NETmundial wrap-up

by on April 25, 2014 · 0 comments

NETmundial is over; here’s how it went down. Previous installments (1, 2, 3).

  • The final output of the meeting is available here. It is being referred to as the Multistakeholder Statement of São Paulo. I think the name is designed to put the document in contention with the Tunis Agenda. Insofar as it displaces the Tunis Agenda, that is fine with me.
  • Most of the civil society participants are not happy. Contrary to my prediction, in a terrible PR move, the US government (among others) weakened the language on surveillance. A statement on net neutrality also did not make it into the final draft. These were the top two issues for most of civil society participants.
  • I of course oppose US surveillance, but I am not too upset about the watered down language since I don’t see this as an Internet governance issue. Also, unlike virtually all of the civil society people, I oppose net neutrality laws, so I’m pleased with that aspect of the document.
  • What bothers me most in the final output are two statements that seem to have been snuck in at the last moment by the drafters without approval from others. These are real shenanigans. The first is on multistakeholderism. The Tunis language said that stakeholders should participate according to their “respective roles and responsibilities.” The original draft of the NETmundial document used the same language, but participants agreed to remove it, indicating that all stakeholders should participate equally and that no stakeholders were more special than others. Somehow the final document contained the sentence, “The respective roles and responsibilities of stakeholders should be interpreted in a flexible manner with reference to the issue under discussion.” I have no idea how it got in there. I was in the room when the final draft was approved, and that text was not announced.
  • Similarly, language in the “roadmap” portion of the document now refers to non-state actors in the context of surveillance. “Collection and processing of personal data by state and non-state actors should be conducted in accordance with international human rights law.” The addition of non-state actors was also done without consulting anyone in the final drafting room.
  • Aside from the surveillance issue, the other big mistake by the US government was their demand to weaken the provision on intermediary liability. As I understand it, their argument was that they didn’t want to consider safe harbor for intermediaries without a concomitant recognition of the role of intermediaries in self-policing, as is done through the notice-and-takedown process in the US. I would have preferred a strong, free-standing statement on intermediary liability, but instead, the text was replaced with OECD language that the US had previously agreed to.
  • Overall, the meeting was highly imperfect—it was non-transparent, disorganized, inefficient in its use of time, and so on. I don’t think it was a rousing success, but it was nevertheless successful enough that the organizers were able to claim success, which I think was their original goal. Other than the two last-minute additions that I saw (I wonder if there are others), nothing in the document gives me major heartburn, so maybe that is actually a success. It will be interesting to see if the São Paulo Statement is cited in other fora, and if they decide to repeat this process again next year.

Some people believe that American broadband prices are too high. They claim that Europeans pay less for faster speeds. Frequently these assertions fail to standardize the comparisons, for example to compare similar networks and speeds. A higher speed, next generation network connection delivering more data generally costs more than a slower one. The challenge for measuring European and American prices is that networks are not uniform across the regions. The OECD comparisons are based on availability in at least one major city in each country, not the country as a whole.

As I describe in my report the EU Broadband Challenge, the EU’s next generation networks exist only in pockets of the EU. For example, 4G/LTE wireless networks are available to 97% of Americans but just 26% of Europeans. Thus it is difficult to prepare a fair assessment of mobile prices on the surface when Americans use 5 times as much voice and twice as much data as Europeans. Furthermore American networks are 75% faster when compared to the EU. The overall price may be higher in the US, but the unit cost is lower, and the quality is higher. This means Americans get value for money.

Another item rarely mentioned in international broadband comparisons is mandatory media license fees. These fees can add as much as $44 to the monthly cost of broadband. When these fees are included in comparisons, American prices are frequently an even better value. In two-thirds of European countries and half of Asian countries, households pay a media license fee on top of the subscription fees to information appliances such as connected computers and TVs. Historically nations needed a way to fund broadcasting, so they levied fees on the people.

