March 2011

Hazlett vs. Wu on Net Neutrality

by Jerry Brito on March 10, 2011 · 4 comments

With all the attention on net neutrality this week, I thought I’d bring your attention to a debate on the-issue-that-won’t-go-away between Tom Hazlett and Tim Wu, which took place earlier this year at Harvard Univerisity. Below is the MP3 audio of the event, but if you want to check it out in living color, [check out the video](http://iep.gmu.edu/event/harvard-law-school-net-neutrality-discussion-thursday-january-13-2011) at the Information Economy Project wabsite.

Hazlett vs. Wu Net Neutrality Debate – Jan. 2011

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Questions for the FTC & DoC at Next Privacy Hearing

by Adam Thierer on March 10, 2011 · 1 comment

Yet another hearing on privacy issues has been slated for this coming Wednesday, March 16th. This latest one is in the Senate Commerce Committee and it is entitled “The State of Online Consumer Privacy.” As I’m often asked by various House and Senate committee staffers to help think of good questions for witnesses, I’m listing a few here that I would love to hear answered by any Federal Trade Commission (FTC) or Dept. of Commerce (DoC) officials testifying. You will recall that both agencies released new privacy “frameworks” late last year and seem determined to move America toward a more “European-ized” conception of privacy regulation. [See our recent posts critiquing the reports here.] Here are a few questions that should be put to the FTC and DoC officials, or those who support the direction they are taking us. Please feel free to suggest others:

Before implying that we are experiencing market failure, why hasn’t either the FTC or DoC conducted a thorough review of online privacy policies to evaluate how well organizational actions match up with promises made in those policies?
To the extent any sort of internal cost-benefit analysis was done internally before the release of these reports, has an effort been made to quantify the potential size of the hidden “privacy tax” that new regulations like “Do Not Track” could impose on the market?
Has the impact of new regulations on small competitors or new entrants in the field been considered? Has any attempt been made to quantify how much less entry / innovation would occur as a result of such regulation?
Were any economists from the FTC’s Economics Bureau consulted before the new framework was released? Did the DoC consult any economists?
Why do FTC and DoC officials believe that citing unscientific public opinions polls from regulatory advocacy organizations serves as a surrogate for serious cost-benefit analysis or an investigation into how well privacy policies actual work in the marketplace?
If they refuse to conduct more comprehensive internal research, have the agencies considered contracting with external economists to build a body of research looking into these issues (as the Federal Communications Commission did in a decade ago in its media ownership proceeding)?
Has either agency attempted to determine consumer’s “willingness to pay” for increased privacy regulation?
More generally, where is the “harm” and aren’t there plenty of voluntary privacy-enhancing tools out there that privacy-sensitive users can tap to shield their digital footsteps, if they feel so inclined?

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Good News! Online Tracking is Slightly Boring

by Jim Harper on March 10, 2011 · 0 comments

You have to wade through a lot to reach the good news at the end of Time reporter Joel Stein’s article about “data mining”—or at least data collection and use—in the online world. There’s some fog right there: what he calls “data mining” is actually ordinary one-to-one correlation of bits of information, not mining historical data to generate patterns that are predictive of present-day behavior. (See my data mining paper with Jeff Jonas to learn more.) There is some data mining in and among the online advertising industry’s use of the data consumers emit online, of course.

Next, get over Stein’s introductory language about the “vast amount of data that’s being collected both online and off by companies in stealth.” That’s some kind of stealth if a reporter can write a thorough and informative article in Time magazine about it. Does the moon rise “in stealth” if you haven’t gone outside at night and looked at the sky? Perhaps so.

Now take a hard swallow as you read about Senator John Kerry’s (D-Mass.) plans for government regulation of the information economy.

Kerry is about to introduce a bill that would require companies to make sure all the stuff they know about you is secured from hackers and to let you inspect everything they have on you, correct any mistakes and opt out of being tracked. He is doing this because, he argues, “There’s no code of conduct. There’s no standard. There’s nothing that safeguards privacy and establishes rules of the road.”

Securing data from hackers and letting people correct mistakes in data about them are kind of equally opposite things. If you’re going to make data about people available to them, you’re going to create opportunities for other people—it won’t even take hacking skills, really—to impersonate them, gather private data, and scramble data sets. Continue reading →

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Is Digital Utopianism Dead? And Other Questions

by Larry Downes on March 10, 2011 · 0 comments

What I hoped would be a short blog post to accompany the video from Geoff Manne and my appearances this week on PBS’s “Ideas in Action with Jim Glassman” turned out to be a very long article which I’ve published over at Forbes.com.

I apologize to Geoff for taking an innocent comment he made on the broadcast completely out of context, and to everyone else who chooses to read 2,000 words I’ve written in response.

So all I’ll say here is that Geoff Manne and I taped the program in January, as part of the launch of TechFreedom and of “The Next Digital Decade.” Enjoy!

