In April I had the opportunity to testify before the House Small Business Committee on the costs and benefits of small business use of Bitcoin. It was a lively hearing, especially thanks to fellow witness Mark T. Williams, a professor of finance at Boston University. To say he was skeptical of Bitcoin would be an understatement.

Whenever people make the case that Bitcoin will inevitably collapse, I ask them to define collapse and name a date by which it will happen. I sometimes even offer to make a bet. As Alex Tabarrok has explained, bets are a tax on bullshit.

So one thing I really appreciate about Prof. Williams is that unlike any other critic, he has been willing to make a clear prediction about how soon he thought Bitcoin would implode. On December 10, he told Tim Lee in an interview that he expected Bitcoin’s price to fall to under $10 in the first half of 2014. A week later, on December 17, he clearly reiterated his prediction in an op-ed for Business Insider:

I predict that Bitcoin will trade for under $10 a share by the first half of 2014, single digit pricing reflecting its option value as a pure commodity play.

Well, you know where this is going. We’re now five months into the year. How is Bitcoin doing?

coindesk-bpi-chart

It’s in the middle of a rally, with the price crossing $600 for the first time in a couple of months. Yesterday Dish Networks announced it would begin accepting Bitcoin payments from customers, making it the largest company yet to do so.

None of this is to say that Bitcoin’s future is assured. It is a new and still experimental technology. But I think we can put to bed the idea that it will implode in the short term because it’s not like any currency or exchange system that came before, which was essentially William’s argument.

I’ve spent a lot of time here through the years trying to identify the factors that fuel moral panics and “technopanics.” (Here’s a compendium of the dozens of essays I’ve written here on this topic.) I brought all this thinking together in a big law review article (“Technopanics, Threat Inflation, and the Danger of an Information Technology Precautionary Principle”) and then also in my new booklet, “Permissionless Innovation: The Continuing Case for Comprehensive Technological Freedom.”

One factor I identify as contributing to panics is the fact that “bad news sells.” As I noted in the book, “Many media outlets and sensationalist authors sometimes use fear-based tactics to gain influence or sell books. Fear mongering and prophecies of doom are always effective media tactics; alarmism helps break through all the noise and get heard.”

In line with that, I want to highly recommend you check out this excellent new oped by John Stossel of Fox Business Network on “Good News vs. ‘Pessimism Porn‘.”  Stossel correctly notes that “the media win by selling pessimism porn.” He says:

Are you worried about the future? It’s hard not to be. If you watch the news, you mostly see violence, disasters, danger. Some in my business call it “fear porn” or “pessimism porn.” People like the stuff; it makes them feel alive and informed.

Of course, it’s our job to tell you about problems. If a plane crashes — or disappears — that’s news. The fact that millions of planes arrive safely is a miracle, but it’s not news. So we soak in disasters — and warnings about the next one: bird flu, global warming, potential terrorism. I won Emmys hyping risks but stopped winning them when I wised up and started reporting on the overhyping of risks. My colleagues didn’t like that as much.

He continues on to note how, even though all the data clearly proves that humanity’s lot is improving, the press relentlessly push the “pessimism porn.” Continue reading →

Shortly after Tom Wheeler assumed the Chairmanship at the Federal Communications Commission (FCC), he summed up his regulatory philosophy as “competition, competition, competition.” Promoting competition has been the norm in communications policy since Congress adopted the Telecommunications Act of 1996 in order to “promote competition and reduce regulation.” The 1996 Act has largely succeeded in achieving competition in communications markets with one glaring exception: broadcast television. In stark contrast to the pro-competitive approach that is applied in other market segments, Congress and the FCC have consistently supported policies that artificially limit the ability of TV stations to compete or innovate in the communications marketplace. Continue reading →

The Federal Communications Commission (FCC) recently sought additional comment on whether it should eliminate its network non-duplication and syndicated exclusivity rules (known as the “broadcasting exclusivity” rules). It should just as well have asked whether it should eliminate its rules governing broadcast television. Local TV stations could not survive without broadcast exclusivity rights that are enforceable both legally and practicably.

The FCC’s broadcast exclusivity rules “do not create rights but rather provide a means for the parties to exclusive contracts to enforce them through the Commission rather than the courts.” (Broadcast Exclusivity Order, FCC 88-180 at ¶ 120 (1988)) The rights themselves are created through private contracts between TV stations and video programming vendors in the same manner that MVPDs create exclusive rights to distribute cable network programming.