Because the US took the route to fund broadcasting through advertising, these fees are rare in the US. State broadcasting has moved to the internet, and the media license fees are now applied to fixed line broadband subscriptions. In general in the applicable countries, all households that subscribe to information services (e.g. broadband) must register with the national broadcasting corporation, and an invoice is sent to the household once or twice year. The media fees are compulsory, and in some countries it is a criminal offense not to pay.

Defenders of media license fees say that they are important way to provide commercial free broadcasting, and in countries which see the state’s role to preserve national culture and language, media license fees make this possible. Many countries maintain their commitment to such fees as a deterrent to what they consider American cultural imperialism.

Media license fees may seem foreign to Americans because there is not a tradition for receiving an annual bill for monthly broadcasting. Historically many associated television and radio as “free” because it was advertising supported. Moreover, the US content industry is the world’s largest and makes up a large part of America’s third largest category of export, that of digital goods and services, which totaled more than $350 billion in 2011.

When calculating the real cost of international broadband prices, one needs to take into account media license fees, taxation, and subsidies. This information is not provided through the Organization for Cooperation and Development’s Broadband Portal nor the International Telecommunication Union’s statistical database.  However, these inputs can have a material impact on the cost of broadband, especially in countries where broadband is subject to value added taxes as high as 27%, not to mention media license fees of hundreds of dollars per year.

In a forthcoming paper for the Mercatus Center at George Mason University, Michael James Horney, Casper Lundgreen, and I provide some insight to media license fees and their impact to broadband prices. We have collected the media license fees for the OECD countries, and where applicable, added them to prevailing broadband price comparisons. Following is an excerpt from our paper.

Here are the media license fees for the OECD countries.

Country Yearly (USD) Monthly (USD)
Australia $0,00 $0,00
Austria $459,10 $38,26
Belgium $236,15 $19,68
Canada $0,00 $0,00
Chile $0,00 $0,00
Czech Republic $90,33 $7,53
Denmark $443,75 $36,98
Estonia $0,00 $0,00
Finland $0,00 $0,00
France $179,45 $14,95
Germany $295,56 $24,63
Greece $70,68 $5,89
Hungary $0,00 $0,00
Iceland $0,00 $0,00
Ireland $219,18 $18,26
Israel $128,77 $10,73
Italy $155,48 $12,96
Japan $197,66 $16,47
Korea $28,32 $2,36
Luxembourg $0,00 $0,00
Mexico $0,00 $0,00
Netherlands $0,00 $0,00
New Zealand $0,00 $0,00
Norway $447,51 $37,29
Poland $72,01 $6,00
Portugal $0,00 $0,00
Slovenia $180,82 $15,07
Spain $0,00 $0,00
Sweden $318,45 $26,54
Switzerland $527,40 $43,95
Turkey $0,00 $0,00
United Kingdom $242,50 $20,21
United States $0,00 $0,00

Here is an example of the media license fee invoice from Denmark, which is levied semi-annually. The fee of 1218 Danish crowns ($225.79) includes tax.

 

Example of media license fee from Denmark, February 2014

 

We added the price of the media license fees to the OECD’s broadband price report. The data is taken from section 4c-4m of the OECD broadband pricing database. The OECD compiles prices for a set of 10 broadband baskets of different speeds ranging from 2 GB at 0.25 Mbit/s to 54 GB at 45 Mbit/s and above in at least 1 major city in each country. The prices are current as of September 2012.

For a graphical illustration, we provide a subset of countries to show the fluctuation of prices depending on the speed and data of each package. The data show that when compulsory media fees are added, US prices are commensurate with other OECD countries.

Broadband prices with media license fees

We also calculated the average broadband price for each basket for all of the OECD countries, adjusted for media license fees. Here we find that among the ten baskets, the US price is lower than the world average in 4 out of 10 baskets. In 5 baskets, the US price is within 1 standard deviation of the world average, and in two cases just $2-3 dollars more. In only one case is the US price outside one standard deviation of the world average, and that is for the penultimate basket of highest speed and data.

These data call into questions assertions that the US is out of line when it comes to broadband prices. Not only are US prices within a normal range, but the entry level prices for broadband are below many other countries.

