Additional Concerns with the Skype-Wu Proposal

by on February 22, 2007 · 2 comments

Two days ago, I posted a short essay expressing my strong reservations about the new Skype petition requesting that the FCC impose Carterfone-like regulations on wireless operators. James Gattuso followed up yesterday with a piece of his own. And this followed last week’s series of essays about Tim Wu’s “Wireless Net Neutrality” paper by Jerry Brito, Hance Haney, James Gattuso, Tim Lee, Scott Wallsten, and Randy May. (The Skype petition essentially asks the FCC to implement Prof. Wu’s ideas into law, so for purposes of this essay I will treat them as the same proposal.) I wanted to elaborate a bit more on this proposal because I think this issue is profoundly important to the future of innovation and competition in the wireless sector.

Burning the Village to Save It?
The fundamental question raised by the Skype-Wu proposal is whether America will continue to allow competition in wireless network architectures and business models to see which systems and plans (a) consumers truly prefer and that also (b) allow carriers to recoup fixed capital costs while (c) expanding and innovating to meet future needs. The Skype-Wu proposal would foreclose such marketplace experimentation by essentially converting cellular networks into a sort of quasi-commons and forcing private network operators to provide network access or services on someone else’s terms. That someone else, of course, is the Federal Communications Commission (FCC), which will be tasked with devising rules and price regulations to ensure “fair and non-discriminatory” access / interconnection pricing.

In my opinion, when you get right down to it, this proposal is a declaration of surrender. That is, Skype and Prof. Wu almost seem to be saying that while it’s nice we’ve seen innovation at the core of the wireless sector over the past two decades, we now need to get on with the important business of establishing rules to ensure the maximum amount of output or innovation at the edge of networks while largely ignoring what happens at the core, or even prohibiting certain things from happening at the core. In other words, to maximize the freedom to innovate at the edge of networks, we must now restrict the freedom to innovate at the core in some ways.

In essence, therefore, this proposal represents a call for the forced commoditization of cellular networks and would necessitate at return to the rate-of-return regulatory methods of the past. It would freeze network innovation in place and stop of the clock on one of the great American success stories of the past quarter century. For these reasons, I will argue that it is essential it be rejected.

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But I Be Done Seen About Ever’thing…

by on February 22, 2007

After all of the lobbying Disney did for the Sonny Bono Copyright Term Extension Act (read as Mickey Mouse Protection Act), there’s some poetic justice in seeing them exposed to a $2 billion lawsuit for copyright and trademark infringement.

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An Encouraging Oral Argument on Software Patents

by on February 21, 2007

I just read through this morning’s oral arguments in the case of Microsoft v. AT&T. It’s a fascinating case because it beautifully highlights the conceptual confusion that lies at the root of software patents.

The case involves a patent dispute between AT&T and Microsoft, in which AT&T claimed some Microsoft software infringed on an AT&T patent. They’ve sorted things out with regard to domestic infringement, but their dispute is over whether Microsoft is liable for infringement overseas. What happened is that Microsoft shipped a single copy of its software to an overseas distributor, who in turn installed thousands of copies of the software on overseas computers.

Under a 1984 revision to patent law, it’s patent infringement to ship the components of a patented invention overseas for the purpose of evading US patents by having the final assembly of the components occur overseas. AT&T claims that Microsoft is liable because its software was a “component” under the law. Microsoft counters that software cannot be a “component,” because it’s an abstract string of 1s and 0s. The component, they argued, was the individual copy of the software, which was created overseas.

The really illuminating thing about the oral arguments, for my money, is when the counsel for AT&T, Seth Waxman, contorts himself into pretzels trying to argue that software is more than just information:

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Free Trade: Still Not Destroying Jobs

by on February 21, 2007

Over at my other blog, Brian Moore points out this article that looks back of the great off-shoring debate of three years ago:

Then-candidate John Kerry issued a statement denouncing what he called “Benedict Arnold CEOs” who shipped U.S. jobs overseas. The airwaves and cables fairly hummed with angry talk about offshoring.

And what happened next? Nothing.