Local TV stations typically negotiate contracts for the exclusive distribution of national broadcast network or syndicated programming in their respective local markets in order to preserve their ability to obtain local advertising revenue. The FCC has long recognized that, “When the same program a [local] broadcaster is showing is available via cable transmission of a duplicative [distant] signal, the [local] broadcaster will attract a smaller audience, reducing the amount of advertising revenue it can garner.” (Program Access Order, FCC 12-123 at ¶ 62 (2012)) Enforceable broadcast exclusivity agreements are thus necessary for local TV stations to generate the advertising revenue that is necessary for them to survive the government’s mandatory broadcast television business model.

The FCC determined nearly fifty years ago that it is an anticompetitive practice for multichannel video programming distributors (MVPDs) to import distant broadcast signals into local markets that duplicate network and syndicated programming to which local stations have purchased exclusive rights. (See First Exclusivity Order, 38 FCC 683, 703-704 (1965)) Though the video marketplace has changed since 1965, the government’s mandatory broadcast business model is still required by law, and MVPD violations of broadcast exclusivity rights are still anticompetitive. Continue reading →

Telephone companies have already begun transitioning their networks to Internet Protocol. This could save billions while improving service for consumers and promoting faster broadband, but has raised a host of policy and legal questions. How can we ensure the switch is as smooth and successful as possible? What legal authority do the FCC and other agencies have over the IP Transition and how should they use it?

Join TechFreedom on Monday, May 19, at its Capitol Hill office for a lunch event to discuss this and more with top experts from the field. Two short technical presentations will set the stage for a panel of legal and policy experts, including:

  • Jodie Griffin, Senior Staff Attorney, Public Knowledge
  • Hank Hultquist, VP of Federal Regulatory, AT&T
  • Berin Szoka, President, TechFreedom
  • Christopher Yoo, Professor, University of Pennsylvania School of Law
  • David Young, VP of Federal Regulatory Affairs, Verizon

The panel will be livestreamed (available here). Join the conversation on Twitter with the #IPTransition hashtag.

When:
Monday, May 19, 2014
11:30am – 12:00pm — Lunch and registration
12:00pm – 12:20pm — Technical presentations by AT&T and Verizon
12:20pm – 2:00 pm — Panel on legal and policy issues, audience Q&A

Where:
United Methodist Building, Rooms 1 & 2
100 Maryland Avenue NE
Washington, DC 20002

RSVP today!

Questions?
Email mail@techfreedom.org.

There seems to be increasing chatter among net neutrality activists lately on the subject of reclassifying ISPs as Title II services, subject to common carriage regulation. Although the intent in pushing reclassification is to make the Internet more open and free, in reality such a move could backfire badly. Activists don’t seem to have considered the effect of reclassification on international Internet politics, where it would likely give enemies of Internet openness everything they have always wanted.

At the WCIT in 2012, one of the major issues up for debate was whether the revised International Telecommunication Regulations (ITRs) would apply to Operating Agencies (OAs) or to Recognized Operating Agencies (ROAs). OA is a very broad term that covers private network operators, leased line networks, and even ham radio operators. Since “OA” would have included IP service providers, the US and other more liberal countries were very much opposed to the application of the ITRs to OAs. ROAs, on the other hand, are OAs that operate “public correspondence or broadcasting service.” That first term, “public correspondence,” is a term of art that means basically common carriage. The US government was OK with the use of ROA in the treaty because it would have essentially cabined the regulations to international telephone service, leaving the Internet free from UN interference. What actually happened was that there was a failed compromise in which ITU Member States created a new term, Authorized Operating Agency, that was arguably somewhere in the middle—the definition included the word “public” but not “public correspondence”—and the US and other countries refused to sign the treaty out of concern that it was still too broad.

If the US reclassified ISPs as Title II services, that would arguably make them ROAs for purposes at the ITU (arguably because it depends on how you read the definition of ROA and Article 6 of the ITU Constitution). This potentially opens ISPs up to regulation under the ITRs. This might not be so bad if the US were the only country in the world—after all, the US did not sign the 2012 ITRs, and it does not use the ITU’s accounting rate provisions to govern international telecom payments.

But what happens when other countries start copying the US, imposing common carriage requirements, and classifying their ISPs as ROAs? Then the story gets much worse. Countries that are signatories to the 2012 ITRs would have ITU mandates on security and spam imposed on their networks, which is to say that the UN would start essentially regulating content on the Internet. This is what Russia, Saudia Arabia, and China have always wanted. Furthermore (and perhaps more frighteningly), classification as ROAs would allow foreign ISPs to forgo commercial peering arrangements in favor of the ITU’s accounting rate system. This is what a number of African governments have always wanted. Ethiopia, for example, considered a bill (I’m not 100 percent sure it ever passed) that would send its own citizens to jail for 15 years for using VOIP, because this decreases Ethiopian international telecom revenues. Having the option of using the ITU accounting rate system would make it easier to extract revenues from international Internet use.

