September 2011

A few days ago, Ars Technica asked me to comment on a class action lawsuit against Paxfire, a company that partners with Internet Service Providers for the purpose of “monetizing Address Bar Search and DNS Error traffic.” The second half of that basically means fixing URL typos, so when you accidentally tell your ISP you want the webpage for “,” they figure out you probably mean Cato. The more controversial part is the first half: When users type certain trademarked terms into a unified address/search bar (but not a pure search bar, or a search engine’s own home page), Paxfire directs the user to the page of paying affiliates who hold the trademark. So, for instance, if I type “apple” into the address bar, Paxfire might take me straight to Apple’s home page, even though Firefox’s default behavior would be to treat it as a search for the term “apple” via whatever search engine I’ve selected as my default.

The question at the heart of the suit is: Does this constitute illegal wiretapping? A free tip if you ever want to pose as an online privacy expert: For basically any question about how the Electronic Communications Privacy Act applies to the Internet, the correct answer is “It’s complicated, and the law is unclear.” Still, being a little fuzzy on the technical details of how Paxfire and the ISP accomplished this, I thought about what the end result of this was without focusing too much on how the result was arrived at. The upshot is that Paxfire (if we take their description of their practices at their word) only ends up logging a small subset of terms submitted via address bars, which are at least plausibly regarded as user attempts to specify addressing information, not communications content. In other words, I basically treated the network as a black box and thought about the question in terms of user intent: If someone who punches “apple” into their search bar is almost always trying to tell their ISP to take them to Apple’s website, that’s addressing information, which ISPs have a good deal of latitude to share with anyone but the government under federal law. And it can’t be wiretapping to route the communication through Paxfire, because that’s how the Internet works: Your ISP sends your packets through a series of intermediary networks owned by other companies and entities, and their computers obviously need to look at the addressing information on those packets in order to deliver them to the right address. So on a first pass, it sounded like they were probably clear legally.

Now I think that’s likely wrong. My mistake was in not thinking clearly enough about the mechanics. Because, of course, neither your ISP nor Paxfire see what you type into your address bar; they see specific packets transmitted to them by your browser. And it turns out that the way they pull out the terms you’ve entered in a search bar is, in effect, by opening a lot of envelopes addressed to somebody else.
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Come hear the other side of the privacy debate! Rep. Marsha Blackburn (R-TN) will lead a discussion among policy experts united by a desire to address demonstrated dangers of data abuse without giving up the value created by data as the vital currency of the digital economy. The Roundtable  is Wednesday, September 14, 8-9:30 am in Congressional Visitors Center Meeting Room North, CVC 268:

The roundtable discussion will cover online privacy issues in anticipation of the final reports to be released this fall by the Department of Commerce and the Federal Trade Commission. Invited participants will consider questions and policy issues related to the value of data, where government should or shouldn’t be involved in regulating online privacy, and alternatives to government regulation.

Congressman Blackburn, a member of the House Energy and Commerce Subcommittee on Telecommunications and vice chair of the Subcommittee on Commerce, Manufacturing, and Trade, pledged to conduct a national series of tech industry roundtables in a speech to the Telecommunications Industry Association earlier this year. Her first roundtable was held in late June at the Interactive Advertising Bureau’s new online advertising community center in New York City. Congressman Blackburn also recently wrote an op-ed titled “The FTC’s Internet Kill Switch” that addresses why any proposed privacy regulation must consider the costs of diminished competition and innovation.

I shared my thoughts on Rep. Blackburn’s healthy skepticism of regulation in a CNET editorial in June: On Online Privacy and Avoiding overregulation. The TLF’s Ryan Radia (Competitive Enterprise Institute), Jim Harper (Cato), Larry Downes and I (both TechFreedom) will be there.  Joining us will be Howard Beales (George Washington University School of Business), Daniel Castro (Information Technology and Innovation Foundation), Harold Furchgott-Roth (Hudson’s Center for Economics of the Internet), Tom Lenard (Technology Policy Institute) and Randy May (Free State Foundation)/

Adam Thierer & I laid out our “Principles to Guide the Debate” on online privacy nearly three years ago, asking that those proposing regulation:
  1. Identify the harm or market failure that requires government intervention.
  2. Prove that there is no less restrictive alternative to regulation.
  3. Explain how the benefits of regulation outweigh its costs Continue reading →

Tim Lee on patent reform

by on September 13, 2011

On the podcast this week, Timothy B. Lee, adjunct scholar with the Cato Institute, a contributor to Ars Technica, and blogger at, discusses the recent patent wars and the prospects for reform. Over the last two decades, large software companies like Microsoft and Apple began acquiring a significant number of patents, gaining the power to shut down or demand payment from any software company that might inadvertently infringe those patents. Lee talks about Google’s entry into the patent game, particularly with the acquisition of Motorola. He also discusses the theory behind these patent wars and how the use of patents have been altered from incentives for innovation to a litigation shield. Finally, Lee talks about different proposals for patent reform, including a first to file scheme that is part of the America Invents Act.

