petition. Our assessment of these bills was that they ranged from timid to unhelpful. Their biggest vice was that they were generally band-aids and temporary fixes aimed solely at cell phones and not the underlying problem of the DMCA’s anti-circumvention provision.

Today, I’m happy to see Rep. Zoe Lofgren introduced a bill that would not only fix cell phone unlocking, but also goes a long way in addressing the DMCA Section 1201’s fundamental problems. Quite simply, the Unlocking Technology Act of 2013 makes the DMCA’s anti-circumvention provisions applicable only in cases where the person circumvents a digital lock in order to infringe copyright. So, ripping a DVD in order to distribute a film without permission on BitTorrent would still be illegal, but ripping the same DVD in order to watch the film on your iPad would be OK. This is good sense and good policy.

The bill also would allow the manufacture, sale, and import of anti-circumvention tools now prohibited under DMCA 1201. Sounds nefarious, but in reality what this means is that, for example, Linux users may for the first time get a legal way to play DVDs on their computers. And making tools that help the blind read ebooks won’t get you in trouble with the FBI.

Finally, the bill requires NTIA to conduct a study and publish a report looking at whether the economic impact of the DMCA’s anti-circumvention provisions, and to look at whether Section 1201 should be further amended or even repealed. Yes folks, this bill uses the word “repeal” in its text.

Congrats to Rep. Lofgren and her bi-partisan co-sponsors, Reps. Massie, Eshoo, and Polis, for showing that common sense still has a shot on the Hill.

There’s a powerful irony lurking underneath the executive order and OMB memorandum on open data that the White House released in tandem today: We don’t have data that tells us what agencies will carry out these policies.

It’s nice that the federal government will work more assiduously to make available the data it collects and creates. And what President Obama’s executive order says is true: “making information resources easy to find, accessible, and usable can fuel entrepreneurship, innovation, and scientific discovery that improves Americans’ lives and contributes significantly to job creation.” GPS and weather data are the premier examples.

But government transparency was the crux of the president’s 2008 campaign promises, and it is still the rightful expectation of the public. Government transparency is not produced by making interesting data sets available. It’s produced by publishing data about the government’s deliberations, management, and results.

Today’s releases make few, if any, nods to that priority. They don’t go to the heart of transparency, but threaten to draw attention away from the fact that basic data about our government, including things as fundamental as the organization of the executive branch of government, are not available as open data.

Yes, there is still no machine-readable government organization chart. This was one of the glaring faults we found when we graded the publication practices of Congress and the executive branch last year, and this fault remains. The coders who may sift through data published by various agencies, bureaus, programs, and projects can’t sift through data reflecting what those organizational units of government are.

Compare today’s policy announcements to events coming up on Capitol Hill in the next two weeks.

On Thursday next week (May 16), the House Committee on Oversight and Government Reform will host a “DATA Demonstration Day” to illustrate to Congress and the media how technology may cut waste and improve oversight if federal spending data is structured and transparent. (That would include my hobby-horse, the machine-readable federal government organization chart.) We’ll be there demo-ing how we at Cato are adding data to the bills Congress publishes.

On May 22nd, the House Administration Committee is hosting its 2013 Legislative Data and Transparency Conference. This is an event at which various service providers to the House will announce not just policies, but recent, new, and upcoming improvements in publication of data about the House and its deliberations. (We’ll be there, too.)

The administration’s open data announcements are entirely welcome. Some good may come from these policies, and they certainly do no harm (barring procurement boondoggles–which, alas, is a major caveat). But I hope this won’t distract from the effort to produce government transparency, which I view as quite different from the subject of the new executive order and memorandum. The House of Representatives still seems to be moving forward on government transparency with more alacrity.

Over at Freedom to Tinker, Steve Schultze has a response to my Reason article about Craigslist suing its competitors. Steve expresses some surprise that I would suggest that we might want to recognize a new property right since I have been so critical of the excesses of our current IP regime. Let me take a stab at reconciling that seeming paradox.

First, I should say I’m sympathetic to Steve’s position, which he shares with many others, and which may well be right. I wrote the Reason article more than anything to provide some balance to what I saw as a knee-jerk reaction in the blogosphere to the Craigslist ruling. I really didn’t see anyone giving Craigslist’s claims a fair shake (probably because the company is acting hypocritically given the public profile they have cultivated). That’s why in the article I’m ambivalent about whether Craigslist should have any remedy, and why I don’t make the case that trespass to chattels is the right approach. The point is that neither am I convinced that it’s clearly the wrong approach, or that Craigslist should clearly not be waging this suit.

