Today, Tyler Cowen posted some cautious, but surprising words about his stance on the net regulation issue:
I favor net neutrality in the current environment. Without neutrality, Comcast and Verizon would use differential pricing schemes to extract more revenue and thus diminish some forms of Net output, including Google, Amazon, ebay, and possibly blogs. … If the cable and telecom companies had no legally-backed monopoly powers, I would not favor legally enforced net neutrality. “Let the market decide” would be a good answer.
You should read his whole post for more of his argument. But I wonder: If a lack of competition is caused by a government-backed monopoly power, as Cowen suggests, wouldn’t removing the regulations that create that power be the preferred course of action? Shouldn’t adding a new layer of “legally enforced net neutrality” regulation be our last, hopeless recourse? And aren’t we headed in a generally pro-competitive direction? Even putting aside the tremendous growth in competition over the past 25 years, don’t steps like the COPE Act’s streamlining of franchising help to continue to eliminate the very government-imposed barriers to entry that create market power?
I don’t know the answers to these questions, and that’s why I will remain “neutral” and simply moderate a panel discussion on neutrality regulation this Thursday, June 15, hosted by America’s Future Foundation. TLF’s own James Gattuso will be joined by Patrick Ross of PFF on the anti-regulation side, while Alex Curtis of Public Knowledge and Frannie Ross of Free Press will take the pro-neutrality side. The event will take place on the Hill with drinks beginning at 6:30 and discussion at 7. I hope you can join us! More information here.
After writing this morning’s post about VoIP and CALEA, it occurs to me that this sort of regulatory issue is probably one of the motivations behind Skype’s decision to make SkypeOut free in the United States. Skype and the FCC are heading for a collision course. Sometime in the middle of 2007, the FCC is probably going to try to force Skype to comply with CALEA. Skype will probably try to wash their hands of the matter, the way they did with E911. The FCC is unlikely to buy that, sparking a showdown.
Skype is likely to react by turning SkypeOut off (or threatening to) and blaming the FCC for the decision in hopes of creating a consumer backlash. The effectiveness of that tactic will depend on how many SkypeOut users they have. If there are enough of them, the FCC will be in the awkward situation of telling millions of Skype users that they’re no longer allowed to call their land line friends as they’d been doing for free for the previous year.
This reminds me of an excellent article in Reason back in 1999 about the fight over satellite transmission of local broadcast TV stations. Basically, satellite companies simply started transmitting the content consumers wanted in violation of the law. By the time the FCC got around to considering the issue, they had gotten so many customers that the FCC didn’t dare force them to stop.
Even if Skype isn’t able to make the FCC blink, the next year will be a fleeting opportunity to convert current landline users to IP-based telephony before going back to being a pure IP service.
Here’s Patrick Leahy’s take on network neutrality:
The last thing we should do is fix a problem that does not exist. We should also carefully examine any approach that would allow law enforcement agencies to set technology mandates, particularly given the challenges we have seen this year in the FBI’s own mishaps in its technology development.
The federal government so far has successfully allowed the Internet to flourish by avoiding design mandates and other limitations. We all must keep that important lesson in mind… The United States developed and nourished the Internet, and the world watches whenever we attempt to regulate it.
Oops, I’m sorry. That’s not about network neutrality, it’s another quote from his CALEA statement. My mistake. When it comes to network neutrality, Leahy seems quite comfortable with fixing problems that don’t yet exist.
The DC Circuit Court of Appeals has ruled that VoIP-based telephone companies are subject to CALEA, the 1994 law mandating that phone companies install infrastructure to facilitate court-ordered wiretaps. The FCC has set a deadline of May 2007 for all VoIP providers to comply.
Back in October, when the FCC first announced its intention to expand CALEA to cover VoIP providers, Sen. Leahy, one of CALEA’s sponsors, objected:
Congress recognized the unique architecture of the Internet and explicitly excluded it from the scope of CALEA’s surveillance design mandates, and we did that to allow Congress to re-visit the appropriateness of such an extension as the Internet developed. Any extension of CALEA–a law written for the telephone system in 1994–to the Internet in 2005 would be inconsistent with congressional intent.
