June 2009

When You’re Getting Software or Other Stuff on the ‘Net for Free, what are the Costs?

by on June 19, 2009 · 8 comments

freeCome one, come all. ACT will be hosting a lunch event next Tuesday (June 23) at noon on privacy, free software, and government procurement.

We’ll discuss “free” software (ie. no license fees, free as in beer). It’s a nuanced take on some of what Chris Anderson will surely be talking about in his upcoming book on Free—where does the $ come from in software that we all use for free on the web, or that we download to our computer?

To answer this question, we’ll attempt to update traditional Total Cost of Ownership analysis for ad-based software and services. There’s a lot of discussion about privacy, security and sustainability considerations of cloud based solutions. In addition, the event will deal with skeptics who think that “free” means no business model at all. We’ll describe how free software and services are usually just one aspect of a larger enterprise geared toward expanding market penetration and increasing revenues. Mike Masnick described this in a recent Techdirt post.

I’m going to moderate, and our speakers will be Rob Atkinson at ITIF, Tom Schatz at CAGW, and Peter Corbett of iStrategyLabs.

We’ll be releasing a paper on all this, so come join us for lunch and a lively discussion–and best of all, it’s FREE!!

Further details are here.

SHARE: 8 comments

Cyberbullying Legislation: Why Education is Preferable to Regulation

by on June 19, 2009 · 19 comments

By Berin Szoka & Adam Thierer

hand on mouseWe’ve just released a new PFF white paper (PDF) entitled, “Cyberbullying Legislation: Why Education is Preferable to Regulation.” In this 24-page study we note that, compared to previous fears about online predation, which have been greatly overblown, concerns about cyberbullying are more well-founded. Evidence suggests the cyberbullying is on the rise and that it can have profoundly damaging consequences for children.

Unsurprisingly, in the wake of a handful of high-profile cyberbullying incidents that resulted in teen/tween suicides, some state lawmakers began floating legislation to address the issue. More recently, two very different federal approaches have been proposed. One approach is focused on the creation of a new federal crime to punish cyberbullying, which would include fines and jail time for violators. In April 2008, Rep. Linda Sánchez (D-CA) introduced H.R. 1966 (originally H.R. 6123), the “Megan Meier Cyberbullying Prevention Act,” a bill that would create a new federal felony:

“Whoever transmits in interstate or foreign commerce any communication, with the intent to coerce, intimidate, harass, or cause substantial emotional distress to a person, using electronic means to support severe, repeated, and hostile behavior, shall be fined under this title or imprisoned not more than two years, or both.”

The other legislative approach is education-based and would create an Internet safety education grant program to address the issue in schools and communities. In mid-May, the “School and Family Education about the Internet (SAFE Internet) Act” (S. 1047) was introduced in the Senate by Sen. Robert Menendez (D-NJ) and in the House by Rep. Debbie Wasserman Schultz (D-FL). The measure proposes an Internet safety education grant program that will be administered by the Department of Justice, in concurrence with the Department of Education, and the Department of Health & Human Services. These agencies will also work in consultation with education, Internet safety, and other relevant experts to administer a five-year grant program, under which each grant will be awarded for a two-year period.

Continue reading →

SHARE: 19 comments

Free Press Hypocrisy over Metering & Internet Price Controls

by on June 18, 2009 · 150 comments

In response to my essay last night about this new Free Press campaign to layer price controls on the Internet by banning metered prices via Rep. Massa’s new bill (the “Broadband Internet Fairness Act“), George Ou and Richard Bennett reminded me of some of the contradictory statements that the (Un)Free Press crew have made on this issue.  Indeed, if you look back at what Free Press and their chairman have said about the matter over just the past 18 months, they seem to be whistling two very different tunes.

