A couple of news items this week have vindicated some opinions I’d previously expressed here, and they’re all about Apple, so how can I can pass up the opportunity to note them, right?

A while back [I wrote](http://techliberation.com/2010/11/04/how-closed-is-apple-anyway/) that as long as iOS devices had a standards-compliant browser, innovation would be safe:

>Apple has come under fire by some supporters of an open internet and open software platforms such as Jonathan Zittrain and Tim Wu, who argue that Apple’s walled garden approach to devices and software will lead us to a more controlled and less innovative world. In particular, they point to the app store and Apple’s zealous control over what apps consumers are allowed to purchase and run on their devices. Here’s the thing, though: Every Apple device comes with a web browser. A web browser is an escape hatch from Apple’s walled garden. And Apple has taken a backseat to no one in nurturing an open web.

This week comes word that the Financial Times, unhappy with having to give Apple a 30% cut of it’s subscription revenues, [has dropped its iOS app in favor of a web app](http://www.macrumors.com/2011/06/07/financial-times-wont-give-apple-a-cut-drops-ios-for-web-app/). Read the story; it’s quite interesting. As far as I can tell, the web app, written in cutting edge HTML5, is as good as the native app.

The second piece of news is that [Apple has quietly backed down](http://www.macrumors.com/2011/06/09/apple-reverses-course-on-in-app-subscriptions/) from its controversial requirement that an in-app newspaper or magazine subscription be the “same price or less than it is offered outside the app”. “Apple also removed the requirement that external subscriptions must be also offered as an in-app purchase.”

What this tells me is that the market works, and when companies make boneheaded moves, they can’t force users or publishers to go along with it by sheer will. Back when the subscription issue was blowing up I wrote that [Apple did not have the market power](http://techliberation.com/2011/02/21/is-apples-digital-subscription-plan-good-or-bad-for-consumers/) to make this stick:

>Digital publishing is very much a contestable market. I hardly need to point out that the day after Apple’s announcement, [Google made public](http://news.cnet.com/8301-17938_105-20032217-1.html) its own very competitive subscription service. And while the iPad is ahead of the game right now, Android tablets are only now beginning to hit the market. If [declining iPhone market share](http://thenextweb.com/apple/2010/02/01/iphone-shedding-market-share-increasingly-competitive-market/) is any indication, Android will nip at Apple’s heels in the tablet space as well. And let’s not forget other formidable (and somewhat-formidable) competitors in the likes of HP’s WebOS, Microsoft-Nokia, and RIM.

Let’s now talk about the real threat to app innovation. There’s news today that Apple has finally [caved in to political pressure](http://bits.blogs.nytimes.com/2011/06/09/apple-will-reject-d-u-i-checkpoints-apps/) from members of Congress and banned DUI checkpoint apps from the app store. RIM had already complied, and Google has yet to respond. You can see, though, how apps are more susceptible to nanny state meddling than to monopolization.

The day many had expected is finally here. This Reuters headline says it all: [Senators seek crackdown on “Bitcoin” currency](http://www.baltimoresun.com/business/sns-rt-us-financial-bitcoitre7573t3-20110608,0,1767151.story).

The main target of Sens. Chuck Schumer and Joe Manchin is Silk Road–the [online illicit drug bazaar](http://gawker.com/5805928/the-underground-website-where-you-can-buy-any-drug-imaginable) run via the TOR network–but bitcoin, the currency of choice on Silk Road, is also in their sights. (Also, Sens. Roy Blunt and Claire McCaskill [are also getting in on the action.](http://www.fox2now.com/news/ktvi-missouri-lawmakers-want-to-shut-down-drug-dealing-website-20110607,0,2162224.story)) In [a recent letter](http://pastebin.com/VurF7dgr) Schimer and Manchin have asked the DOJ and DEA to shut down Silk Road, and “seize” the website’s domain. More to the point, in his press conference, [which you can watch here](http://www.wpix.com/videobeta/f76e263d-8ab3-4028-bf42-1b18c3eb9b5d/News/RAW-VIDEO-Sen-Schumer-On-Silk-Road), Schumer said that bitcoin is “an online form of money laundering used to disguise the source of money, and to disguise who’s both selling and buying the drug.”

As the DOJ and DEA plan a response and this issue develops, I though I’d offer some initial thoughts:

– Bitcoin is digital cash, and like any form of cash, it can be used for good or for ill. Because, like all cash, it is largely anonymous, it will be used by persons looking to evade official scrutiny. This could be contributing anonymously to unpopular causes like Wikileaks, but it could also mean buying drugs online. We don’t ban hard to trace paper cash because we understand that there’s nothing inherently bad about it; it’s what people do with it that’s can be problematic. Bitcoin should be treated the same way.

That said about what I think ought to be, what’s really interesting is what will be regardless of normative values. That is, can Silk Road and bitcoin “cracked down”?