Whatever you think of, e.g., Comcast and Cogent’s peering dispute, applying ITU regulation to ISPs would be significantly worse in terms of keeping the Internet open. By reclassifying US ISPs as common carriers, we would open the door to exactly that. The US government has never objected to ITU regulation of ROAs, so if we ever create a norm under which ISPs are arguably ROAs, we would be essentially undoing all of the progress that we made at the WCIT in standing up for a distinction between old-school telecom and the Internet. I imagine that some net neutrality advocates will find this unfair—after all, their goal is openness, not ITU control over IP service. But this is the reality of international politics: the US would have a very hard time at the ITU arguing that regulating for neutrality and common carriage is OK, but regulating for security, content, and payment is not.

If the goal is to keep the Internet open, we must look somewhere besides Title II.

Adam Thierer, senior research fellow with the Technology Policy Program at the Mercatus Center at George Mason University, discusses his latest book Permissionless Innovation: The Continuing Case for Comprehensive Technological Freedom. Thierer discusses which types of policies promote technological discoveries as well as those that stifle the freedom to innovate. He also takes a look at new technologies — such as driverless cars, drones, big data, smartphone apps, and Google Glass — and how the American public will adapt to them.

Download

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The outrage over the FCC’s attempt to write new open Internet rules has caught many by surprise, and probably Chairman Wheeler as well. The rumored possibility of the FCC authorizing broadband “fast lanes” draws most complaints and animus. Gus Hurwitz points out that the FCC’s actions this week have nothing to do with fast lanes and Larry Downes reminds us that this week’s rules don’t authorize anything. There’s a tremendous amount of misinformation because few understand how administrative law works. Yet many net neutrality proponents fear the worst from the proposed rules because Wheeler takes the consensus position that broadband provision is a two-sided market and prioritized traffic could be pro-consumer.

Fast lanes have been permitted by the FCC for years and they can benefit consumers. Some broadband services–like video and voice over Internet protocol (VoIP)–need to be transmitted faster or with better quality than static webpages, email, and file syncs. Don’t take my word for it. The 2010 Open Internet NPRM, which led to the recently struck-down rules, stated,

As rapid innovation in Internet-related services continues, we recognize that there are and will continue to be Internet-Protocol-based offerings (including voice and subscription video services, and certain business services provided to enterprise customers), often provided over the same networks used for broadband Internet access service, that have not been classified by the Commission. We use the term “managed” or “specialized” services to describe these types of offerings. The existence of these services may provide consumer benefits, including greater competition among voice and subscription video providers, and may lead to increased deployment of broadband networks.

I have no special knowledge about what ISPs will or won’t do. I wouldn’t predict in the short term the widespread development of prioritized traffic under even minimal regulation. I think the carriers haven’t looked too closely at additional services because net neutrality regulations have precariously hung over them for a decade. But some of net neutrality proponents’ talking points (like insinuating or predicting ISPs will block political speech they disagree with) are not based in reality.

We run a serious risk of derailing research and development into broadband services if the FCC is cowed by uninformed and extreme net neutrality views. As Adam eloquently said, “Living in constant fear of hypothetical worst-case scenarios — and premising public policy upon them — means that best-case scenarios will never come about.” Many net neutrality proponents would like to smear all priority traffic as unjust and exploitative. This is unfortunate and a bit ironic because one of the most transformative communications developments, cable VoIP, is a prioritized IP service.

There are other IP services that are only economically feasible if jitter, latency, and slow speed are minimized. Prioritized traffic takes several forms, but it could enhance these services:

VoIP. This prioritized service has actually been around for several years and has completely revolutionized the phone industry. Something unthinkable for decades–facilities-based local telephone service–became commonplace in the last few years and undermined much of the careful industrial planning in the 1996 Telecom Act. If you subscribe to voice service from your cable provider, you are benefiting from fast lane treatment. Your “phone” service is carried over your broadband cable, segregated from your television and Internet streams. Smaller ISPs could conceivably make their phone service more attractive by pairing up with a Skype- or Vonage-type voice provider, and there are other possibilities that make local phone service more competitive.

Cloud-hosted virtual desktops. This is not a new idea, but it’s possible to have most or all of your computing done in a secure cloud, not on your PC, via a prioritized data stream. With a virtual desktop, your laptop or desktop PC functions mainly as a dumb portal. No more annoying software updates. Fewer security risks. IT and security departments everywhere would rejoice. Google Chromebooks are a stripped-down version of this but truly functional virtual desktops would be valued by corporations, reporters, or government agencies that don’t want sensitive data saved on a bunch of laptops in their organization that they can’t constantly monitor. Virtual desktops could also transform the device market, putting the focus on a great cloud and (priority) broadband service and less on the power and speed of the device. Unfortunately, at present, virtual desktops are not in widespread use because even small lag frustrates users.