The ITU has also recognized this. According to the ITU in its 2013 report Measuring the Information Society, broadband prices should be no more than 5% of income. The US scored #3 in the world in 2012 for entry level affordability of fixed line broadband. The country is tied with Kuwait for fixed line broadband prices being just 0.4% of gross national income per capita. This means for as little as $15 per month, Americans could get a basic broadband package at purchasing power parity in 2011 ($48,450 annual income).

The figures are higher for mobile broadband (based on a post-paid handset with 500 MB of data), 2.1% of gross national income per capita, equating to $85/month. However, using mobile broadband for a computer with 1 GB of data compares to just 0.5% of gross national income per capita, about $20 in 2011. The US scores in the top ten for entry level affordability in the world for both prepaid and postpaid mobile broadband for use with a computer.

If you believe that broadband prices should scale with consumption, then you will likely support such an analysis. However, there are those who simply say broadband should be the same price regardless of how much or how little data is used. In general, the price tiers favor a pay as you go approach (and is particularly better for people of lower income) while the one size fits all models increases the overall price, with the heaviest users paying less than their consumption.

Taking the highly digital nation of Denmark as an example, 80% of broadband subscriptions are under 30 mbps. That corresponds to baskets 1-4 in the chart. If we assume that most American households subscribe to 30 mbps or less, then American prices are in line with the rest of the OECD countries. Only subscribers who demand more than 30 mbps pay more than the OECD norm.

The assertion that Americans pay more for broadband than people in other countries is frequently supported by incomplete and inappropriate data. To have a more complete picture of the real price of broadband across countries, media license fees need to be included.

Aereo’s antenna system is frequently characterized perjoratively as a Rube Goldberg contraption, including in the Supreme Court oral arguments. Funny enough, Preston Padden, a veteran television executive, has characterized the legal system producing over-the-air broadcast television–Aereo’s chief legal opponents–precisely the same way. It’s also ironic that Aereo is in a fight for its life over alleged copyright violations since communications law diminishes the import of copyright law and makes copyright almost incomprehensible. Larry Downes calls the legal arguments for and against Aereo a “tangled mess.” David Post at the Volokh Conspiracy likewise concluded the situation is “pretty bizarre, when you think about it” after briefly exploring how copyright law interacts with communications law.

I agree, but Post actually understates how distorted the copyright law becomes when TV programs pass through a broadcaster’s towers, as opposed to a cable company’s headend. In particular, a broadcaster, which is mostly a passive transmitter of TV programs, gains more control over the programs than the copyright owners. It’s nearly impossible to separate the communications law distortions from the copyright issues, but the Aereo issue could be solved relatively painlessly by the FCC. It’s unfortunate copyright and television law intertwine like this because a ruling adverse to Aereo could potentially–and unnecessarily–upend copyright law.

This week I’ve seen many commentators, even Supreme Court justices, mischaracterize the state of television law when discussing the Aereo case. This is a very complex area and below is my attempt to lay out some of the deeper legal issues driving trends in the television industry that gave rise to the Aereo dispute. Crucially, the law is even more complex than most people realize, which benefits industry insiders and prevents sensible reforms. Continue reading →

Today is the second and final day of NETmundial and the third in my series (parts 1 and 2) of quick notes on the meeting.