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To keep the conversation around this episode in one place, we’d like to ask you to comment at the webpage for this episode on Surprisingly Free. Also, why not subscribe to the podcast on iTunes?

[Cross-posted at]

In the wake of the Department of Justice’s lawsuit to stop the merger of AT&T and T-Mobile USA, there has been some discussion about where T-Mobile would end up if the government effort proved successful.

While debate continues whether a merged AT&T-T-Mobile would harm consumers, there is no disputing that T-Mobile itself is mired in business problems. For all the DoJ’s concern that T-Mobile remain in the market as a low-priced alternative for consumers, the company is short of the cash necessary to expand infrastructure at a pace to remain technologically competitive. Blocking the AT&T deal would not necessarily keep Deutsche Telekom, T-Mobile’s German parent, from seeking other buyers. Last week, Dave Goldman of CNN Money summed the situation up in “Without AT&T, T-Mobile is a White Elephant.” The facts he lays out are among the reasons the merger makes sense.

Yet let’s assume for a minute that the DoJ is successful in stopping the merger. A number of pundits both from both the business and the policy side have suggested other potential buyers could rescue T-Mobile. Sascha Segan at PC Magazine provided a good summary here.

Segan was just one of many analysts who pointed to Google, Apple and Comcast (or a cable company consortium) as potential T-Mobile buyers. There are numerous reasons as to why these companies might or might not make a bid. Yet what I find interesting the way several critics of the AT&T deal are almost giddy with the idea that one of these companies might jump at T-Mobile, noting that the entry of a deep-pocketed non-carrier might be a good development for the consolidating wireless industry.

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If you’re in DC this week, join Kevin Bankston from EFF, myself, fellow TLFers Berin Szoka, Geoff Manne, and Larry Downes, starting at 5:30pm at Johnny’s Half Shell, 400 North Capitol St NW. This event is being co-hosted by TLF and the Electronic Frontier Foundation (EFF). Please RSVP on Facebook so we have an idea how many people are attending. Attendees must be 21 or older. Space is limited.

And ALF 15 is already in the works. We’re planning to do it in conjunction with Digital Capital Week on November 8th. Stay tuned for more details!

I’ve reviewed many tech policy books here over the years, but have only found myself in agreement with a couple of titles. One of my favorites is “The Laws of Disruption” by fellow TLF co-blogger Larry Downes.  [My short review is here]  Larry does a terrific job documenting the technological forces (or “laws” as he calls them) that our reshaping the modern economy.

The fundamental law of disruption he identifies is: “Technology changes exponentially, but social, economic, and legal systems change incrementally.” Downes says this law is “a simple but unavoidable principle of modern life” and that it will have profound implications for the way businesses, government, and culture evolve going forward. “As the gap between the old world and the new gets wider,” he argues, “conflicts between social, economic, political, and legal systems” will intensify and “nothing can stop the chaos that will follow.”  He’s exactly right and I’ll be elaborating on that “law” in more detail in a new paper with Jerry Brito as well as in my next book, which I’m finishing up currently.

Anyway, with Larry’s “law” in mind, I couldn’t help but laugh out loud when I was reading this Reuter‘s summary of a recent editorial from the People’s Daily, the main newspaper of China’s ruling Communist Party. The commentary lambasted the Internet, social networking technologies, and online culture. It contained this gem of quote that proves the Chinese government has a firm grasp of the Law of Disruption: “We have failed to take into sufficient account just how much the Internet is a double-edged sword, and have a problem of allowing technology to advance while administration and regulation lag.” Continue reading →

For CNET this morning, I have a long article reviewing the sad recent history of how local governments determine the quality of mobile services.

As it  turns out, the correlation is deeply negative.  In places with the highest level of user complaints (San Francisco, Washington, D.C.), it turns out that endless delays or outright denials for applications to add towers and other sites as well as new and upgraded equipment is also high.  Who’d have thought?