That said, let me suggest that my thinking on this is not at odds with my thinking on copyright. Steve chides me for saying that maybe there’s something to Craigslist’s claims because what its competitors are doing doesn’t “sit well.” He says that “the notion that something doesn’t ‘sit well’ is not necessarily a good indicator that one can or should prevail in legal action,” and he’s right, which is why I don’t make that claim in the article. He goes on to admit that “to be sure, tort law (and common law more generally) develops in part out of our collective notion of what does or doesn’t seem right.” And that was my point. The fact that what Craigslist’s competitors are doing doesn’t sit well, I suggest, should give us a hint that this isn’t as open-and-shut a case as some have made it out to be, and that perhaps we should take a closer look.

I’m glad Steve brings up the common law. One of the central critiques I have made about copyright as a property right is that it did not develop at common law, and is instead a creature of statute. The fact that copyright is created by politicians guessing about the future (and influenced by special interests), rather than courts deciding actual cases and controversies, is what in large part leads to its excesses. I am much less skeptical of property rights that emerge at common law over time after an evolutionary process of trial and error, and as Steve points out, this process usually begins when a court is presented with a novel question that doesn’t “sit well.”

On to nitpicks about copyright. Steve says that “there is a bit of confusion around the copyright claims” that he wants to clear up and notes that, “The court held that Craigslist unambiguously does not hold copyright in user-created postings, except for those three ill-fated weeks last summer when they instituted that horrible terms of service.” That is a confusing statement in itself because at face value it implies that Craigslist does indeed have copyright over the postings created during the couple of weeks it required users to click through what Craigslist claims is a notice that assigns to it an exclusive license. Of course, as Steve knows, the court’s ruling was on a pretrial motion and whether Craigslist has copyright in that small set of listings has not yet been determined. And if I had to bet, I’d bet the click-thru won’t qualify as an assignment of an exclusive license.

He goes on to say that “Jerry’s claim … that no copyright exists in these posts whatsoever, seems weak.” Well, again, I made no such claim. The only thing I said on this was that “a site like PadMapper only copies facts about a listing (i.e. 3 bedrooms, 800 sq. ft., $2,000 a month, etc.), and mere facts are not subject to copyright.” I wasn’t suggesting that the listings in questions were Feist-style facts that could not be copyrighted, but that PadMapper is not copying the listings wholesale, but only taking mere facts, which would be unprotected given the merger doctrine. Steve seems to miss that distinction.

Even if I had said that the listings were not subject to copyright, Steve’s evidence that such a claim is weak is, well, weak. He points to the court’s ruling, which finds that the listings probably are copyrightable. Yet as Steve notes, the facts in the case are read in the light most favorable to the non-moving party, which is Craigslist since this is a motion to dismiss. So I’m not sure how a court looking at the issue in a light favorable to Craigslist and finding that Craigslist has adequately alleged sufficient facts to proceed is much evidence against the legal claim that the listings aren’t copyrightable.

Anyhow, after clarifying “confusions around the copyright claims” that I did not introduce, Steve takes me to task for “argu[ing] that maybe this is the right case to test out some novel approaches to applying physical-world torts to online things that feel kinda like property.” In this he’s probably right; this is likely the wrong case. It is “a messy fact pattern,” as Steve says. I think that’s true in part because Craigslist has not been adding new features to its site and has seemingly been resting on its laurels since the late 90s. A better case would be one that involved, say, a service that took Match.com and OKCupid listings without permission. It would be a much more clear-cut question if we had a plaintiff that was working hard to attract users’ listings only to see them taken without permission, as 3taps says in its white papers should be allowed. Alas, though, this is the case we have.

Steve then goes on to the heart of the matter: my suggestion that it’s not clear that there shouldn’t be a property right here. Steve first says that “moving law in this direction is bad policy,” without providing any support for that assertion except to say that “Jerry has written extensively about the problems with propertization creep, so I don’t know why he would think that this makes sense.” I’ve already explained the difference between property rights that emerge at common law, and the creep we see from statutory property schemes, so I won’t repeat myself. The bottom line is that sometimes property makes sense, and sometimes it doesn’t. The question is, in a particular case, how do we increase human welfare? With a property right, or with a commons? As I said before, Steve and other commentators may be right that a commons is the way to go in this case, but it’s not as obvious to me as it seemingly is to them. I’d love to see the case made explicitly.