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“Privacy” as Censorship: Fleischer Dismantles the EU’s “Right to Forget”

by Berin Szoka on March 9, 2011 · 6 comments

Few people have experienced just how oppressive “privacy” regulation can be quite so directly as Peter Fleischer, Google’s Global Privacy Counsel. Early last year, Peter was convicted by an Italian court because Italian teenagers used Google Video to host a video they shot of bullying a an autistic kid—even though he didn’t know about the video until after Google took it down.

Of course, imposing criminal liability on corporate officers for failing to take down user-generated content is just a more extreme form of the more popular concept of holding online intermediaries liable for failing to take down content that is allegedly defamatory, bullying, invasive of a user’s privacy, etc. Both have the same consequence: Given the incredible difficulty of evaluating such complaints, sites that host UGC will tend simply to take it down upon receiving complaints—thus being forced to censor their own users.

Now Peter has turned his withering analysis on the muddle that is Europe’s popular “Right to be Forgotten.” Adam noted the inherent conflict between that supposed “right” and our core values of free speech. It’s exactly the kind of thing UCLA Law Prof. Eugene Volokh had in mind when he asked what is your “right to privacy” but a right to stop me from observing you and speaking about you?” Peter hits the nail on the head:

More and more, privacy is being used to justify censorship. In a sense, privacy depends on keeping some things private, in other words, hidden, restricted, or deleted. And in a world where ever more content is coming online, and where ever more content is find-able and share-able, it’s also natural that the privacy counter-movement is gathering strength. Privacy is the new black in censorship fashions. It used to be that people would invoke libel or defamation to justify censorship about things that hurt their reputations. But invoking libel or defamation requires that the speech not be true. Privacy is far more elastic, because privacy claims can be made on speech that is true.

Continue reading →

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Book Review: Siva Vaidhyanathan’s “Googlization of Everything”

by Adam Thierer on March 9, 2011 · 615 comments

In one sense, Siva Vaidhyanathan’s new book, The Googlization of Everything (And Why Should Worry), is exactly what you would expect: an anti-Google screed that predicts a veritable techno-apocalypse will befall us unless we do something to deal with this company that supposedly “rules like Caesar.” (p. xi) Employing the requisite amount of panic-inducing Chicken Little rhetoric apparently required to sell books these days, Vaidhyanathan tells us that “the stakes could not be higher,” (p. 7) because the “corporate lockdown of culture and technology” (p. xii) is imminent.

After lambasting the company in a breathless fury over the opening 15 pages of the book, Vaidhyanathan assures us that “nothing about this means that Google’s rule is as brutal and dictatorial as Caesar’s. Nor does it mean that we should plot an assassination,” he says. Well, that’s a relief! Yet, he continues on to argue that Google is sufficiently dangerous that “we should influence—even regulate—search systems actively and intentionally, and thus take responsibility for how the Web delivers knowledge.” (p. xii) Why should we do that? Basically, Google is just too damn good at what it does. The company has the audacity to give consumers exactly what they want! “Faith in Google is dangerous because it increases our appetite for goods, services, information, amusement, distraction, and efficiency.” (p. 55) That is problematic, Vaidhyanathan says, because “providing immediate gratification draped in a cloak of corporate benevolence is bad faith.” (p. 55) But this begs the question: What limiting principle should be put in place to curb our appetites, and who or what should enforce it? Continue reading →

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Siva Vaidhyanathan on why we should worry about Google

by Jerry Brito on March 8, 2011 · 1 comment

On the podcast this week, Siva Vaidhyanathan, professor of media studies at the University of Virginia, discusses his new book, The Googlization of Everything: (And Why We Should Worry). Vaidhyanathan talks about why he thinks many people have “blind faith” in Google, why we should worry about it, and why he doesn’t think it’s likely that a genuine Google competitor will emerge. He also discusses potential roles of government, calling search neutrality a “nonstarter,” but proposing the idea of a commission to monitor online search. He also talks about a “Human Knowledge Project,” an idea for a global digital library, and why a potential monopoly on information by such a project doesn’t worry him the way that Google does.

Targeted Advertising for Cable TV & Skype

by Adam Thierer on March 7, 2011 · 4 comments

We’ve said it here before too may times to count: When it comes to the future of content and services — especially online or digitally-delivered content and services — there is no free lunch. Something has to pay for all that stuff and increasingly that something is advertising. But not just any type of advertising — targeted advertising is the future. We see that again today with Skype’s announcement that it is rolling out an advertising scheme as well as in this Wall Street Journal story (“TV’s Next Wave: Tuning In to You“) about how cable and satellite TV providers are ramping up their targeted advertising efforts.