  • Yesterday, Dilma Rousseff did indeed sign the Marco Civil into law as expected. Her appearance here began with the Brazilian national anthem, which is a very strange way to kick off a multistakeholder meeting.
  • The big bombshell in Rousseff’s speech was her insistence that the multilateral model can peacefully coexist with the multistakeholder model. Brazil had been making a lot of pro-multistakeholder statements, so many of us viewed this as something of a setback.
  • One thing I noticed during the speech was that the Portuguese word for “multistakeholder” actually literally translates as “multisectoral.” This goes a long way toward explaining some of the disconnect between Brazil and the liberals. Multisectoral means that representatives from all “sectors” are welcome, while multistakeholder implies that every stakeholder is welcome to participate, even if they sometimes organize into constituencies. This is a pretty major difference, and NETmundial has been organized on the former model.
  • The meeting yesterday got horribly behind schedule. There were so many welcome speeches, and they went so much over time, that we did not even begin the substantive work of the conference until 5:30pm. I know that sounds like a joke, but it’s not.
  • After three hours of substantive work, during which participants made 2-minute interventions suggesting changes to the text, a drafting group retreated to a separate room to work on the text of the document. The room was open to all participants, but only the drafting group was allowed to work on the drafting; everyone else could only watch (and drink).
  • As of this morning, we still don’t have the text that was negotiated last night. Hopefully it will appear online some time soon.
  • One thing to watch for is the status of the document. Will it be a “declaration” or a “chairman’s report” (or something else)? What I’m hearing is that most of the anti-multistakeholder governments like Russia and China want it to be a chairman’s report because that implies a lesser claim to legitimacy. Brazil, the hosts of the conference, presumably want to make a maximal claim to legitimacy. I tend to think that there’s enough wrong with the document that I’d prefer the outcome to be a chairman’s report, but I don’t feel too strongly.

As I blogged last week, I am in São Paulo to attend NETmundial, the meeting on the future of Internet governance hosted by the Brazilian government. The opening ceremony is about to begin. A few more observations:

  • The Brazilian Senate passed the landmark Marco Civil bill last night, and Dilma Rousseff, the Brazilian president, may use here appearance here today to sign it into law. The bill subjects data stored on Brazilians anywhere in the world to Brazilian jurisdiction and imposes net neutrality domestically. It also provides a safe harbor for ISPs and creates a notice-and-takedown system for offensive content.
  • Some participants are framing aspects of the meeting, particularly the condemnation of mass surveillance in the draft outcome document, as civil society v. the US government. There is a lot of concern that the US will somehow water down the surveillance language so that it doesn’t apply to the NSA’s surveillance. WikiLeaks has stoked some of this concern with breathless tweets. I don’t see events playing out this way. I am as opposed to mass US surveillance as anyone, but I haven’t seen much resistance from the US government participants in this regard. Most of the comments by the US on the draft have been benign. For example, WikiLeaks claimed that the US “stripped” language referring to the UN Human Rights Council; in fact, the US hasn’t stripped anything because it is not in charge (it can only make suggestions), and eliminating the reference to the HRC is actually a good idea because the HRC is a multilateral, not a multistakeholder, body. I expect a strong anti-surveillance statement to be included in the final outcome document. If it is not, it will probably be other governments, not the US, that block it.
  • In my view, the privacy section of the draft still needs work, however. In particular, it is important to cabin the paragraph to address governmental surveillance, not to interfere with voluntary, private arrangements in which users disclose information to receive free services.
  • I expect discussions over net neutrality to be somewhat contentious. Civil society participants are generally for it, with some governments, businesses, parts of the technical community, and yours truly opposed.
  • Although surveillance and net neutrality have received a lot of attention, they are not the important issues at NETmundial. Instead, look for the language that will affect “the future of Internet governance,” which is after all what the meeting is about. For example, will the language on stakeholders’ “respective roles and responsibilities” be stricken? This is language held over from the Tunis Agenda and it has a lot of meaning. Do stakeholders participate as equals or do they, especially governments, have separate roles? There is also a paragraph on “enhanced cooperation,” which is a codeword for governments running the show. Look to see in the final draft if it is still there.
  • Speaking of the final draft, here is how it will be produced: During the meeting, participants will have opportunities to make 2-minute interventions on specific topics. The drafting group will make note of the comments and then retreat to a drafting room to make final edits to the draft. This is, of course, not really the open governance process that many of us want for the Internet, one where select, unaccountable participants have the final say. Yet two days is not a long enough time to really have an open, free-wheeling drafting conference. I think the structure of the conference, driven by the perceived need to produce an outcome document with certainty, is unfortunate and somewhat detracts from the legitimacy of whatever will be produced, even though I expect the final document to be OK on substance.