Despite a late 2009 ruling by the FCC that put a modest “shot clock” on local governments to approve or deny applications, data from CTIA and PCIA included in recent comments on the FCC’s Broadband Acceleration NOI suggests the clock has had little to no effect.  This is in part because the few courts that have been asked to enforce it have demurred or refused.

Much of the dithering by local zoning boards is unprincipled and pointless, a sign not so much of legitimate concerns over safety and aesthetics but of incompetence, corruption, and the insidious influence of  outside “consultants” whose fees are often levied against the applicant, adding insult to injury. Continue reading →

[Cross posted at Truthonthemarket]

So, the AT&T / T-Mobile transaction gets more and more interesting.  Sprint has filed a complaint challenging the transaction.  I’ve been commenting on the weakness of the DOJ complaint and in particular, its heavy reliance on market structure to make inferences about competitive effects.  The heavy dose of structural presumption in the DOJ complaint — especially in light of the DOJ / FTC’s new Horizontal Merger Guidelines which stress reducing that emphasis because it is grounded in outdated economic thinking in favor of analysis of actual competitive effects — reads more like a 1960s complaint than a modern post-2010 Guidelines approach.

There is a question that jumps out here.  What does Sprint get for jumping into full litigation mode rather than free-riding upon the DOJ’s case?  They could certainly free-ride and retain some influence over the DOJ case with economic submissions.  The DOJ is not a passive plaintiff.  This is the DOJ of “reinvigorated” antitrust enforcement.  There is an even more obvious cost to getting involved.  The conventional antitrust wisdom requires skepticism of private suits by rivals for the reasons I discussed here.   Rivals often have a financial incentive to sue more efficient competitors.  Various substantive and procedural stands of antitrust attempt to minimize the costs of providing rivals with generous remedies and a private right of action under the antitrust laws.  Suffice it to say, a rival suit doesn’t get the same attention as one brought by the DOJ or FTC.

So why do it? Continue reading →

On the podcast this week, Michael Nelson, Associate Professor at Old Dominion University, developed, along with colleagues at the Los Alamos National Laboratory, “Memento,” a technical framework aimed at better integrating the current and the past web. In the past, archiving history involved collecting tangible things such as letters and newspapers. Now, Nelson points out, the web has become a primary medium with no serious preservation system in place. He discusses how the web is stuck in the perpetual now, making it difficult to view past information. The goal behind Memento, according to Nelson, is to create an all-inclusive Internet archive system, which will allow users to engage in a form of Internet time travel, surpassing the current archive systems such as the Wayback Machine.

Related Links

To keep the conversation around this episode in one place, we’d like to ask you to comment at the webpage for this episode on Surprisingly Free. Also, why not subscribe to the podcast on iTunes?

Milton Mueller responded to my post Wednesday on the DOJ’s decision to halt the AT&T/T-Mobile merger by asserting that there was no evidence the merger would lead to “anything innovative and progressive” and claiming “[t]he spectrum argument fell apart months ago, as factual inquiries revealed that AT&T had more spectrum than Verizon and the mistakenly posted lawyer’s letter revealed that it would be much less expensive to expand its capacity than to acquire T-Mobile.”  With respect to Milton, I think he’s been suckered by the “big is bad” crowd at Public Knowledge and Free Press.  But he’s hardly alone and these claims — claims that may well have under-girded the DOJ’s decision to step in to some extent — merit thorough refutation.

To begin with, LTE is “progress” and “innovation” over 3G and other quasi-4G technologies.  AT&T is attempting to make an enormous (and risky) investment in deploying LTE technology reliably and to almost everyone in the US–something T-Mobile certainly couldn’t do on its own and something AT&T would have been able to do only partially and over a longer time horizon and, presumably, at greater expense.  Such investments are exactly the things that spur innovation across the ecosystem in the first place.  No doubt AT&T’s success here would help drive the next big thing–just as quashing it will make the next big thing merely the next medium-sized thing.

The “Spectrum Argument”

The spectrum argument that Milton claims “fell apart months ago” is the real story here, the real driver of this merger, and the reason why the DOJ’s action yesterday is, indeed, a blow to progress.  That argument, unfortunately, still stands firm.  Even more, the irony is that to a significant extent the spectrum shortfall is a product of the government’s own making–through mismanagement of spectrum by the FCC, political dithering by Congress, and local government intransigence on tower siting and co-location–and the notion of the government now intervening here to “fix” one of the most significant private efforts to make progress despite these government impediments is really troubling.

Anyway, here’s what we know about spectrum:  There isn’t enough of it in large enough blocks and in bands suitable for broadband deployment using available technology to fully satisfy current–let alone future–demand.

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