Nothing, that is, like the massive outflow of jobs that many feared. Employment growth, which had been notably slow after the 2001 recession, picked up in the United States. (We’ve gained more than five million jobs since early 2004.) Recruiters who specialize in information-technology workers say they have more openings than they can fill…

Most economists who’ve looked at the issue rate the long-run economic impact of offshoring as either (1) minimal, or (2) positive. Using overseas workers to save money or boost productivity generally results in better or cheaper services, which in turn leads to more competition, more innovation, and growth.

But you don’t have to take my word for it. Listen to Scott Kirwin, who made a return appearance in December to Wired magazine. Things have changed. He shut down his anti-offshoring Web site in 2006 and has since found himself a better job in the software business. “I don’t view outsourcing as the big threat it was,” he told the magazine. “In the end, America may be stronger for it.”

I wonder if any of the pundits who excoriated Greg Mankiw in 2004 are ready to apologize yet.

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“Blogging should not be a crime.”

by on February 21, 2007

My former Cato Institute colleague Tom Palmer has penned an important editorial in today’s Washington Post along with Raja Kamal of the University of Chicago that illustrates how very lucky we are to live in a country that respects freedom of speech and religious differences. Palmer and Kamal tell the story of Abdelkareem Nabil Soliman, a 22 year old student who is sitting in an Egyptian prison, awaiting sentencing tomorrow. “His alleged ‘crime’: expressing his opinions on a blog. His mistake: having the courage to do so under his own name,” note Palmer and Kamal. They continue:

Soliman.. was expelled from Al-Azhar University last spring for sharply criticizing the university’s rigid curriculum and faulting religious extremism on his blog. He was ordered to appear before a public prosecutor on Nov. 7 on charges of “spreading information disruptive of public order,” “incitement to hate Muslims” and “insulting the President.” Soliman was detained pending an investigation, and the detention has been renewed four times. He has not had consistent access to lawyers or to his family.
…
Soliman has criticized Egyptian authorities as failing to protect the rights of religious minorities and women. He has expressed his views about religious extremism in very strong terms. He is the first Egyptian blogger to be prosecuted for the content of his remarks. Remarkably, the legal complaint originated with the university that had expelled him; once, it was a great center of learning in the Arab world, but it has been reduced to informing on students for their dissent from orthodoxy.
…
Whether or not we agree with the opinions that Abdelkareem Nabil Soliman expressed is not the issue. What matters is a principle: People should be free to express their opinions without fear of being imprisoned or killed. Blogging should not be a crime.

Amen. Again, it’s stories like this that should remind us how good we have it here in America.

By the way, a website has been set up to petition for his freedom: www.FreeKareem.org

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Geoffrey Stone on a National Shield Law

by on February 21, 2007

University of Chicago Professor Geoffrey Stone, one of America’s leading experts on First Amendment law, has an editorial in today’s New York Times calling for the passage of a federal journalist-source priviledge law, or “shield law.” Such a law would, in Stone’s words, “protect journalists from compelled disclosure of their sources’ confidential communications in the same way psychiatrists and lawyers are protected.”

Prof. Stone notes that 49 states already have such a shield law and that 13 of those states provide journalist-source confidentiality absolutely. In the 36 other states the right is qualified but still provides a great deal of protection. Stone argues that the same protections need to be granted at the federal level because:

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Skype Gripes: Cellphones, Carterfones, and 1968

by on February 21, 2007

Don’t look now, but it may be time to dig out those old bell bottoms and love beads from your closet. The calendar may say its 2007, but in Washington regulatory circles it may soon be 1968 all over again. You may remember 1968 as a year of turmoil–with anti-war protests, assassinations, and the election of Richard Nixon. Forget all that. At the FCC, it was the year of the Carterfone decision, in which the Bell System was banned from restricting equipment consumers could put on their phone lines. The same year, the Commission allocated the first frequencies for cell phone service.

Both decisions revolutioned the communications world: Carterphone opened the first crack in the previously iron-clad, legally-protected Bell System monopoly to competition, and the cell phone allocation planting the seed for today’s wireless services, which shattered the idea of telephone monopolies at its root.

These two regulatory threads of 1968 are now on a collision course. Yesterday,
Skype –the Internet phone company now owned by eBay– petitioned the FCC to apply the Carterfone decision to wireless carriers (see Adam’s excellent post on this.) The filing follows by less than a week a paper by Tim Wu, father of the term “net neutrality”, endorsing the same idea (discussed here, here, here, here and here.)