Steve goes on:

Jerry also turns to the economics of network effects to support his “it doesn’t feel right” hypothesis. As his argument goes, Craigslist built the network effects that it now enjoys, so competitors should have to do the same. I suppose that this satisfies a visceral sense of fairness, but it doesn’t say much about what is optimal for the market and for innovation.

I’d argue it says far more than Steve has said. As I explain in chapter one of Copyright Unbalanced (the subtitle of which Steve oh so cleverly zings in his concluding line) we do want to see new property rights emerge when it’s worthwhile to internalize (at least some of) an existing externality. In this case the externality is the network effect that listing platforms like Craigslist provide. What I’m suggesting is that it’s not obvious that we won’t get better platforms and more innovation by having competing closed platforms (Match.com vs. OKCupid) rather than one open one. Commentators like Steve, however, seem happy to forgo the analysis, dismissing such thinking as “Paleo-Schumpeterian,” and jumping right to the conclusion that any new propertization is bad. I’ve explained my limiting principle; I’d love to hear theirs.

Finally, so much of the reaction to Craigslist this past week was predicated on the company’s lack of innovation. As Steve points out,

Once you have a network effect in a market, your incentives to innovate decrease because of lock-in. Others, however, are strongly motivated to try to break into that market. Padmapper and others innovated—in a way that is no less “true” than Craigslist’s original innovation. Craigslist saw the value of that innovation and even tried to imitate it by creating its own mapping tool (arguably innovation in and of itself).

I don’t get it. If Craiglist is asleep at the switch and as un-innovative as Steve says it is, and if competitors are innovating, then why should we worry if it does have a property right? Won’t Craigslist eventually get disrupted and have the network effect wrested away from it by a competitor that entices aways its users? It’s how Facebook beat MySpace, and how MySpace beat Friendster. Lock-in didn’t stop them. And isn’t at least some of the incentive that draws those potential disruptors the chance of one day wearing the crown?

I’m not saying this is the right answer, but I don’t see anyone making a good case why a property model is obviously wrong, and a commons is obviously better.

I plan to write more about broadband competition and the impact of Google Fiber but in the meantime, there is a New York Times article on the subject that I’ll briefly address.

The author, Eduardo Porter, misdiagnoses why tiered pricing in broadband exists, giving readers the impression that only monopolies price discriminate:

That means that in most American neighborhoods, consumers are stuck with a broadband monopoly. And monopolies don’t strive to offer the best, cheapest service. Rather, they use speed as a tool to discriminate by price — coaxing consumers who are willing to pay for high-speed broadband into more costly and profitable tiers.

Consumer advocacy groups regularly–and wrongly–equate price discrimination with monopoly. Price discrimination–where firms price different customers different prices because of their willingness to pay–tells us nothing about the existence of monopoly (and little about market power). Firms lacking monopoly–in industries like airlines, clothing retail, movie theaters, and restaurants–use price discrimination. No one alleges monopoly in these industries, so I don’t know why the author makes this connection between monopoly and price discrimination. Had Porter thought about it, this paragraph makes little sense since even in the urban areas that have 2 or 3 high-speed broadband providers you still see tiered pricing. This should be a tip-off that tiered pricing does not arise from monopoly.

Porter makes another error, which I think just signals the sloppy reporting in this piece:

The preferred strategy seems to involve more cooperation than competition. In 2011, Verizon tried to cobble together agreements with the nation’s major cable firms to jointly market each others’ services — offering itself as the wireless complement to cable’s wireline plans. It was foiled only because the Justice Department slapped the deals down as anticompetitive.

As Gigi Sohn (who generally agrees with the author) points out on Twitter, this is not right either.

Great @nytimes piece on why US #broadband is mediocre: nytimes.com/2013/05/08/bus…Correction: DoJ did *not* block Verizon-cable spectrum deal

— Gigi Sohn (@gigibsohn) May 8, 2013

The agreements to jointly market others’ products were not in any meaningful sense “foiled.” Those agreements were approved with conditions, namely, that Verizon couldn’t market a cable company’s service where FiOS is available.

I don’t think these are minor nitpicks. The fact is, journalists and advocates regularly employ loose definitions of “monopoly,” often intentionally in order to increase the urgency to further some political end. And the portion about the Verizon deal gives readers the distinct impression that Verizon was doing something colluding and nefarious that was stopped by the DOJ, and that’s just not true.