I don’t think it’s obvious how the courts should have ruled here. Vonage does present itself as an alternative to a traditional phone line, and it does interface extensively with the PSTN. Although I’d rather the federal government have as little power over the Internet as possible, it’s not clear to me that Vonage and its ilk shouldn’t be classified as telephone companies.
What is clear, though, is that the FCC’s definitional headaches will only get worse. Skype is very careful to emphasize that it’s not a replacement for phone service, and the vast majority of Skype users call other Skype users without using the PSTN. There are pure VoIP services like Apple’s iChat and Google Talk that don’t interface with the PSTN at all. And then there are services like XBox Live that allow users to chat with one another during video games. If the FCC is going to start requiring Vonage and (perhaps) Skype to comply with CALEA, they’re going to have to decide how “phone like” an application has to be before it gets classified as such.
And of course, CALEA’s not the only regulatory scheme that applies to phone companies. We’ve also got Universal Service fees, E911 service, and probably others. If the FCC piles too many requirements on services it classifies as “phone like,” it’ll lead to the fragmentation of phone connectivity, as “pure” VoIP applications refuse to interface with the PSTN for fear of triggering all those regulatory obligations. That will mean that grandma with her land line can’t call junior on his Google phone. That wouldn’t be the end of the world, but it’s probably not what the FCC is trying to accomplish.
Never mind fees for priority broadband service. What this nation really needs is a fee on anyone still using the term “trickle-down economics.” In a post yesterday on Digital Destiny, Jeff Chester of the Center for Digital Democracy pulled the Commodore-era cliche out of his white hat, in a blogpost entitled “Memo to Heritage’s James Gattuso: The era of trickle down media economics is over.”
The trickle down era is over? Well, ok. I never said it wasn’t. I never said trickle down at all. I honestly don’t know what “trickle-down media economics” even means.
Chester’s memo follows an earlier post criticizing my recent Heritage Foundation paper on neutrality regulation as “a litany of rationalizations and under-developed analysis.” Sensing that he disagreed with me on some points, I read on to see where my paper had gone wrong. But he didn’t say. Instead he focused on Heritage’s funding, promising a substantive response in “our next post.”
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Another day, another absurd software patent: Ars reports that Nintendo has patented the concept of instant messaging in games:
In the claims section, the patent describes a chat system that uses a remotely stored buddy list, supports multiple statuses, broadcasts information about active gaming activities, displays notification of events including the arrival of new e-mail messages, facilitates transmission of player preferences, and enables users to communicate with each other either with voice or text messages. Keep in mind that this patent does not cover game-oriented chat in general; it specifically describes a console gaming chat mechanism that displays game information and uses a buddy list.
Sure, instant messaging and computer games had been around for several years when Nintendo filed for this patent in 2000. But combining them was truly a stroke of genius!
The New York Times reports that European regulators are becoming increasingly concerned about the development of the music-download market:
Government consumer protection agencies in Norway and Sweden want Apple to remove restrictions that prevent customers from playing music they bought through iTunes on devices made by other companies.
And in Britain, one of the largest digital music markets, the British recording industry’s trade association, known as B.P.I., told a Parliamentary committee on Tuesday that iTunes music should be made compatible with other portable music devices. It was the first time the group had taken a public stance on the issue.
Early last year, European Union competition regulators opened an investigation into Apple’s pricing practices at the behest of Britain’s Office of Fair Trading. Users of the British iTunes Web site are charged 99 pence, or $1.82, for most iTunes tracks, while French users are charged 99 euro cents, or $1.25.
“European regulators are clearly concerned that consumers need to get a fair deal when they buy music online,” said Struan Robertson, a British-based technology lawyer at Pinsent Masons. “Since we share very similar competition laws across the E.U., a domino effect could cause changes across the Continent.”
I suspect that these regulators will come up with bad policy proposals; government regulators almost always do. Certainly, mandating that Apple change its format, or share proprietary details of its format with other companies, would be bad policy, opening the door to the politicization of the digital music industry.
But I can’t say I’m shocked at their concern. The DMCA (and in Europe, the EUCD) have had the unintended consequence of giving Apple a monopoly on iTunes-compatible MP3 players. And so it’s not crazy for them to be looking into ways to remedy the problem.