TV. The future of TV is IP-based and the distinction between “TV” and “the Internet” is increasingly blurring, with Netflix leading the way. In a fast lane future, you could imagine ISPs launching pared-down TV bundles–say, Netflix, HBO Go, and some sports channels–over a broadband connection. Most ISPs wouldn’t do it, but an over-the-top package might interest smaller ISPs who find acquiring TV content and bundling their own cable packages time-consuming and expensive.

Gaming. Computer gamers hate jitter and latency. (My experience with a roommate who had unprintable outbursts when Diablo III or World of Warcraft lagged is not uncommon.) Game lag means you die quite frequently because of your data connection and this depresses your interest in a game. There might be gaming companies out there who would like to partner with ISPs and other network operators to ensure smooth gameplay. Priority gaming services could also lead the way to more realistic, beautiful, and graphics-intensive games.

Teleconferencing, telemedicine, teleteaching, etc. Any real-time, video-based service could reach critical mass of subscribers and become economical with priority treatment. Any lag absolutely kills consumer interest in these video-based applications. By favoring applications like telemedicine, providing remote services could become attractive to enough people for ISPS to offer stand-alone broadband products.

This is just a sampling of the possible consumer benefits of pay-for-priority IP services we possibly sacrifice in the name of strict neutrality enforcement. There are other services we can’t even conceive of yet that will never develop. Generally, net neutrality proponents don’t admit these possible benefits and are trying to poison the well against all priority deals, including many of these services.

Most troubling, net neutrality turns the regulatory process on its head. Rather than identify a market failure and then take steps to correct the failure, the FCC may prevent commercial agreements that would be unobjectionable in nearly any other industry. The FCC has many experts who are familiar with the possible benefits of broadband fast lanes, which is why the FCC has consistently blessed priority treatment in some circumstances.

Unfortunately, the orchestrated reaction in recent weeks might leave us with onerous rules, delaying or making impossible new broadband services. Hopefully, in the ensuing months, reason wins out and FCC staff are persuaded by competitive analysis and possible innovations, not t-shirt slogans.

This article was written by Adam Thierer, Jerry Brito, and Eli Dourado.

For the three of us, like most others in the field today, covering “technology policy” in Washington has traditionally been synonymous with covering communications and information technology issues, even though “tech policy” has actually always included policy relevant to a much wider array of goods, services, professions, and industries.

That’s changing, however. Day by day, the world of “technology policy” is evolving and expanding to incorporate much, much more. The same forces that have powered the information age revolution are now transforming countless other fields and laying waste to older sectors, technologies, and business models in the process. As Marc Andreessen noted in a widely-read 2011 essay, “Why Software Is Eating The World”:

More and more major businesses and industries are being run on software and delivered as online services—from movies to agriculture to national defense. Many of the winners are Silicon Valley-style entrepreneurial technology companies that are invading and overturning established industry structures. Over the next 10 years, I expect many more industries to be disrupted by software, with new world-beating Silicon Valley companies doing the disruption in more cases than not.

Why is this happening now? Six decades into the computer revolution, four decades since the invention of the microprocessor, and two decades into the rise of the modern Internet, all of the technology required to transform industries through software finally works and can be widely delivered at global scale.

More specifically, many of the underlying drivers of the digital revolution—massive increases in processing power, exploding storage capacity, steady miniaturization of computing, ubiquitous communications and networking capabilities, the digitization of all data, and increasing decentralization and disintermediation—are beginning to have a profound impact beyond the confines of cyberspace.

Continue reading →

Allowing broadband providers to impose tolls on Internet companies represents a “grave” threat to the Internet, or so wrote several Internet giants and their allies in a letter to the Federal Communications Commission this past week.

The reality is that broadband networks are very expensive to build and maintain.  Broadband companies have invested approximately $250 billion in U.S. wired and wireless broadband networks—and have doubled average delivered broadband speeds—just since President Obama took office in early 2009.  Nevertheless, some critics claim that American broadband is still too slow and expensive.

The current broadband pricing model is designed to recover the entire cost of maintaining and improving the network from consumers.  Internet companies get free access to broadband subscribers.

Although the broadband companies are not poised to experiment with different pricing models at this time, the Internet giants and their allies are mobilizing against the hypothetical possibility that they might in the future.  But this is not the gravest threat to the Internet.   Continue reading →