For example, George Ou reminded me of what Free Press had to say in its November 2007 filing in the FCC’s Comcast-Bit Torrent proceeding:

“More importantly, if Comcast is concerned that the collective set of users running P2P applications are affecting quality of service for other users on a cable loop… they could also charge by usage.” (p. 29)

[…]

“Indeed, in many nations, network providers do meter, and bill their customers on the basis of amount used. So the transaction costs of doing so must not be prohibitively high. Indeed, a network provider can apparently meter cheaply because, in most networks, users’ traffic to and from the Internet passes through a single gateway, the network access server.” (p. 31)

And Richard Bennett reminded me of what Tim Wu, chairman of the Free Press, had to say about metering to the Washington Post just one year ago:

“I don’t quite see [metering] as an outrage, and in fact is probably the fairest system going — though of course the psychology of knowing that you’re paying for bandwidth may change behavior.”

So, what gives?  Will the real Free Press please stand up? Does the Free Press believe in pricing freedom or price controls for the Internet?

SHARE: 150 comments

Amazon Threatens to Leave the Affiliate Tax Jungle in North Carolina

by on June 18, 2009 · 18 comments

jungleWelcome to the jungle
We take it day by day
If you want it you’re gonna bleed
But it’s the price you pay

Amazon.com announced yesterday that it won’t be paying the price of affiliate advertising in North Carolina if the state uses it to assert nexus for sales tax collection. It will stop using affiliates in the Tar Heel state, which is what Overstock did when New York considered the affiliate nexus approach.

States are wrong-headed when it comes to asserting tax nexus just because some companies use a web-based network of affiliates to help advertise their products. As I’ve discussed before, affiliates are more akin to in-state advertisers, not sales reps.

Furthermore, states that pass these affiliate nexus bills really end up hurting in-state companies that rely on Internet advertising.  At a time when companies are struggling for ways to make money on the Internet, we think now is a particularly bad time to tax Internet marketing.

North Carolina should stay out of the affiliate tax jungle. It’s constitutionally messy, bad policy…and as Guns ‘N Roses mildly stated, it’ gonna bring you down – huh!

SHARE: 18 comments

Export Controls: Impediments to Tech Free Trade

by on June 18, 2009 · 19 comments

I’ve spent the past couple of months interning for a large Silicon Valley technology company doing export compliance work. The company I’m working for does an enormous amount of its business overseas. And it exports, well, technology products, many of which are controlled. Laws ostensibly designed to prevent terrorism and proliferation in fact control way more than weapons and chemicals – indeed, they regulate even extremely mundane goods like servers, software with encryption, and the technical data used to design and build such products.

As a result, it has to employ large numbers of people to comply with the US’s, the EU’s, and other countries’ export control regimes. The US’s is particularly complicated, with a long list of prohibitions, some which can be circumvented if an exporter gets a license and exceptions to the licensing requirement (based on the classification of the goods, the destination country, the end-user, and the end-use). In addition, there are lists of parties – companies, universities, and individuals – with whom no company can do business. Companies that provide lots of goods and services: hardware, software, courseware for training on the products, etc., have to screen those lists many times – when a customer buys a product, when she signs up for training, when a part is shipped from a manufacturer, etc. They also have to spend lots on classifying their products and devising schemes to ensure compliance at every step in their complicated supply and distribution chains. And, because of the US “deemed export” rule, they often cannot share information with their US-based engineers who are citizens of other countries (who were hard enough to obtain visas for in the first place!).

And, yet, the US system – with all its complexity – still requires less effort than some other countries’, which require a license to export every controlled good. That entails significant delay and processing costs. Unfortunately, too little attention has been paid to these costs on doing business internationally when passing feel-good “anti-terrorism” and “anti-proliferation” laws and regulations.

As Tim Lee points out, some of the more ridiculous encryption controls have finally gone away, but as technology advances, more and more products will fall into a category (which are often based on technical performance) that requires a license. So, as American products improve, the costs of sending them overseas increases! One would think politicians supposedly worried about the trade deficit would see this as counterproductive to their goals of increasing US exports and reducing imports… but that’s politics!

SHARE: 19 comments

Behavioral Advertising Industry Practices Hearing: Some Issues that Need to be Discussed

by on June 17, 2009 · 23 comments

by Berin Szoka & Adam Thierer

This morning, the House Energy & Commerce Committee will hold a hearing on “Behavioral Advertising: Industry Practices And Consumers’ Expectations.” If nothing else, it promises to be quite entertaining:  With full-time Google bashers Jeff Chester and Scott Cleland on the agenda, the likelihood that top Google officials will be burned in effigy appears high!

