Two weeks ago, as Facebook CEO Mark Zuckerberg was getting grilled by Congress during a two-day media circus set of hearings, I wrote a counterintuitive essay about how it could end up being Facebook’s greatest moment. How could that be? As I argued in the piece, with an avalanche of new rules looming, “Facebook is potentially poised to score its greatest victory ever as it begins the transition to regulated monopoly status, solidifying its market power, and limiting threats from new rivals.”
With the exception of probably only Google, no firm other than Facebook likely has enough lawyers, lobbyists, and money to deal with layers of red tape and corresponding regulatory compliance headaches that lie ahead. That’s true both here and especially abroad in Europe, which continues to pile on new privacy and “data protection” regulations. While such rules come wrapped in the very best of intentions, there’s just no getting around the fact that
regulation has costs. In this case, the unintended consequence of well-intentioned data privacy rules is that the emerging regulatory regime will likely discourage (or potentially even destroy) the chances of getting the new types of innovation and competition that we so desperately need right now.
Others now appear to be coming around to this view. On April 23, both the
New York Times and The Wall Street Journal ran feature articles with remarkably similar titles and themes. The New York Times article by Daisuke Wakabayashi and Adam Satariano was titled, “How Looming Privacy Regulations May Strengthen Facebook and Google,” and The Wall Street Journal’s piece, “Google and Facebook Likely to Benefit From Europe’s Privacy Crackdown,” was penned by Sam Schechner and Nick Kostov.
“In Europe and the United States, the conventional wisdom is that regulation is needed to force Silicon Valley’s digital giants to respect people’s online privacy. But new rules may instead serve to strengthen Facebook’s and Google’s hegemony and extend their lead on the internet,” note Wakabayashi and Satariano in the
NYT essay. They continue on to note how “past attempts at privacy regulation have done little to mitigate the power of tech firms.” This includes regulations like Europe’s “right to be forgotten” requirement, which has essentially put Google in a privileged position as the “chief arbiter of what information is kept online in Europe.”
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Today marks the 10th anniversary of the launch of the Apple iPhone. With all the headlines being written today about how the device changed the world forever, it is easy to forget that before its launch, plenty of experts scoffed at the idea that Steve Jobs and Apple had any chance of successfully breaking into the seemingly mature mobile phone market.
After all, those were the days when BlackBerry, Palm, Motorola, and Microsoft were on everyone’s minds. Perhaps, then, it wasn’t so surprising to hear predictions like these leading up to and following the launch of the iPhone:
In December 2006, Palm CEO Ed Colligan summarily dismissed the idea that a traditional personal computing company could compete in the smartphone business. “We’ve learned and struggled for a few years here figuring out how to make a decent phone,” he said. “PC guys are not going to just figure this out. They’re not going to just walk in.”
In January 2007, Microsoft CEO Steve Ballmer laughed off the prospect of an expensive smartphone without a keyboard having a chance in the marketplace as follows: “Five hundred dollars? Fully subsidized? With a plan? I said that’s the most expensive phone in the world and it doesn’t appeal to business customers because it doesn’t have a keyboard, which makes it not a very good e-mail machine.”
In March 2007, computing industry pundit John C. Dvorak argued that “Apple should pull the plug on the iPhone” since “There is no likelihood that Apple can be successful in a business this competitive.” Dvorak believed the mobile handset business was already locked up by the era’s major players. “This is not an emerging business. In fact it’s gone so far that it’s in the process of consolidation with probably two players dominating everything, Nokia Corp. and Motorola Inc.”
The Federal Trade Commission (FTC) is taking a more active interest in state and local barriers to entry and innovation that could threaten the continued growth of the digital economy in general and the sharing economy in particular. The agency recently announced it would be hosting a June 9th workshop “to examine competition, consumer protection, and economic issues raised by the proliferation of online and mobile peer-to peer business platforms in certain sectors of the [sharing] economy.” Filings are due to the agency in this matter by May 26th. (Along with my Mercatus Center colleagues, I will be submitting comments and also releasing a big paper on reputational feedback mechanisms that same week. We have already released this paper on the general topic.)
Relatedly, just yesterday, the FTC sent a letter to Michigan policymakers about restricting entry by Tesla and other direct-to-consumer sellers of vehicles. Michigan passed a law in October 2014 prohibiting such direct sales. The FTC’s strongly-worded letter decries the state’s law as “protectionism for independent franchised dealers” noting that “current provisions operate as a special protection for dealers—a protection that is likely harming both competition and consumers.” The agency argues that:
consumers are the ones best situated to choose for themselves both the vehicles they want to buy and how they want to buy them. Automobile manufacturers have an economic incentive to respond to consumer preferences by choosing the most effective distribution method for their vehicle brands. Absent supportable public policy considerations, the law should permit automobile manufacturers to choose their distribution method to be responsive to the desires of motor vehicle buyers.
