Wu’s Many Mistaken Metaphors

by on July 30, 2008 · 16 comments

In today’s New York Times, Tim Wu writes in favor new regulation of the Internet and uses a number of bad analogies to do so. Let us count the ways.

My colleague Adam Thierer has already noted that OPEC is a group of mostly government-run oil companies whereas U.S. broadband service providers are private companies operating in an intensely competitive environment.

Wu bungles another analogy between oil and bandwidth. Wu writes, “Americans today spend almost as much on bandwidth — the capacity to move information — as we do on energy….If we aren’t careful, we’re going to repeat the history of the oil industry by creating a bandwidth cartel” — implying that bandwidth prices, for lack of competition, are about to skyrocket.

But in the last decade, the nominal price of oil has risen by a factor of 12. In the same time period, the nominal price of U.S. residential bandwidth has dropped by a factor of five or more. Mobile phone bandwidth has dropped in price even more. Thus $10 worth of oil in 1998 now costs around $120. Ten dollars of residential bandwidth in 1998 now costs about $2 or less.

Wu could not have chosen a worse metaphor.

Oil prices are mostly governed by the Fed’s monetary policy (not OPEC, yet another Wu blunder), and we don’t know which way oil prices are headed. But we know for sure bandwidth prices measured in dollars-per-bit-per-second will continue falling dramatically. The imperial forces of Moore’s Law and the equally powerful innovations of fiber-optic, memory, and hard-disk storage technology assure it.

This isn’t to say broadband networks are cheap. No, they are very expensive. They will cost hundreds of billions of dollars over the next five to 10 years. It is to say silicon and optical technologies are massively productive and will deliver ever greater services at ever lower prices. As Wu states, Americans may actually spend more and more dollars on monthly communications services overall. But per bit, they will be spending dramatically less. All this means is communications is becoming a vastly more important part of our lives.

By all means, let us explore and develop “alternative sources of bandwidth” as Wu desires. Unlike natural resources such as oil, which, while abundant, are at some point finite, bandwidth is potentially infinite. The miraculous microcosmic spectrum reuse capabilities of optical fiber and even wireless radiation improve at a rate far faster than any of our macrocosmic machines and minerals. It is far more efficient to move electrons than atoms, and yet more efficient to move photons. Left unfettered, these technologies will continue delivering bandwidth abundance.

But Wu fools no one with his slight of hand — attacking a phantom bandwidth “OPEC” — when his real goal is to establish and further empower his own cartel of scarcity-rationing bandwidth bureaucrats.

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Product Placement in Historical Context

by on July 30, 2008 · 23 comments

Texaco Star Theater Last month I posted a tongue-and-cheek piece thanking policymakers for taking steps to save us from loud TV ads and product placements. The whole thing just strikes me as the height of absurdity; it’s a stupid way for regulators to spend their time and it’s a complete waste of taxpayer dollars. Backers of such regulations assume that we in the public are little more than ignorant sheep whose minds will be subliminally programmed to want to drink certain colas or drive certain cars just because they saw them in a TV show. Absurd.

The other thing that kills me about this debate is how some people seem to imagine that product placement has somehow come out of nowhere recently and taken over broadcast TV and radio to an unprecedented extent. That’s either revisionist history or ignorance of it. The fact is, broadcasting has been filled with product placement for years. Media guru Jack Myers points this out in a good piece on the issue this week:

Those old enough to recall the early days of television news recall that Camel cigarettes and Timex sponsored the NBC News with John Cameron Swayze. On-set signage was prominent. Local radio personalities have always used their relationships with consumers to advance their sponsors’ interests.

But it goes way beyond that. For God’s sake, has everyone forgotten about the “Texaco Star Theater“? It was the top-rated show of the 1950s, pulling in a stunning 61.6 rating in 1950-51 alone. How did the show begin? Here’s how the Wikipedia entry describes it:

On television, continuing a practice long established in radio, Texaco included its brand name in the show title. When the television version launched, Texaco also made sure its employees were featured prominently throughout the hour, usually appearing as smiling “guardian angels” performing good deeds of one or another kind, and a quartet of Texaco singers opened each week’s show with the following theme song:

Continue reading →

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Tim Wu’s “Mother-May-I” World of Net Neutrality Regulation

by on July 30, 2008 · 21 comments

Tim Wu has an absurd piece in today’s New York Times comparing America’s broadband marketplace to OPEC. This really is quite outrageous, beginning with the fact that OPEC is a GOVERNMENT-RUN cartel. Wu also had a comment in the Washington Post today saying that he didn’t think broadband metering was an outrage. Well, that’s nice. I’m happy that we have Tim’s permission to experiment with new business models for financing broadband networks going forward!

