The Mercatus Center at George Mason University has just released a new paper by Brent Skorup and me entitled, “A History of Cronyism and Capture in the Information Technology Sector.” In this 73-page working paper, which we hope to place in a law review or political science journal shortly, we document the evolution of government-granted privileges, or “cronyism,” in the information and communications technology marketplace and in the media-producing sectors. Specifically, we offer detailed histories of rent-seeking and regulatory capture in: the early history of the telephony and spectrum licensing in the United States; local cable TV franchising; the universal service system; the digital TV transition in the 1990s; and modern video marketplace regulation (i.e., must-carry and retransmission consent rules, among others.

Our paper also shows how cronyism is slowly creeping into new high-technology sectors.We document how Internet companies and other high-tech giants are among the fastest-growing lobbying shops in Washington these days. According to the Center for Responsive Politics, lobbying spending by information technology sectors has almost doubled since the turn of the century, from roughly $200 million in 2000 to $390 million in 2012.  The computing and Internet sector has been responsible for most of that growth in recent years. Worse yet, we document how many of these high-tech firms are increasingly seeking and receiving government favors, mostly in the form of targeted tax breaks or incentives.

We argue that the creeping cronyism could have two major negative ramifications. First, it could dull entrepreneurialism and competition in this highly innovative sector since time and resources spent on influencing politicians and capturing regulators cannot be spent competing and innovating in the marketplace. Cronyism will also negatively impact consumer welfare by denying consumers more and better products and services. Additionally, consumers might end up paying higher prices or higher taxes due to government privileges for industry.

Second, cronyism also raises the specter of greater government control of the Internet and of the digital economy. When policymakers dispense favors, they usually expect something in return. They also become accustomed to having greater informal powers over the sector receiving favors, and contribute to DC’s infamous “revolving door” problem.

High-tech America’s recent embrace of Washington could take it down the familiar path followed by the agriculture, telecommunications, and automotive sectors (among many others), with government becoming both protector and punisher of industry. Today’s dynamic tech industries will increasingly come under the “Mother, may I?” permission-based regulatory regime that encumbered the older information technology sectors.

Finally, this paper offers strategies for stalling and diminishing the cronyism already taking root in the high-tech sector. We suggest several targeted reforms to limit or undo cronyism. Generally speaking, however, we note that, as economist David R. Henderson argued in an earlier Mercatus Center report, “There is only one way to end, or at least to reduce, the amount of cronyism, and that is to reduce government power.”

The paper can be downloaded from the Mercatus website, SSRN, or Scribd. The Scribd version is embedded down below. (Also, here’s some coverage of the paper over at the Washington Post’s “Wonkblog” from our old colleague Tim Lee. Here’s more coverage from Bloomberg Businessweek and the San Francisco Chronicle. And here’s a U.S. News oped that Brent and I wrote condensing our paper into just 600 words. Finally, a short 3-minute video of me discussing the problem of tech cronyism is also embedded below.)

A History of Cronyism and Capture in the Information Technology Sector [Thierer and Skorup – July 2013] by Adam Thierer

The Mercatus Center at George Mason University has just released my new white paper, “The Perils of Classifying Social Media Platforms as Public Utilities.” [PDF] I first presented a draft of this paper last November at a Michigan State University conference on “The Governance of Social Media.” [Video of my panel here.]

In this paper, I note that to the extent public utility-style regulation has been debated within the Internet policy arena over the past decade, the focus has been almost entirely on the physical layer of the Internet. The question has been whether Internet service providers should be considered “essential facilities” or “natural monopolies” and regulated as public utilities. The debate over “net neutrality” regulation has been animated by such concerns.

While that debate still rages, the rhetoric of public utilities and essential facilities is increasingly creeping into policy discussions about other layers of the Internet, such as the search layer. More recently, there have been rumblings within academic and public policy circles regarding whether social media platforms, especially social networking sites, might also possess public utility characteristics. Presumably, such a classification would entail greater regulation of those sites’ structures and business practices.

Proponents of treating social media platforms as public utilities offer a variety of justifications for regulation. Amorphous “fairness” concerns animate many of these calls, but privacy and reputational concerns are also frequently mentioned as rationales for regulation. Proponents of regulation also sometimes invoke “social utility” or “social commons” arguments in defense of increased government oversight, even though these notions lack clear definition.

Social media platforms do not resemble traditional public utilities, however, and there are good reasons why policymakers should avoid a rush to regulate them as such. Treating these nascent digital services as regulated utilities would harm consumer welfare because public utility regulation has traditionally been the archenemy of innovation and competition. Furthermore, treating today’s leading social media providers as digital essential facilities threatens to convert “natural monopoly” or “essential facility” claims into self-fulfilling prophecies. Related proposals to mandate “API neutrality” or enforce a “Separations Principle” on integrated information platforms would be particularly problematic. Such regulation also threatens innovation and investment. Marketplace experimentation in search of sustainable business models should not be made illegal.

Remedies less onerous than regulation are available. Transparency and data-portability policies would solve many of the problems that concern critics, and numerous private empowerment solutions exist for those users concerned about their privacy on social media sites.

Finally, because social media are fundamentally tied up with the production and dissemination of speech and expression, First Amendment values are at stake, warranting heightened constitutional scrutiny of proposals for regulation. Social media providers should possess the editorial discretion to determine how their platforms are configured and what can appear on them.

This 63-page paper can be found on the Mercatus site here, on SSRN, or on Scribd.  I’ve also embedded it below in a Scribd reader. Eventually, a shorter version of this paper will appear as a chapter in a MIT Press book.

