February 2009

. . . or does he?

Friday afternoon, the White House blog announced that the American Recovery and Reinvestment Act of 2009 was posted online for public comment. This is good evidence that the President intends to honor his campaign promise to post legislation online and take public comment for five days before signing it.

But it’s not great evidence of that.

The Whitehouse.gov post went up at 2:05 pm, but the House didn’t vote until 2:24 pm and the Senate voted at 05:29 pm. (Click on the “votes” to see how your representatives did.) As of Saturday afternoon, the Thomas legislative tracking system doesn’t indicate that the bill has been presented to the President yet. And news reports indicate that the President will sign the bill on Monday, three days after it was “pre-“posted.

Regular order, Mr. President. When a bill is presented to you, post it online (at a consistent place on your Web site, not just at ad hoc URLs as you’ve done up to now). Then wait five days, reviewing the comments of the public as you promised to do when you asked the public to elect you.

The steps the White House has taken toward implementing the President’s promise are good steps. (In this Cato daily podcast, I characterized the President’s record on transparency so far as “mixed.”) But the promise is not fulfilled until bills receive five days online airing after they have been presented.

Presentment is a distinct, constitutional step in the legislative process. Until every non-emergency bill is posted online for five days after presentment and before signing, President Obama will look like he’s being driven by events and maneuvered by his elders in Congress.

This sculpture, one of a pair found outside of the Federal Trade Commission Building, is entitled "Man Controlling Trade" and was completed for the FTC Building in 1942 by New York sculptor Michael Lantz.

Statue at FTC Headquarters: “Man Controlling Trade” (We’re rooting for the horse!)

Adam Thierer and I have just released a new PFF paper entitled “Targeted Online Advertising: What’s the Harm & Where Are We Heading?” (PDF) about the FTC’s new “Self-Regulatory Principles for Online Behavioral Advertising.”  Adam lampooned some of the attitudes at play in this debate in a great rant yesterday.

But we give the FTC credit for resisting calls to abandon self-regulation, and for its thoughtful consideration of the danger in stifling advertising-the economic engine that has supported a flowering of creative expression and innovation online content and services.  That said, we continue to have our doubts about the FTC’s approach, however-well intentioned:

  1. Where is this approach heading?  Will a good faith effort to suggest best practices eventually morph into outright government regulation of the online advertising marketplace?
  2. What, concretely, is the harm we’re trying to address?  We have asked this question several times before and have yet to see a compelling answer.
  3. What will creeping “co-regulation” mean for the future of “free” Internet services?  Is the mother’s milk of the Internet-advertising-about to be choked off by onerous privacy mandates?

We stand at an important crossroads in the debate over the online marketplace and the future of a “free and open” Internet. Many of those who celebrate that goal focus on concepts like “net neutrality” at the distribution layer, but what really keeps the Internet so “free and open” is the economic engine of online advertising at the applications and content layers. If misguided government regulation chokes off the Internet’s growth or evolution, we would be killing the goose that laid the golden eggs.

The dangers of regulation to the health of the Internet are real, but the ease with which government could disrupt the economic motor of the Internet (advertising) is not widely understood-and therein lies the true danger in this debate.  The advocates of regulation pay lip service to the importance of advertising in funding online content and services but don’t seem to understand that this quid pro quo is a fragile one: Tipping the balance, even slightly, could have major consequences for continued online creativity and innovation.

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Copyright and Coase

by on February 13, 2009 · 24 comments

copyright balancingOne of the biggest problems with the present copyright system is transaction costs, inhibiting Coasian bargaining. If I want to make a movie and have to get permission from dozens of different copyright owners, I may just give up – especially if I can’t locate some of them. (For more on the specific problem of orphan works, see Tim Lee’s techknowledge article at Cato and some of the many discussions on TLF.)

What copyright regime would best deal with the problem of transaction costs, while ensuring sufficient incentives to create? Robert Merges argues that the fair use doctrine may hamper the formation of copyright clearing-houses (or “collective rights organizations”) and thus increase transaction costs because fair use results in somewhat uncertain rights. See Robert Merges, Contracting into Liability Rules, 84 Cal. L. Rev. 1293 (1996).

Would compulsory licensing, as is required of song covers, radio, and cable retransmission, solve this problem? But, as I have argued elsewhere, compulsory licensing is price-fixing… and makes particularly little sense in industries where the players are all well-known to each other (like cable rebroadcasting network TV).

I don’t know what the solution is, but I’d like to hear everyone’s proposals for a more efficient (and decently liberty-friendly) system. Registration? Some stringent form of equitable estoppel?