The Supreme Court hears oral arguments today in a case that will decide whether Aereo, an over-the-top video distributor, can retransmit broadcast television signals online without obtaining a copyright license. If the court rules in Aereo’s favor, national programming networks might stop distributing their programming for free over the air, and without prime time programming, local TV stations might go out of business across the country. It’s a make or break case for Aereo, but for broadcasters, it represents only one piece of a broader regulatory puzzle regarding the future of over-the-air television.

If the court rules in favor of the broadcasters, they could still lose at the Federal Communications Commission (FCC). At a National Association of Broadcasters (NAB) event earlier this month, FCC Chairman Tom Wheeler focused on “the opportunity for broadcast licensees in the 21st century . . . to provide over-the-top services.” According to Chairman Wheeler, TV stations shouldn’t limit themselves to being in the “television” business, because their “business horizons are greater than [their] current product.” Wheeler wants TV stations to become over-the-top “information providers”, and he sees the FCC’s role as helping them redefine themselves as a “growing source of competition” in that market segment. Continue reading →

Patrick Byrne, CEO of Overstock.com, discusses how Overstock.com became one of the first online retail stores to accept Bitcoin. Byrne provides insight into how Bitcoin lowers transaction costs, making it beneficial to both retailers and consumers, and how governments are attempting to limit access to Bitcoin. Byrne also discusses his project DeepCapture.com, which raises awareness for market manipulation and naked short selling, as well as his philanthropic work and support for education reform.

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Pre-NETmundial Notes

by on April 18, 2014 · 1 comment

Next week I’ll be in São Paulo for the NETmundial meeting, which will discuss “the future of Internet governance.” I’ll blog more while I’m there, but for now I just wanted to make a few quick notes.

  • This is the first meeting of its kind, so it’s difficult to know what to expect, in part because it’s not clear what others’ expectations are. There is a draft outcome document, but no one knows how significant it will be or what weight it will carry in other fora.
  • The draft outcome document is available here. The web-based tool for commenting on individual paragraphs is quite nice. Anyone in the world can submit comments on a paragraph-by-paragraph basis. I think this is a good way to lower the barriers to participation and get a lot of feedback.
  • I worry that we won’t have enough time to give due consideration to the feedback being gathered. The meeting is only two days long. If you’ve ever participated in a drafting conference, you know that this is not a lot of time. What this means, unfortunately, is that the draft document may be something of a fait accompli. Undoubtedly it will change a little, but the amount of changes that can be contemplated will be limited due to sheer time constraints.
  • Time will be even more constrained by the absurd amount of time allocated to opening ceremonies and welcome remarks. The opening ceremony begins at 9:30 am and the welcome remarks are not scheduled to conclude until 1 pm on the first day. This is followed by a lunch break, and then a short panel on setting goals for NETmundial, so that the first drafting session doesn’t begin until 2:30 pm. This seems like a mistake.
  • Speaking of the agenda, it was not released until yesterday. While NETmundial has indeed been open to participation by all, it has not been very transparent. An earlier draft outcome document had to be leaked by WikiLeaks on April 8. Not releasing an agenda until a few days before the event is also not very transparent. In addition, the processes by which decisions have been made have not been transparent to outsiders.

See you all next week.

Andrea Castillo and I have a new paper out from the Mercatus Center entitled “Why the Cybersecurity Framework Will Make Us Less Secure.” We contrast emergent, decentralized, dynamic provision of security with centralized, technocratic cybersecurity plans. Money quote:

The Cybersecurity Framework attempts to promote the outcomes of dynamic cybersecurity provision without the critical incentives, experimentation, and processes that undergird dynamism. The framework would replace this creative process with one rigid incentive toward compliance with recommended federal standards. The Cybersecurity Framework primarily seeks to establish defined roles through the Framework Profiles and assign them to specific groups. This is the wrong approach. Security threats are constantly changing and can never be holistically accounted for through even the most sophisticated flowcharts. What’s more, an assessment of DHS critical infrastructure categorizations by the Government Accountability Office (GAO) finds that the DHS itself has failed to adequately communicate its internal categories with other government bodies. Adding to the confusion is the proliferating amalgam of committees, agencies, and councils that are necessarily invited to the table as the number of “critical” infrastructures increases. By blindly beating the drums of cyber war and allowing unfocused anxieties to clumsily force a rigid structure onto a complex system, policymakers lose sight of the “far broader range of potentially dangerous occurrences involving cyber-means and targets, including failure due to human error, technical problems, and market failure apart from malicious attacks.” When most infrastructures are considered “critical,” then none of them really are.