The agency cites the “well-developed body of research on these issues strongly suggests that government restrictions on distribution are rarely desirable for consumers” and the staff letter continues on to utterly demolish the bogus arguments set forth by defenders of the blatantly self-serving, cronyist law. (For more discussion of just how anti-competitive and anti-consumer these laws are in practice, see this January 2015 Mercatus Center study, “State Franchise Law Carjacks Auto Buyers,” by Jerry Ellig and Jesse Martinez.) Continue reading →
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. Continue reading →
First, no matter how well-intentioned, restrictions on data collection could negatively impact the competitiveness of America’s digital economy, as well as consumer choice.
Second, it is unwise to place too much faith in any single, silver-bullet solution to privacy,including “Do Not Track,” because such schemes are easily evaded or defeated and often fail to live up to their billing.
Finally, with those two points in mind, we should look to alternative and less costly approaches to protecting privacy that rely on education, empowerment, and targeted enforcement of existing laws. Serious and lasting long-term privacy protection requires a layered, multifaceted approach incorporating many solutions.
The testimony also contains 4 appendices elaborating on some of these themes.
Down below, I’ve embedded my testimony, a list of 10 recent essays I’ve penned on these topics, and a video in which I explain “How I Think about Privacy” (which was taped last summer at an event up at the University of Maine’s Center for Law and Innovation). Finally, the best summary of my work on these issues can be found in this recent Harvard Journal of Law & Public Policy article, “The Pursuit of Privacy in a World Where Information Control is Failing.” (This is the first of two complimentary law review articles I will be releasing this year dealing with privacy policy. The second, which will be published early this summer by the George Mason University Law Review, is entitled, “A Framework for Benefit-Cost Analysis in Digital Privacy Debates.”) Continue reading →
[UPDATE 4/30/13: This article was subsequently published in Volume 65, Issues 2 of the Federal Communications Law Journal in April 2013. The links below now point to the final FCLJ version.]
The Mercatus Center at George Mason University has just released a new paper by Brent Skorup and me entitled, “Uncreative Destruction: The War on Vertical Integration in the Information Economy.” Brent, who is the research director for the Information Economy Project at the George Mason University School of Law, and I have been working on this paper since the Spring and we are looking forward to getting it published in a law review shortly. The paper focuses on Tim Wu’s “separations principle” for the digital economy, something I’ve spent some time critiquing here in the past. Here’s the introduction from the 44-page paper that Brent and I just released:
Are information sectors sufficiently different from other sectors of the economy such that more stringent antitrust standards should be applied to them preemptively? Columbia Law School professor Tim Wu responds in the affirmative in his book The Master Switch: The Rise and Fall of Information Empires. Having successfully pushed net-neutrality regulation into the policy spotlight, Wu has turned his attention to what he regards as excessive market concentration and threats to free speech throughout the entire information economy.To support his call for increased antitrust intervention, Wu explains his view of competition in the information economy—a view that deviates substantially from current mainstream antitrust theory.
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It’s my great pleasure this week to be participating in a 2-day symposium on “Competition in Online Search” that is being hosted by the Antitrust & Competition Policy Blog. Daniel Sokol, Associate Professor of Law at the University of Florida Levin College of Law, was kind enough to invite me to join the fun. Professor Sokol is the editor of the Antitrust & Competition Policy Blog. Others participating in this symposium include: James Grimmelman (NY Law); Eugene Volokh (UCLA); Marvin Ammori (Stanford Law); Mark Jamison (Univ. of Florida); Eric Clemons (Wharton School); Dan Crane (Michigan Law); and both Marina Lao and Frank Pasquale (Seton Hall); and more.
My entry is now live. In it, I focus on how dynamically competitive and innovative the digital economy has been over the past 15 years and question to need for intervention at this time, especially of the “public utility” variety. I’ve re-posted my entry below, but make sure to head over to the Antitrust & Competition Policy Blog to read all the contributions to this excellent symposium. Continue reading →
Writing over at the conservative Big Government blog (part of the Breitbart.com network of blogs), someone who goes by the pseudonym “Capitol Connection” has posted an editorial about the debate over retransmission consent reform that is full of misinformation and misguided policy prescriptions, at least if you believe is truly limited government. The piece is entitled, “Big Cable Would Prefer if You Paid Their Bills,” and the problems are almost immediately evident from that headline alone. First, what is a supposedly small government-oriented blog doing using a silly label like “Big Cable” to describe a vigorously competitive sector of our capitalist economy? Using terms like “Big Cable” is a silly lefty tactic. Second, no one in the cable industry is proposing anyone “pay their bills” except for the customers who enjoy their services. Isn’t a fee for service part of capitalism?