Chester, self-appointed spokesman for what one might call the People for the Ethical Treatment of Data (PETD) movement, is sure to rant and rave about the impending techno-apocalypse that will, like all his other Chicken-Little scenarios, befall us all if online advertisers were permitted to better tailor ads to consumers’ liking. After all, can you imagine the nightmare of less annoying ads that might actually convey more useful information to consumers? Isn’t serving up “untargeted” dumb banner ads for Viagra to young women and Victoria’s Secret ads to Catholic school kids the pinnacle of modern online advertising?  Gods forbid we actually make advertising more relevant and interest-based!  (Those Catholic school boys may appreciate the lingerie ads, but few will likely buy bras.)

Anyway, according to National Journal’s Tech Daily Dose, the hearing lineup also includes:

  • Charles Curran, Executive Director, Network Advertising Initiative
  • Christopher Kelly, Chief Privacy Officer, Facebook
  • Edward Felten, Director, Center for IT Policy, Princeton University
  • Anne Toth, Chief Privacy Officer & Vice President, Policy, Yahoo!
  • Nicole Wong, Deputy General Counsel, Google

That’s an interesting group and we’re sure that they will say interesting things about the issue. Nonetheless, because four of them have a corporate affiliation that fact will inevitably be used by some critics to dismiss what they have to say about the sensibility of more targeted or interest-based forms of online advertising. So, we’d like to offer a few thoughts and pose a few questions to make sure that Committee members understand why, regardless of what it means for any particular online operator, targeting online advertising is very pro-consumer and essential to the future of online content, culture, and competition.  As Wall Street Journal technology columnist Walt Mossberg has noted, “Advertising is the mother’s milk of all the mass media.”  Much of the “free speech” we all cherish isn’t really free, but ad-supported!

Continue reading →

SHARE: 23 comments

The (Un)Free Press Calls for Internet Price Controls: “The Broadband Internet Fairness Act”

by on June 17, 2009 · 37 comments

You really have to hand it to the folks over at the (Un)Free Press with their endlessly shameful attempts to use doublespeak to remake the entire media, communications, and Internet landscape in their preferred Big Government image.  Their latest bit of charlatanism is the so-called “Stop the Internet Rip-Off of 2009” campaign.  It’s another one of their computerized “stuff-the-FCC-and Congressional-complaint-box-with-electronic-form-letters” efforts that involves getting their merry band of radical reformistas to encourage lawmakers to sign on to Rep. Eric Massa’s (D-NY) newly-introduced “Broadband Internet Fairness Act.”

Ah yes, “Internet fairness.”  Who can possibly be against it?  Well, before you rush to click send on that UnFree Press form letter, let’s be clear what this effort is really all about.  Free Press claims that the Massa bill is needed because “phone and cable giants [are] weighing schemes to hike prices, shut down the free-flowing Web and keep user innovation in check.”  How are those companies doing that?  Tiered pricing!   Rep. Massa says that, “Time Warner has announced an ill-conceived plan to charge residential and business broadband fees based on the amount of data they download.”  Oh my God, no… you mean some people might be charged for the costs they impose?  What’s next?  Are we going to force people to pay for their own energy use by metering gasoline, electricity, or water?  Think of the horror!  (This is sarcasm, folks.  All those things are metered currently. And yet, somehow, the Earth hasn’t spun off its axis.)

Like all the other propaganda produced at the Free Press techno-spin factory, their latest crusade is based on a combination of outright lies and blatant economic ignorance.  Metering broadband access is not an effort “to restrict Internet use,” as Free Press claims. Rather, like every other metered system under the sun, it’s an effort to price a scarce resource in such a way so as to maximize use.  Broadband operators don’t sit around all day scheming to find ways to decrease network usage.  They wouldn’t make any money that way!!  They need to find business models that encourage increased uptake while also investing in and growing their networks to meet new demand and competitive challenges.

