May 2005

My colleague Wayne Crews has a new paper out on cybersecurity. He outlines why we need to let the insurance market develop for software risks, and that government mandates would hurt this development. He says:

Contractually driven approaches that treat liability as an evolving relationship should prevail over regulatory approaches that mandate liability, or at the opposite extreme, indemnify companies from liability when technologies fail.

From the executive summary:

We face unprecedented information security vulnerabilities in our hyper-networked, global economy. Leaving the path clear for private, technical, market, and contractual solutions, and avoiding governmental mandates that impede contractual liability and insurance markets, should take priority. Embracing legislation or mandates can mean locking in collective “solutions” that may be hard to correct, undermining information security rather than enhancing it.

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Why are so many media companies breaking up or shedding assets? Well, the answer certainly has something to do with stock price. As this nice piece in yesterday’s (U.K.) Telegraph noted, Viacom alone has lost 36% of its value over the past five years. “We do not control the price of the stock,” says Viacom leader Sumner Redstone, “although we think about it a great deal.” I bet they do now! In fact, we know that declining stock price has led to the split Viacom plans to complete by the end of June. The end result will be two smaller companies, one containing MTV Networks and the Paramount movie studio, the other containing the older media properties (CBS Television, Infinity Broadcasting, Paramount Television, and book publisher Simon & Schuster.)

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Media guru Ben Compaine has posted an important new essay on his site entitled: “Peercasting as the New Western Frontier.” Ben argues that the Internet and new media are creating the equivalent of a new Western frontier for the expansion of ideas and creativity. Here’s how he puts it:

“The expansive western frontier offered anyone an opportunity to build a farm and become an independent member of society. Free land thus tended to relieve poverty in the Eastern cities while on the frontier it fostered greater economic equality.

What does this have to do with the media? Here’s what: Though it may be a tad premature to know with certainty, in the equally unlimited expanses of information available through the Internet and its related ecosystem I see the makings of a similar safety value for expression and communication.”

Whether is web sites, blogs, Net radio, P2P, podcasting, vodcasting, or whatever your new favorite form of media transmission may be, these new forms of “peercasting” as Ben calls them are revolutionizing today’s media marketplace by giving every man, woman and child the opportunity to speak to the whole planet.

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When I saw this article yesterday about agents from DHS shutting down a BitTorrent site, I thought that there’s no way anyone could be suggesting that copyright infringement and terrorism are related. Turns out, that’s exactly what some folks in law enforcement think.

Fun Fact of the Day… The three major blog tracking sites, Technorati, BlogPulse, and PubSub are now all reporting that they are monitoring over ten million blogs.

We live in amazing times where 10 million people have become their own broadcast station. And yet, as I noted in a recent post, there remains a crowd who say it all doesn’t make a difference. Just crazy.

As they say, the only difference between men and boys is the cost of their toys. For U.S. senators they can be even more costly. National Journal reports that, in a speech yesterday, Sen. Stevens remarked that he was “toying with the idea” of requiring analog TV manufacturers to sell digital converter boxes with their sets.” The idea is ensure that more households can receive TV signals when the transition to digital TV broadcasting is complete. Households that buy analog sets shouldn’t have to cover the cost of converter boxes, he argued, saying “I don’t know why these foreign manufacturers shouldn’t shift over to digital and if they don’t, they should give us a box.”

There may be some flaws in this logic. First, the reason any manufacturer–foreign or not–sells things to American consumers is because American consumers want to buy those things. The reference to foreign interests smacks of political pandering and is entirely unhelpful to the debate. Second, rather than relieve consumers of the cost of converter boxes, a mandate would simply ensure that consumers paid, as manufacturers would certainly pass on the cost to their customers.

There is no easy way out of the digital TV quagmire. The problem was created a decade ago when the government gave broadcasters–for free–the use of additional spectrum to use during the transition from analog transmission. Now (surprise) it is having a devil of a time getting it back. The answer isn’t clear. What is clear is that blaming foreigners and pretending that consumers won’t shoulder the costs of new rules doesn’t help.

I want to draw everyone’s attention to an amazing speech on the marvels of the modern Information Age by Stephen T. Gray, managing publisher of The Christian Science Monitor. Speaking to the graduating seniors of Michigan-based Adrian College, Gray argues that, compared to past generations, today’s youngsters are blessed to live in a world of information abundance. “The media saturate your lives far more than any previous generation,” he noted. “Today’s information environment [is] omnipresent, like the air we breathe.” “In this era of innovations and breakthroughs, you’ll be able to explore more options than the most privileged members of past generations.”

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There’s a nasty spat taking place between broadcast giants Paxson and NBC Universal over the PAX television network. Back in the late 1990s, NBC invested over $400 million in PAX to help the new network grow. As part of the deal, Paxson and NBC struck a complicated Joint Sales Agreement (JSA) that imposed responsibilities on each party.

For whatever reason, things haven’t worked out as planned and earlier this year Paxson announced that they intended to drop all the original programming from the PAX lineup (much of which was NBC-produced) and instead rely on paid programming and info-mercials. For this and other reasons, the Paxson-NBC relationship has soured quickly. In fact, it’s gotten downright ugly with both sides calling the other names in the press and pursuing legal action.

Frustrated that it has lost some of these initial legal fights, Paxson has decided to take this fight to another level: The FCC. According to a report in this week’s Broadcasting & Cable magazine, Paxson has filed a complaint with the Federal Communications Commission claiming that NBC is trying to take “illegal control” of its group of television stations. Moreover, Paxson is seeking a declaratory ruling from the FCC’s Enforcement Bureau against NBC. Specifically, Paxson wants the agency to impose “whatever additional monetary forfeitures it deems appropriate.” In other words, Paxson wants to FCC to intervene on their behalf and even fine NBC to get them to buckle to their demands.

I’m not going to beat around the bush here: I find this sort of behavior absolutely despicable. Don’t get me wrong, it may very well be the case that Paxson is right on the merits of their contractual dispute with NBC. Without examining all the paperwork surrounding these deals, I have no way of knowing who is right here.

But I do know that taking this dispute to the FCC is the wrong move. A regulatory agency is not the place to be deciding matters such as this. This is a fight that belongs in the courts, or better yet, in private dispute resolution. If this was a fight between GM and one of its parts suppliers, we wouldn’t expect that either party could take their case to a regulatory agency and get that agency to wield the club of Big Government on their behalf. But that’s exactly what Paxson is attempting here.

Regulatory agencies are hardly the neutral arbitrators of disputes some might think. They have a vested interest, at times, in tilting the balance in one party’s favor to accomplish other political goals. That’s what makes a situation like this so dangerous. If the FCC did intervene, it could end up doing a lot more than just settling the dispute. It could impose indirect regulation on the entities in question.

Regardless, even if you don’t accept this argument, I would hope most people would understand that routine contractual disputes belong in court, not in a politicized regulatory agency.

According to Conan O’Brien.

Via Hit & Run.

The Volokh Conspiracy has posted this gem.