Anyway, that’s just the problem with the title of the essay. Sadly, the rest of the piece is filled with even more erroneous information and arguments about the retransmission consent regulatory process as well as the bill that aims to reform that process, “The Next Generation Television Marketplace Act” (H.R. 3675 and S. 2008). That bill, which is sponsored by Senator Jim DeMint (R-SC) and Rep. Steve Scalise (R-LA), represents a comprehensive attempt to deregulate America’s heavily regulated video marketplace. In a recent Forbes oped, I argued that the DeMint-Scalise effort would take us “Toward a True Free Market in Television Programming” by eliminating a litany of archaic media regulations that should have never been on the books to begin with. The measure would:
eliminate: “retransmission consent” regulations (rules governing contractual negotiations for content);
end “must carry” mandates (the requirement that video distributors carry broadcast signals even if they don’t want to);
repeal “network non-duplication” and “syndicated exclusivity” regulations (rules that prohibit distributors from striking deals with broadcasters outside their local communities);
end various media ownership regulations; and
end the compulsory licensing requirements of the Copyright Act of 1976, which essentially forced a “duty to deal” upon content owners to the benefit of video distributors.
This represents genuine and much-needed deregulation of a market that has been encumbered with far too much top-down control and micro-management by the FCC over the past several decades. To be clear,
none of these rules apply to any other segment of our modern information economy. Every day of the week, deals are cut between content creators and distributors in many other segments of the media industry without these rules encumbering the process. The DeMint-Scalise bill is an attempt to get big government out of the way and let these deals be cut in a truly free market without regulators putting their thumb on the scale in one direction or the other. Continue reading →
As I’ve mentioned here previously, PFF has been rolling out a new series of essays examining proposals that would have the government play a greater role in sustaining struggling media enterprises, “saving journalism,” or promoting more “public interest” content. We’re releasing these as we get ready to submit a big filing in the FCC’s “Future of Media” proceeding (deadline is May 7th). Here’s a podcast Berin Szoka and I did providing an overview of the series and what the FCC is doing.
In the first installment of the series, Berin and I critiqued an old idea that’s suddenly gained new currency: taxing media devices or distribution systems to fund media content. In the second installment, I took a hard look at proposals to impose fees on broadcast spectrum licenses and channeling the proceeds to a “public square channel” or some other type of public media or “public interest” content.
In our latest essay, “The Wrong Way to Reinvent Media, Part 3: Media Vouchers,” Berin and I consider whether it is possible to steer citizens toward so-called “hard news” and get them to financially support it through the use of “news vouchers” or “public interest vouchers”? We argue that using the tax code to “nudge” people to support media — while less problematic than direct subsidies for the press — will likely raise serious issues regarding eligibility and be prone to political meddling. Moreover, it’s unlikely the scheme will actually encourage people to direct more resources to hard news but instead just become a method of subsidizing other content they already consume.
Three years ago this month, Columbia University Law School professor Tim Wu released a controversial white paper in conjunction with the New America Foundation entitled, “Wireless Net Neutrality: Cellular Carterfone and Consumer Choice in Mobile Broadband.” It contained a litany of accusations regarding supposed corporate shenanigans in the mobile marketplace, including: intentional crippling of features and functionality; refusal to allow 3rd party attachments or intentional curtailment of a market for 3rd party application developers; and various concerns about “discrimination” of one sort or another.
Here at the TLF, we responded quite forcefully. I think every one of us piled on this study in one way or another. (ex: Hance, Jerry, James, Tim Lee, me x 2, + a podcast). I called his proposal “a declaration of surrender” since Prof. Wu was essential calling the game early and raising the white flag on mobile competition. Further, I argued he was essentially asking for “the forced commoditization of cellular networks” which “would necessitate at return to the rate-of-return regulatory methods of the past.” Others were a bit more kind to him, but we were all pretty skeptical of his gloomy claims. However, each of us here also argued that the wireless market (especially the applications side of the market) was still developing and that we’d have to check back in a few years to see how well the hands-off approach worked out.
Well, thankfully, we now know for certain that Tim Wu’s was much too lugubrious in his outlook and far too quick to call for regulatory intervention to solve a non-crisis. On the occasion of the 3rd anniversary of the release of Prof. Wu’s paper, CTIA-The Wireless Association filed a short paper with the FCC taking stock of just how far the mobile marketplace has come in just three short years. The results are really quite remarkable, as CTIA’s letter notes: Continue reading →
The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology. Learn more about TLF →
The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.