Moreover, there are other pro-consumer reasons for companies to consider metering options.  Unless it is your goal to allow some particularly aggressive users to be subsidized by all other users, it is sometimes sensible to price usage based on demand.  If you don’t, you potentially create a perverse incentive for a small handful of over-grazers to to be feeding at the trough at everyone else’s expense. As economist Russell Roberts aptly noted in the title of a famous 1995 Wall Street Journal editorial, “If You’re Paying, I’ll Have Top Sirloin.”  Thus, you would never want to make the “all-you-can-eat” pricing model the only option for the provision of a scarce resource. Even if you choose not to deploy it, it is useful to have the metered pricing model available in case you need to charge the over-grazers at some point.

Continue reading →

SHARE: 37 comments

China’s Green Dam Filter and the Threat of Rising Global Censorship

by on June 17, 2009 · 11 comments

Rebecca MacKinnon has an important piece in the Wall Street Journal today about China’s “Green Dam Youth Escort” filtering mandate and the danger of this model catching on with other governments. “More and more governments — including democracies like Britain, Australia and Germany — are trying to control public behavior online, especially by exerting pressure on Internet service providers,” she notes. “Green Dam has only exposed the next frontier in these efforts: the personal computer.”

She’s right, and that’s cause for serious concern.  Moreover, there’s the question of how corporations doing business in China should respond to demands and threats related to installing such filters. She notes:

In a world that includes child pornographers and violent hate groups, it is probably not reasonable to oppose all censorship in all situations. But if technical censorship systems are to be put in place, they must be sufficiently transparent and accountable so that they do not become opaque extensions of incumbent power — or get hijacked by politically influential interest groups without the public knowing exactly what is going on.

Which brings us back to companies: the ones that build and run Internet and telecoms networks, host and publish speech, and that now make devices via which citizens can go online and create more speech. Companies have a duty as global citizens to do all they can to protect users’ universally recognized right to free expression, and to avoid becoming opaque extensions of incumbent power — be it in China or Britain.

I generally agree with all that but this is a difficult issue and one that I have struggled with personally. (See this “Friendly Conversation about Corporate High-Tech Engagement with China” that Jim Harper and I had three years ago).  But I do hope that more companies take a hard line with the Chinese as well as there own governemnts when it comes to filtering mandates or even restricitve parental control defaults and settings [an issue I wrote more about in this paper: “The Perils of Mandatory Parental Controls and Restrictive Defaults.”]  On that note, kudos to the business groups that already signed on to a joint letter oppossing China’s new filtering mandate.

SHARE: 11 comments

The Clearest Path to a Useful Recovery.gov . . .

by on June 17, 2009 · 7 comments

. . . is for the group being convened by the Sunlight Foundation to do it. Pitch in if you can. Pass the word.

I think Sunlight stands a pretty good chance, simply because the contract award will now be subject to public scrutiny. Value-for-dollar to the taxpayer will be easily discernible, and that will raise the political risk if the contract is awarded based on cronyism or go-with-whatchya-knowism.

Kudos to Sunlight for taking this bold and fun step!

SHARE: 7 comments

Twitter and Iran – It’s Not About the U.S. Government

by on June 17, 2009 · 8 comments

It’s fascinating to continue watching developments in Iran via Twitter and other social media.

The fact that Twitter delayed a scheduled outage to late-night Tehran time was laudable, but contrary to a growing belief it wasn’t done at the behest of the State Department. It was done at the behest of Twitter users.

Twitter makes that fairly (though imperfectly) clear on its blog, saying, “the State Department does not have access to our decision making process.”

As my Cato Institute colleague Justin Logan notes, events in Iran are not about the United States or U.S. policy. They should not be, or appear to be, directed or aided from Washington, D.C. Any shifts in power in Iran should be produced in Iran for Iranians, with support from the people of the world – not from any outside government.

People are free to speculate that the State Department asked Twitter to deny its involvement precisely to create the necessary appearances, but without good evidence of it, assuming that just reflects a pre-commitment that governments – not people and the businesses that serve them – are the primary forces for good in the world.

SHARE: 8 comments

← Previous Entries

Next Entries →