Social Networks as Public Utilities [Adam Thierer]

When people ask me why I do what I do for a living — and, more specifically, why I focus all my attention on digital media and technology policy — I often respond by showing them the new gadgets or software I am playing with at any given time.  I just love digital technology.  I am swimming in a sea of digital gadgets, consumer electronics, online applications, computing software, video games, and all sorts of cyber-stuff.

Anyway, even though this is a technology policy blog, I sometimes highlight new digital toys or applications that have changed my life for the better. As the year winds down, therefore, I thought I would share with you five technologies that improved my life and productivity in 2008. I’d also love to hear from all of you about the technologies that you fell in love with this year in case I might have missed them. Here’s my list:

#1) Naturally Speaking 10:

Thanks to Nate Anderson’s outstanding review over at Ars Technica, I finally made the plunge and bought Dragon Naturally Speaking 10 earlier this month.  Wow, what a life-changer. I had played around with an earlier version of this market-leading speech recognition technology and found it somewhat clunky and unreliable. But Ver. 10, has ironed out almost all the old problems and become an incredibly sophisticated piece of software in the process. I love the way I can use simple voice commands to navigate menus in Microsoft Word and in Firefox. Perhaps best of all, I can dictate random rants into a pocket recording device and then upload them to Naturally Speaking (via a USB connection) and have them instantly transcribed. I’m even composing blog entries like this using it! Only problem is inserting HTML code; that’s still a hassle. Also, I find that switching from one input device to another definitely affects the quality of the transcription. Once you “train” Naturally Speaking using one device, it makes sense to stick with it. It’s not just the quality of the microphone; it’s also the proximity to your mouth that makes a difference. Regardless, this is one great product and, best of all, it’s should help save my rapidly-aging hands from becoming prematurely arthritic! All those years of video games and keyboards have taken their toll. #2) Scribd:

Like many other policy wonks and academics, I’ve long been housing my papers and studies on SSRN to give them more widespread visibility or share them with others. But SSRN’s format is clunky and its functionality is extremely limited. Worst of all, it didn’t provide any embeddable code such that documents could be hosted directly within a blog post. Scribd solves all those problems for me. It’s a slick document-hosting service that is also highly searchable. It also offers up relevant documents as you are viewing others (the same way YouTube does for video). Very cool feature. Better yet, Scribd let’s you create groups for your organization or interests to collect related documents in one place. (For example, check out the PFF group page here.) Why couldn’t SSRN be more like this?!

#3) Ubiquity for Firefox:

“CTRL-SPACE BAR.” Thanks to Ubiquity, that keyboard shortcut has forever changed the way I use the Firefox web browser. I know this won’t seem like a big deal to some people, but for an old geek like me, I still prefer navigating some applications with keyboard shortcuts instead of using my mouse and drop-down menus. Ubiquity lets me do so in a browser environment. Basically, anytime I see something in my browser that I’d like more info about, I just run my cursor over that term, hit CTRL/SPACE and up pops a command prompt box that lets me run an inquiry of my choice. Once that box pops up, I can run a quick search about the term by just typing Google, MSN, or Yahoo and then hitting enter. Or I can map it instantly by typing “map.” Or search for an image or video related to it by typing “Flickr” or “YouTube.” Or “eBay” it. Or “Wiki” it. Or “Digg” it. And so on, and so on. Here’s lists of the command prompts at your disposal (1, 2, 3).

#4) HTC Touch (Verizon Wireless XV6900):

Screw the iPhone. This is little beauty can do everything the iPhone can do and do it in more compact package. This thing sits in my front shirt pocket and I often forget its there. It also has a stylus. Don’t understand how you iPhone zombies get along without one. It also has none of the silly restrictions that encumber the iPhone. I’ve downloaded more mods and apps to this thing than I know what to do with. While you iPhoners are salivating over the slim pickings at the iPhone apps store, I’m sitting on 10,000 choices to decide from over at Handango (and that doesn’t even begin to scratch the market for homebrew hacks). HTC’s TouchFlo navigation is very cool and works effortlessly with the flick of your thumb. The touchscreen keyboard wasn’t so hot, but who cares when dozens of aftermarket ones are available (I went with Resco). Same goes for the IE mobile browser, which is the weak spot of any Windows Mobile equipped device. But I solved that problem with my next choice…

#5) Skyfire mobile web browser:

The mobile version of Internet Explorer has just never cut it, and Skyfire capitalized on that fact to produce a very slick touchscreen browser for Windows Mobile smartphones. The early beta version had some bugs, but they’ve been working those out and producing a great product in the process. Is the iPhone Safari mobile browser better? Yes, it still is. Even an Apple-hater like me will admit it.  But Skyfire is catching up quickly.

Honorable mentions…

LinkedIn: Yes, I know LinkedIn has been around a couple of years, but it really took off in 2008 and made impressive improvements to become more than just the “Facebook for Old Farts” I once thought it was. I am a huge fan of the new applications they have worked into the site, especially the WordPress blog app and the Amazon books app.

Google Chrome: Although it won’t be displacing Firefox in my heart any time soon, I have come to really appreciate Chrome’s speed compared to my Firefox experience, which is now bogged down with waaaaaay too many add-ons. (So much so that it takes me well over a minute to even get Firefox to boot up!) So, I pull up Chrome and run it alongside Firefox to surf script-heavy or graphically-intensive sites (like ESPN.com) or to just keep my eMail accounts and LinkedIn page active on another screen.