We argue that instead of adopting a technocratic approach, the government should take steps to improve the existing emergent security apparatus. This means declassifying information about potential vulnerabilities and kickstarting the cybersecurity insurance market by buying insurance for federal agencies, which experienced 22,000 breaches in 2012. Read the whole thing, as they say.

[The following essay is a guest post from Dan Rothschild, director of state projects and a senior fellow with the R Street Institute.]

As anyone who’s lived in a major coastal American city knows, apartment renting is about as far from an unregulated free market as you can get. Legal and regulatory stipulations govern rents and rent increases, what can and cannot be included in a lease, even what constitutes a bedroom. And while the costs and benefits of most housing policies can be debated and deliberated, it’s generally well known that housing rentals are subject to extensive regulation.

But some San Francisco tenants have recently learned that, in addition to their civil responsibilities under the law, their failure to live up to some parts of the city’s housing code may trigger harsh criminal penalties as well. To wit: tenants who have been subletting out part or all of their apartments on a short-term basis, usually through web sites like Airbnb, are finding themselves being given 72 hours to vacate their (often rent-controlled) homes.

San Francisco’s housing stock is one of the most highly regulated in the country. The city uses a number of tools to preserve affordable housing and control rents, while at the same time largely prohibiting higher buildings that would bring more units online, increasing supply and lowering prices. California’s Ellis Act provides virtually the only legal and effective means of getting tenants (especially those benefiting from rent control) out of their units — but it has the perverse incentive of causing landlords to demolish otherwise useable housing stock.

Again, the efficiency and equity ramifications of these policies can be discussed; the fact that demand curves slope downward, however, is really not up for debate.

Under San Francisco’s municipal code it may be a crime punishable by jail time to rent an apartment on a short-term basis. More importantly, it gives landlords the excuse they need to evict tenants they otherwise can’t under the city’s and state’s rigorous tenant protection laws. After all, they’re criminals!

Here’s the relevant section of the code:

Any owner who rents an apartment unit for tourist or transient use as defined in this Chapter shall be guilty of a misdemeanor. Any person convicted of a misdemeanor hereunder shall be punishable by a fine of not more than $1,000 or by imprisonment in the County Jail for a period of not more than six months, or by both. Each apartment unit rented for tourist or transient use shall constitute a separate offense.

Here lies the rub. There are certainly legitimate reasons to prohibit the short-term rental of a unit in an apartment or condo building — some people want to know who their neighbors are, and a rotating cast of people coming and going could potentially be a nuisance.

But that’s a matter for contracts and condo by-laws to sort out. If people value living in units that they can list on Airbnb or sublet to tourists when they’re on vacation, that’s a feature like a gas stove or walk-in closet that can come part-and-parcel of the rental through contractual stipulation. Similarly, if people want to live in a building where overnight guests are verboten, that’s something landlords or condo boards can adjudicate. The Coase Theorem can be a powerful tool, if the law will allow it.

The fact that, so far as I can tell, there’s no prohibition on having friends or family stay a night — or even a week — under San Francisco code, it seems that the underlying issue isn’t a legitimate concern about other tenants’ rights but an aversion to commerce. From the perspective of my neighbor, there’s no difference between letting my friend from college crash in my spare bedroom for a week or allowing someone I’ve never laid eyes on before do the same in exchange for cash.

The peer production economy is still in its infancy, and there’s a lot that needs to be worked out. Laws like those in San Francisco’s that circumvent the discovery process of markets prevent landlords, tenants, condos, homeowners, and regulators from leaning from experience and experimentation — and lock in a mediocre system that threatens to put people in jail for renting out a room.