Skype–whose founders weren’t even born in 1968–see Carterfone in grand Jeffersonian terms, using the word “right” some 35 times. One practically expects to read of the right to life, liberty, and the right to use non-harmful devices and software on telecommunications networks. Carterfone, however, did not create a right. It created a regulation. A regulation that was justifed in the face of a legally-protected, comprehensive, vertically-integrated old-fashioned monopoly, but a regulation nonetheless. It makes no sense to saddle today’s competitive, innovative and growing cell phone market with the same regulation.

The battle over regulation of wireless networks promises to be a divisive one–in effect a new front in the larger war over neutrality regulation that has been raging for over a year At its heart are two vastly different visions of how best to create competition: one based on forced access and restrictions mandated by government, the other based on reducing barriers to the creation of alternative networks, with consumers–through the marketplace–deciding how they should best be run. Network managers throughout the economy–and consumers as well–should be watching this debate with interest.

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An Ignorant Screed on School Choice

by on February 21, 2007 · 12 comments

I’m sure Leander Kahney of Wired makes a lot of sense when he’s talking about music and copyright protection, but when the topic is schools, he seems completely clueless:

Jobs has also been a longtime advocate of a school voucher system, another ridiculous idea based on the misplaced faith that the mythical free market will fix schools by giving parents choice.

Jobs argues that vouchers will allow parents, the “customers,” to decide where to send their kids to school, and the free market will sort it out. Competition will spur innovation, improve quality and drive bad schools (and bad teachers) out of business. The best schools will thrive.

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Wikinomics

by on February 21, 2007

I’m reading Wikinomics: How Mass Collaboration Changes Everything. The authors, Don Tapscott and Anthony Williams, have managed an impressive feat: they’ve translated Yochai Benkler’s The Wealth of Networks into marketing copy. Well, OK, that’s a little bit unfair. But their book is definitely unlike I’ve read about peer production. To my knowledge, it’s the first book on the subject that’s pitched toward business leaders rather than academics or techies. Accordingly, it stays at the treetop level and focuses on business implications wherever possible, explaining what peer production is, why businesses should care, and how businesses can use peer production to their advantage.

The authors are extremely enthusiastic about the phenomena they describe. They’re positively effusive in their predictions that mass collaborations will revolutionize industries, empower consumers, and democratize markets. Yet despite the gee-whiz tone, this is not a shallow book. They do a good job of summarizing the thesis of Benkler’s “Coase’s Panguin” without getting bogged in academic formalisms. They discuss the various controveries surrounding Wikipedia (such as this one), mostly coming down on the pro-Wikipedia side of the arguments. And they introduce the reader to a variety of programs, companies, and concepts–blogs, Linux, Apache, Flickr, Boing Boing, Second Life, etc. Obviously, few of these are new to TLF readers, but for the business people who are the book’s target audience, this is likely to be a welcome introduction to the concepts.

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Skype Asks FCC to Impose Carterfone Regs on Wireless

by on February 20, 2007 · 4 comments

It hasn’t even been a week since Tim Wu made such a splash with his “Wireless Net Neutrality” proposal and already a major corporation has run to the FCC asking for it to be implemented into law! (Tim, my old friend and occasional nemesis, you know how to get results!)

Today, Internet phone giant Skype filed a petition with the Federal Communications Commission “to confirm a consumer’s right to use Internet communications software and attach devices to wireless networks.” The 32-page filing repeats many of the arguments Tim Wu made in his paper about the supposed need for regulators to step in and impose Bell System-era device attachment rules to modern cell phone operators. Specifically, Skype wants the FCC “to create an industry-led mechanism to ensure the openness of wireless networks.” I’m not sure what that means but I am certain that entire forests will fall as the paperwork flies at the FCC in an attempt to interpret and implement these new regulations.

I disagree on so many levels with the Skype petition that I don’t know exactly where to begin, but luckily I don’t have to say much. I just need to point to the excellent critiques that my TLF colleagues and current and former PFF colleagues published last week in response to the Wu paper. Here’s a sampling:

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