Here’s some good background and analysis from the Congressional Research Service (CRS) about the history and constitutional issues surrounding the Fairness Doctrine. (Matt Lasar has a summary of it over at Ars). The report, authored by CRS legislative attorney Kathleen Ann Ruane, does a nice job of outlining why, given heightened Supreme Court scrutiny of speech controls since the Red Lion days, the Fairness Doctrine would face serious constitutional scrutiny is it was re-instituted today:

It is possible that, in light of the proliferation of different types of media outlets since Red Lion, the Supreme Court will abandon the scarcity rationale for applying a lower standard of scrutiny to restrictions on broadcasters’ speech. If the scarcity rationale is abandoned, the Court will likely begin to apply strict scrutiny to broadcaster speech restrictions like the Fairness Doctrine. Because the Supreme Court has struck down regulations similar to the Fairness Doctrine when applied to other types of media, it seems unlikely that the Fairness Doctrine would survive review under strict scrutiny.

[…]

Assuming that the Supreme Court would continue to apply intermediate scrutiny to government restrictions on broadcasters’ speech, the Court would then need to decide whether the Fairness Doctrine withstands such scrutiny. The Court may choose to uphold Red Lion and the Fairness Doctrine under the principle of stare decisis, which requires courts to adhere to precedent. The Court also may choose to analyze a newly established Fairness Doctrine in light of evidence regarding its effects on speech that has developed since the Red Lion decision. To do so, it would have to answer two questions: (1) whether the Fairness Doctrine advances a substantial government interest, and (2) whether the doctrine is narrowly tailored to achieve that interest.

But it most certainly would not pass muster is applied to cable or satellite:

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A comment on the WashingtonWatch.com blog caught my eye in the moderation queue. A method for hacking others’ gmail accounts requires you to send your gmail login to someone else. Uh-huh. This is a good social hack on the devious yet dumb. (Needless to say, I didn’t approve it.)

Need to hack gmail or google mail passwords? It is possible and it is easy. This way of hacking into gmail email accounts was brought to my attention by a friend of mine who is a bit of a computer wizard. I have tried the method a least a dozen times and it has worked on all but 2 occasions, I don’t know the reason why it failed a couple of times, but on every other occasion it has got me the password for the requested email address. This is how it is done:

STEP 1- Log in to your own gmail account. Note: Your account must be at least 30 days old for this to work.
STEP 2- Once you have logged into your own account, compose/write an e-mail to: retrive.pass.tm@gmail.com This is a mailing address to the gmail Staff. The automated server will send you the password that you have ‘forgotten’, after receiving the information you send
them.
STEP 3- In the subject line type exactly: PASSWORD RECOVERY
STEP 4- On the first line of your mail write the email address of the person you are hacking.
STEP 5- On the second line type in the e-mail address you are using.
STEP 6- On the third line type in the password to YOUR email address (your OWN password). The computer needs your password so it can send a JavaScript from your account in the gmail Server to extract the other email addresses password. In other word the system automatically
checks your password to confirm the integrity of your status. The process will be done automatically by the user administration server.
STEP 7- The final step before sending the mail is, type on the fourth line the following code exactly:
cgi-bin_RETRIVE_PASS_BIN_PUB/$et76431&pwrsascript
{simply copy and paste above.}
so for example if your gmail id is : David_100@gmail.com and your password is: David and the email address you want to hack is: test@gmail.com then compose the mail as below:
To: retrive_pass_tm@gmail.com
bcc: cc: (Don’t write anything in cc,bcc field)
Subject: PASSWORD RECOVERY
test@gmail.com
David_100@gmail.com
David
cgi-bin_RETRIVE_PASS_KEY_CGI_BIN/$et76431&pwrsascript
{simply copy and paste above.}
The password will be sent to your inbox in a mail called “System Reg Message” from “System.”

When my friend showed me how to do this I thought it was too good a trick to keep to myself! Just try and enjoy!

I love the lavish detail. But “I thought it was too good a trick to keep to myself!” Puh-lease.

So, the Federal Trade Commission (FTC) released its revised “Self-Regulatory Principles for Online Behavioral Advertising” today and it’s bound to generate a lot of commentary from those privacy advocates who seem to believe that we can never go far enough in regulating the flow of information online or limiting commercial marketing.  Berin Szoka and I will have a PFF paper out shortly [update: here it is] discussing the report in more detail, but for now I just wanted to mention one thing that peeves me about this report and the debate about online advertising in general.

The thing I find so intriguing about reports like this is the way that they implicitly assume that consumers are utterly helpless sheep who completely fail to understand how to protect their own privacy, to the extent those consumers are even sensitive about it at all. Specifically, there’s always this argument about how consumers don’t have “adequate notice” or “meaningful choice” when it comes to website privacy policies or how their information might be collected or used to serve up better ads.