This is indicative of what we can expect in the future once Net neutrality laws get on the books: A world of incessant “Mother may I?” permission-based forms of preemptive Internet regulation. Tim and his radical band of regulatory advocates over at Free Press will incessantly petition the FCC to review each and every business model decision and encourage the unelected bureaucrats at the agency to manage the Internet to their heart’s content.

And what does Tim offer for an alternative vision of the way the world should work since he doesn’t believe private markets can handle the job? Well, it’s back to the Big Government drawing board for more tax-spend-and-subsidize solutions! “Amsterdam and some cities in Utah have deployed their own fiber to carry bandwidth as a public utility,” he says. Yeah, that’s the promised land. After all, it’s working out soooooo well at the municipal level. Please.

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The Future of Event Ticket Reselling: Price Caps, Taxes and Venue Control

by on July 29, 2008 · 6 comments

Tickets, Baby, Tickets: that was the mantra of the ticket broker and reselling crowd at the Ticket Summit last week in Las Vegas. I was there to present on the legal and public policy issues of ticket reselling (with a focus on Internet sales).

The resale market for tickets is a great example of how markets work, because with event tickets it’s truly a case where supply and demand reigns supreme. But still, government regulation and the primary market have a large influence on how the resale secondary market operates.

I discussed three major influences — price caps, taxes and venue control.

Price caps–the amount you’re allowed to resell your ticket over face value — are on their way out, as legislators pretty much understand the economics of supply/demand.

Taxes are a different story, and are on the way in. A North Carolina bill (SB 1407) is the wave of the future I think – as states deregulate, they’ll think they need tax sales over face value. But general income tax laws still apply, so states and cities shouldn’t think they need a special tax (in North Carolina they call it a 3% “privilege tax”) just for tickets.

Venue control is also a growing force, and I discussed the legislative, licensing and technological ways venues can assert control over how a ticket is resold: Continue reading →

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What Mike Said

by on July 29, 2008 · 10 comments

Sometimes Mike Masnick has posts that are so spot-on that I can’t resist quoting them almost in their entirety:

As you may recall, a few years back, the entertainment industry pushed for the FCC to mandate a broadcast flag that would allow it to define rules for whether or not its content could be recorded by DVRs. The courts rightfully determined that such a mandate was outside the scope of the FCC’s authority. However, an FCC ruling on net neutrality is basically covering identical grounds, yet many of the groups cheering this decision are the same who fought against the Broadcast Flag, claiming the FCC had no mandate.

Now, to be clear, the concept of network neutrality is definitely a good thing — but having the FCC suddenly put itself in charge of regulating such things (even if it’s regulating it in a reasonable manner) is really dangerous. Those who are celebrating this decision should be worried about what it means. Specifically, they’re going to have little leg to stand on when the FCC next tries to mandate something outside of its authority (which is almost certainly going to happen in the near future).

That doesn’t mean that the apocalyptic predictions from the industry will come true, however. Represented by a positively ridiculous and blatantly silly editorial in the Washington Post by FCC commissioner Robert McDowell, it’s pure rubbish to suggest that this ruling by the FCC means the internet might “grind to a halt” is totally unsubstantiated sensationalism that has been shown time and time and time again to be false. There isn’t a serious bandwidth crunch — and whatever potential crunch may be coming could be dealt with by some modest improvements in infrastructure, not necessarily by breaking network neutrality, which is more of an attempt to double charge for bandwidth than anything else.

However, supporters of net neutrality may be making a big mistake in cheering on the FCC as it expands its authority in this area. The FCC has never been about protecting consumer rights, and granting them this authority (which the law appears not to do) opens the door to a lot more trouble down the road.

Lucky for me, Mike isn’t a stickler about enforcing his rights under copyright.

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NPR spot on Third Circuit decision in Janet Jackson case

by on July 29, 2008 · 5 comments

I was on NPR’s “On the Media” program this weekend discussing the recent Third Circuit Court of Appeals decision striking down the FCC’s fines in the “Janet Jackson case.” As I noted in this lengthy analysis of the decision, the court said that the agency’s recent efforts to expand the parameters of “indecency” enforcement for broadcast programming went too far, too fast. “[T]he FCC’s new policy sanctioning ‘fleeting expletives’ is arbitrary and capricious under the Administrative Procedure Act for failing to articulate a reasoned basis for its change in policy,” the Court held.