No doubt, we’ll soon hear the same old complaints and fears trotted out about these developments. We’ll hear about how “annoying” such ads are or how “creepy” they are. Yet, few will bother detailing what the actual harm is in being delivered more tailored or targeted commercial messages. After all, there’s actually a benefit to receiving ads that may be of more interest to us. Much traditional advertising was quite “spammy” in that it was sent to the mass market without a care in the world about who might see or hear it. But in a diverse society, it would be optimal if the ads you saw better reflected your actual interests / tastes. And that’s a primary motivation for why so many content and service providers are turning to ad targeting techniques. As Skype noted in its announcement today: “We may use non-personally identifiable demographic data (e.g. location, gender and age) to target ads, which helps ensure that you see relevant ads. For example, if you’re in the US, we don’t want to show you ads for a product that is only available in the UK.” Similarly, the Journal article highlights a variety of approaches that television providers are using to better tailor ads to their viewers.

Some will still claim it’s too “creepy.” But, as I noted in my recent filing to the Federal Trade Commission on its new privacy green paper: Continue reading →

4 comments

What is Market Failure? And What if There is One?

by Jim Harper on March 4, 2011 · 14 comments

Twitter curmudgeon @derekahunter writes: “With all the medical advances of last 100 years, why hasn’t anyone created a cough drop that doesn’t taste like crap?” Dammit, he’s right! Why hasn’t the market for cold remedies produced a tasty cough drop? Put differently, the market for cold remedies has failed to produce a tasty cough drop. The market has failed. Market . . . failure.

We have now established the appropriateness of a regulatory solution for the taste problem in the field of cold remedies. Have we not? There is a market failure.

No, we haven’t.

“Market failure” is not what happens when a given market has failed so far to reach outcomes that a smart person would prefer. It occurs when the rules, signals, and sanctions in and around a given marketplace would cause preference- and profit-maximizing actors to reach a sub-optimal outcome. You can’t show that there’s a market failure by arguing that the current state of the actual market is non-ideal. You have to show that the rules around that marketplace lead to non-ideal outcomes. The bad taste of cough drops is not evidence of market failure.

The failure of property rights to account for environmental values leads to market failure. A coal-fired electric plant might belch smoke into the air, giving everyone downwind a bad day and a shorter life. If the company and its customers don’t have to pay the costs of that, they’re going to over-produce and over-consume electricity at the expense of the electric plant’s downwind neighbors. The result is sub-optimal allocation of goods, with one set of actors living high on the hog and another unhappily coughing and wheezing.

Take an issue that’s closer to home for tech policy folk: People seem to underweight their privacy when they go online, promiscuously sharing anything and everything on Facebook, Twitter, and everyplace else. Marketers are hoovering up this data and using it to sell things to people. The data is at risk of being exposed to government snoops. People should be more attentive to privacy. They’re not thinking about long-term consequences. Isn’t this a market failure?

It’s not. It’s consumers’ preferences not matching up with the risks and concerns that people like me and my colleagues in the privacy community share. Consumers are preference-maximizing—but we don’t like their preferences! That is not a market failure. Our job is to educate people about the consequences of their online behavior, to change the public’s preferences. That’s a tough slog, but it’s the only way to get privacy in the context of maximizing consumer welfare.

If you still think there’s a market failure in this area—I readily admit that I’m on the far edge of my expertise with complex economic concepts like this—you haven’t finished making your case for regulation. You need to show that the rules, signals, and sanctions in and around the regulatory arena would produce a better outcome than the marketplace would. Be sure that you compare real market outcomes to real regulatory outcomes, not real market outcomes to ideal regulatory outcomes. Most arguments for privacy regulation simply fail to account for the behavior of the regulatory universe.

Adam has collected quotations on the subject of regulatory capture from many experts. I wrote a brief series of “real regulators” posts on the SEC and the Madoff scam a while back (1, 2, 3). And a recent article I’m fond of goes into the problem that many people think only consumers suffer, asking: “Are Regulators Rational?”

There’s no good-tasting cough drop because the set of drops that remedy coughing and the set of drops that taste good are mutually exclusive. Not because of market failure.

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Progress on Spectrum Inventory…if Only Illusory

by Larry Downes on March 3, 2011 · 8 comments

I’ve written posts today for both CNET and Forbes on legislation introduced yesterday by Senators Olympia Snowe and John Kerry that would require the FCC and NTIA to complete inventories of existing spectrum allocations. These inventories were mandated by President Obama last June (after Congress failed to pass legislation), but got lost at the FCC in the net neutrality armageddon.

Everyone believes that without relatively quick action to make more spectrum available, the mobile Internet could seize up. Given the White House’s showcasing of wireless as a leading source of new jobs, investment, and improved living conditions for all Americans, both Congress and President Obama, along with the FCC and just about everyone else, knows this is a crisis that must be avoided.

Indeed, the National Broadband Plan estimates conservatively that mobile users will need 300-500 mhz of new spectrum over the next 5-10 years. Continue reading →

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