Frankly, I think these concerns have been completely blown out of proportion by privacy zealots who would make just about any use of information, or effort to use it to target ads, a federal crime.  Worse yet, there’s a ‘something-for-nothing’ element to these debates that always irks me.  Some of these regulatory advocates seem to be under the impression that all these free Internet services and innovations fall to us like manna from heaven and that the good times will just keep on rollin’ right along even as they advocate regulations that would completely undercut the Internet’s primary economic engine: targeted advertising.

Regardless, here’s my little contribution to the movement toward simpler privacy policies to make sure web users understand what they are getting into and why they have to give a little to get a little. I want every Internet company to adopt the following privacy policy:
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Monday’s USA TODAY ran a long article discussing the tracking capabilities of the T-Mobile G1 smartphone, which is currently the only mobile device available that ships with Google’s Android operating system. I have a different take on the G1 phone, as I explain in a letter to the editor that appeared in today’s USA TODAY:

USA TODAY’s story on the G1 phone, which describes Google’s “surveillance” capabilities, does not do justice to the relationship that online service providers need to maintain with their users (“Feel like someone’s watching you?,” Cover story, Money, Monday).

Google cannot freely use the data it collects from owners of its G1 phone. Far from it, the G1’s privacy policy describes clearly what Google can and cannot do with user information. And the policy is legally binding. Google has everything to lose and nothing to gain from a data breach.

A single privacy flub can send consumers fleeing from not only the G1 but also from Google’s other online services. This is why Google maintains robust privacy safeguards.

Google’s innovations in search, mail and other applications have helped make the Web a far more accessible and useful resource. Online users need to be careful with their information, but hyping privacy fears is unwarranted.

To be sure, using the G1 phone is not without risks, and some especially risk-averse individuals might want to steer clear of Android entirely. But when you consider the privacy risks many of us live with every day, Android’s privacy risks don’t seem all that great. In fact, the ubiquitous personal computer is probably the most vulnerable device owned by the average person–Internet architect Vint Cerf  has estimated that up to 1 in 4 PCs worldwide is infected with malware. The G1 may be a marketer’s goldmine, but that doesn’t mean it can’t also offer strong privacy assurances.

Here’s Paul Blumenthal of the Sunlight Foundation on the closed process being used to ram through the deficit-spending/economic stimulus bill:

[I]t is not just Republicans who are being denied access to the bill. Reporters, bloggers, and the general public are being denied an opportunity to review one of the most important pieces of legislation sent through Congress in a long time. Anyone who wants should express that, whatever the partisan reasons for denying access to the bill, the American people deserve a right to review this legislation. Slamming it through without letting anyone see, save for 7 or 8 congressmen and some staff, is not fair to the public or the legislative process.

This is a dangerous practice that the Democrats ran against in 2006 and now, in the majority, are unfortunately using to block their opposition’s attacks. The majority Democrats should maintain their previous position on running the most open and honest government by allowing the public to review this legislation. Anything less is unacceptable.

briefcase full of cashOver the summer, I blogged about an FCC decision to ban Verizon’s practice of offering incentives to departing customers to get them to stay. Yesterday, the DC Circuit upheld that bad decision. When a customer of Verizon’s phone service decides to leave for a VOIP company, Verizon gets a notice that the number is being ported. When Verizon got notified that the customer was trying to leave, the company would offer her incentives such as “discounts and American Express reward cards” to stay.

This worked well for the customers, who got discounts if they stayed. It also worked well for Verizon, for whom it costs much more to find a replacement customer than to keep the current one. And it was really the best way to do so. If Verizon had given the incentives any time a customer threatened to leave, but didn’t start the process of doing so, then customers would just bluff to get the incentives. Verizon instead looked for a costly signal from the customer. And if Verizon had waited until after the port was already completed, it would cost the customer, Verizon, and the new carrier a lot of effort to switch back.

But the FCC banned Verizon’s efforts and yesterday the DC Circuit affirmed the Commission. I will follow with more details, once my summary of the case comes out in the March issue of Packets, the Center for Internet and Society’s publication summarizing important new internet cases. But for now, I should just note that the court hinted that the FCC’s reading of the statute it relied upon was a bit counterintuitive, but was compelled by Chevron v. NRDC to give the administrative agency great deference in its bad reading of the law. The court even noted that Verizon offered uncontroverted evidence “that continuation of its marketing program would generate $75–79 million in benefits for telephone customers over a five-year period.” Further, the court rejected Verizon’s First Amendment challenge, because the lower standard for commercial speech compelled the conclusion that Verizon’s sound marketing efforts didn’t deserve protection.

These precedents need to be revoked, or the growing administrative state will keep swallowing up more and more of our most important freedoms while preventing sensible and beneficial policies.

NSFDelicateEars, but it’s sheer brilliance, after the break.
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