“On the Media” host Bob Garfield interviewed me for 5 minutes about the decision and its ramifications. The show can be heard here or you can just read the transcript there. Or you can just listen to it by clicking the button below…

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Joint FCC Filing on Internet Filtering Plan for AWS-3 Spectrum

by on July 29, 2008 · 14 comments

This week I was pleased to join a diverse collection of think tanks and public interest groups in submitting joint comments to the FCC opposing the proposed content filtering mandate that would be part of a future AWS-3 auction. That’s the proposed auction that would create a “free” nationwide wireless broadband service. As part of the deal, the company would need to need to take steps to provide a “clean” Internet connection by filtering content. This joint filing points out why that is a bad idea:

* the reach of the filtering mandate is extraordinarily broad, and would attempt to censor content far beyond any content regulation regime that has been previously upheld in the face of constitutional challenge.
* even if the scope of the filtering mandate were more narrowly focused, it would conflict with the First Amendment analysis that the Supreme Court applied to Internet access in the seminal Reno v. ACLU decision.
* even if the Commission were to require filtering on an “opt out” or “opt in” basis, the Constitutional problems would not be avoided. Opt-out filtering would impose an unconstitutional burden on listeners and recipients of Internet communications, and both opt-out and opt-in filtering would violate the First Amendment rights of speakers and other content providers on the Internet. Simply put, the First Amendment does not allow a government mandated “blacklist” of websites to be blocked.
* would also violate the terms and intent of two federal statutes – 47 U.S.C. § 326 (which prohibits the Commission from “interfer[ing] with the right of free speech”) and 47 U.S.C. § 230 (which promotes user control over content and limits burdens on service providers).
* would also limit what people could do online using the free AWS-3 service so dramatically that the usefulness of the service would be radically reduced.
* would also certainly lead to legal challenges that would delay the implementation of the proposed access service.
Continue reading →

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Cuil’s Incredible Privacy Policy

by on July 29, 2008 · 15 comments

First, an excerpt:

[W]hen you search with Cuil, we do not collect any personally identifiable information, period. We have no idea who sends queries: not by name, not by IP address, and not by cookies (more on this later). Your search history is your business, not ours.

Next, the obligatory read the whole thing.

Because you can. It’s just a little over 500 words.

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Tarring and Feathering Comcast

by on July 28, 2008 · 14 comments

The Federal Communications Commission, according to the Wall Street Journal, is prepared to stop Comcast from blocking peer-to-peer file sharing later this week — although the commission won’t fine the company because it wasn’t “previously clear what the agency’s rules were.”

Now, according to Multichannel News, comes word that there is a wireless broadband provider who explicitly prohibits all uses that may cause extreme network capacity issues, and “explicitly identif[ies] P2P file sharing applications as such a use.” 

I am not familiar with the wireless broadband provider’s practices in this area (nor even of its relevant terms of service, even though I am a customer).  However, Comcast delayed file sharing only when necessary to relieve network congestion.  Absent congestion, Comcast permitted file sharing.  A cable broadband network typically experiences congestion during the early evening hours. Which means that if file sharers were willing to avoid those hours they could share files on the Comcast network the rest of the time.  

So it will be interesting whether the FCC bans network management which prohibits file sharing, in which case cable and wireless networks could become congested to the annoyance of millions of ordinary users.  Or whether it allows broadband providers to practice network management so long as they clearly disclose it, in which case file sharers may discover they can’t use a broadband wireless or cable connection to share files, ever. Or maybe the brilliant politicians at the commission will require disclosure in sufficient detail to enable hackers to defeat network management altogether, permitting congestion to reign but ensuring that providers, not the commission, will be blamed.

As everyone who reads this blog knows, the architecture of cable, wireless and wireline networks is completely different.  Each have unique congestion challenges, and in the short term all providers must have flexibility to find appropriate solutions.  

The key point is that all broadband providers are trying to increase bandwidth as fast as they can.  The proper role for the commission is to eliminate barriers to investment, of which regulatory uncertainty is one of the most significant.

If a particular company, Comcast, is the target here primarily because it refused to pay certain political dues or tribute, as I suspect it is, we should acknowledge that and take the company’s side.

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McDowell: Collaboration Over Regulation

by on July 28, 2008 · 4 comments

Though Adam has already declared the end of the world (and himself “man enough” to admit it – let’s let others judge that, hmm, Adam?), FCC Commissioner Robert McDowell sounds a less dire, but still very cautionary note in this WaPo Op-Ed.

A taste:

If we choose regulation over collaboration, we will be setting a precedent by thrusting politicians and bureaucrats into engineering decisions. Another concern is that as an institution, the FCC is incapable of deciding any issue in the nanoseconds that make up Internet time. And asking government to make these decisions could mean that every few years the ground rules would change based on election results. The Internet might grind to a halt in such a climate. It would certainly die of clogged arteries if network owners had to seek government permission before serving their customers by managing surges of information flow.

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