But the right way to deal with the problem is to repeal the law that caused the problem in the first place, not to add another layer of regulations on top. Because those regulations, too, will have unintended consequences. If you repeal the DMCA and the EUCD, makers of competing MP3 players will reverse-engineer FairPlay and add the capability to play iTunes songs. No further government oversight will be required. But if you pass additional regulations, we’ll have to come back in another decade to figure out how to deal with the unintended consequences of those regulations.
Not only is eBay lobbying to impose government regulations on the Internet, but they’re lobbying for more draconian restrictions on Internet gambling, too. Radley Balko gives them a a well-deserved spanking in his Fox News column:
Goodlatte’s bill bans the use of financial services to facilitate Internet gambling sites. It’s already illegal to operate a gaming site on U.S. soil. But most experts agree it’s still legal to “place” a bet. Goodlatte wants to put up a wall between the domestic “bet placing” and the offshore “bet taking,” which FirePay and Neteller make possible.
If banks and other financial institutions are going to be responsible for policing what their customers do online, as will happen should Goodlatte’s bill become law, it’s safe to assume that they’ll comply by simply banning all transactions with offshore payment services.
Which means that Goodlatte’s bill’s main effect will be to shield PayPal, a domestic company, from foreign competitors (foreign competitors that, ironically, are doing exactly what PayPal’s founders envisioned).
What’s more, the letter eBay government relations director Brian Bieron sent to Goodlatte announcing the company’s support of his bill actually goes above and beyond what any gambling foes in Congress have called for. Bieron in fact calls for the actual prosecution of Internet gamblers themselves, a policy which could only be enforced by allowing law enforcement officials to essentially begin monitoring everyone’s online activity, including tracing visited websites back to IP addresses.
Instead of lobbying for the so-called “the First Amendment of the Internet,” perhaps they should show more concern for the actual Bill of Rights.
Each week seems to bring another exuse for me to pen an entry in my ongoing “Media DE-Consolidation” series. This week it’s the Tribune Co. According to a front-page story in today’s Wall Street Journal, the 160-year-old media / newspaper giant is considering spinning off its broadcasting group, which includes 26 TV stations (including my beloved WGN-TV in Chicago on which I watched countless Cubs games growing up). I find this interesting for two reasons:
(1) Most newspaper owners are making a push for the FCC to relax the newspaper-broadcasting cross-ownership rule so they can own both papers and stations in the same market. But this move by Tribune would signal a retreat by a major company in the opposite direction. So perhaps this will take the steam out of the dereg effort at the FCC.
(2) However, let’s not forget that the Tribune Co. long ago received waivers to hold papers and stations in key markets such as Chicago and Los Angeles and the resulting combinations certainly haven’t done anything to negatively impact media diversity in those towns. So, it’s difficult to see what harm would come from allowing others to combine newspaper and broadcasting operations.
Regardless, the push for media DE-consolidation continues and the Chicken Little media critics are nowhere to be found. Any time an operator even mentions the idea of buying more properties, the media critics go bananas and scream for government regulation. But when major operators start spinning off entire divisions, the critics don’t say a peep. They fail to appreciate how dynamic media markets are and how investors, consumers and technological change is the greatest check on market power, not ham-handed government regulations.
I participated in a major conference yesterday sponsored by the New America Foundation (NAF) and the Kaiser Family Foundation (KFF) entitled “Beyond Censorship: Policies and Technologies to Give Parents Control over Children’s Media Content.” The event featured an impressive collection of lawmakers, regulators, corporate leaders and public policy experts who gathered to discuss, as the conference agenda stated, “who is responsible for protecting kids from inappropriate media–industry, the government, or parents armed with new technologies?”
I thought it might be worth transcribing a few of my notes here since others might be interested in what was said. I did the same thing in February after I participated in a similar conference that Stephen Balkam of the Internet Content Rating Association (ICRA) hosted at Yahoo headquarters in Sunnyvale, California. Incidentally, I’m going to be co-hosting a similar event with Stephen and ICRA next week in Brussels entitled “Protecting Children AND Free Expression in Our New, Digital Content World.” EU Commissioner Viviane Reding will be on hand to deliver a keynote address and then we’ll be hearing from many others on these issues.
What follows below is a brief summary of yesterday’s NAF / KFF discussion over the span of the 3-hour event.
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The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.