– The federal government is no doubt going to go after Silk Road. This sets up another “natural experiment” like [the one presented by LulzSec taking bitcoin donations](http://techliberation.com/2011/06/03/bitcoin-silk-road-and-lulzsec-oh-my/). Given that the site exists as a [.onion an anonymous hidden service](http://en.wikipedia.org/wiki/.onion) via TOR, will the feds be able to find who’s behind it and shut it down? We’ll see. They certainly won’t be able to “seize the domain” as Schumer and Manchin’s letter suggests. If a year from now the site is still operating, will we be able to say that government does not “[possess any methods of enforcement we have true reason to fear.](http://www.wired.com/wired/if/declaration/)”

– If the federal government seeks to go after bitcoin, it won’t be able to take down the network. That’s just impossible as far as I can tell. The weakest link in the bitcoin ecosystem, however, are the exchanges, like Mt Gox. These allow you to trade your bitcoins for dollars and vice versa. At this point, there’s not a lot you can buy with bitcoins, so the ability to trade them to a widely accepted currency is important.
According to Gavin Andresen, the lead developer of the bitcoin project, Mt Gox “is careful to comply with all anti-money-laundering laws and regulations.” I’d love to know more about this. As far as I can tell, we know very little about who runs Mt Gox and how they comply with the law.

– Even if the federal government is able to shut down Silk Road and exchanges like Mt Gox, we will quickly see others take their place. Silk Road will be supplanted by another anonymart ([to use Kevin Kelly’s phrase](http://www.kk.org/thetechnium/archives/2011/06/the_stealthy_an.php)), and we’ll see a replay of the drug war we know too well from meatspace. As for exchanges, we’ll see new ones pop up, likely in jurisdictions with liberal banking laws, and it will be interesting to see if Congress tries to make it illegal for financial institutions and payment processors to deal with them, just as they’ve made it illegal to deal with offshore online casinos. What I hope we’ll see emerge is a properly licensed and legally compliant domestic exchange that is as committed to fighting money laundering as Citibank. That would certainly help test bitcoin’s legality. This [great paper by Reuben Grinberg](http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1817857) that gives me hope that, for now at least, there’s nothing inherently illegal about trading bitcoins.

Facebook announced yesterday that it had finished most of the global roll-out, begun in the U.S. last December. Now ZDNet reports that European Privacy regulators are already planning a probe of this. Emil Protalinski writes:

“Tags of people on pictures should only happen based on people’s prior consent and it can’t be activated by default,” Gerard Lommel, a Luxembourg member of the so-called Article 29 Data Protection Working Party, told BusinessWeek. Such automatic tagging “can bear a lot of risks for users” and the group of European data protection officials will “clarify to Facebook that this can’t happen like this.”

No doubt our friends at the Extra-Paternalist Internet Cops (EPIC) will jump into the fray with another of their many complaints to the FTC, dripping with outrage that Facebook has “opted us into” this feature. But what’s the big deal, really?  Emil explains how things work:

When you upload new photos, Facebook uses software similar to that found in many photo editing tools to match your new photos to other photos you’re tagged in. Similar photos are grouped together and, whenever possible, Facebook suggests the name(s) your friend(s) in the photos. In other words, the square that magically finds faces in a photo now suggests names of your Facebook friends to streamline the tagging process, especially with the same friends in multiple uploaded photos.

Lifehacker explains how easy it is for Facebook users to opt-out of having their friends seeing the automatically generated suggestion to tag their face (as Facebook did  in its own announcement):

  1. Head your Privacy Settings and click on Customize Settings.
  2. Scroll down to the “Suggest Photos of Me to Friends” setting and hit “Edit Settings”.
  3. In the drop-down on the right, hit “Disable”.

See the screenshots here. So, in short: The feature that’s upsetting the privacy regulationistas is a feature that saves us time and effort in tagging our friends in photos we upload—unless our friends have opt-outed of having their photos auto-suggested.

Continue reading →

Wired’s Brian Chen writes today about the “damage” caused to Apple’s competitors and there own developers by products announced at yesterday’s WWDC keynote, making several claims that are bit dubious, the most suspect of which was this claim about Apple’s new cloud-focused trio:

Now, here’s why iCloud, iOS 5 and Lion pack such a deadly punch against so many companies: Together, they strengthen Apple’s lock-in strategy with vertical integration.

While I don’t doubt that Apple is indeed going to deal a very deadly punch to many competitors with their version of cloud computing for consumers, I think using the term “lock-in” is going to far.  True lock-in would mean driving consumers down a one-way street where their data can’t be moved to another platform (think Facebook prior to late last year) or driving up switching costs through cancellation fees ala the telecom industry.  Apple, on the other hand, is offering consumers a truly compelling user experience, not holding them hostage.

Continue reading →

If you’re like me, you woke up at the crack of dawn today to maximize your enjoyment of World IPv6 Day. Don’t want to miss a minute! If you’re like me, you’ll also say untruthful things as a very dry form of sarcasm. I hope you got that.

Whatever your interest in IPv6—learn more by reading this heresy—you should take interest in whether the next generation of the Internet protocol will erode or enhance your ability to protect privacy. That’s a question that’s been gnawing at me for a long time.

IPv4 was designed without enough numbers to accommodate the worldwide, multiple-device Internet we’ve got today. IPv5 seems to have disappeared—and I’m desperate to know what happened to it. (see above re: sarcasm) Now we’re talking about IPv6, a major feature of which is that it has enough numbers to assign one to every device on the globe.

IPv6’s ginormous number space is great for simplifying the maintenance of quality communications on the modern Internet, but it could suck for privacy. You see, if every device can be assigned a permanent number, that number will act as a permanent identifier, and lots of privacy-reducing inferences can be drawn. I.e., “If I saw this IP number before, it’s probably the same device and the same person I dealt with before.” Communications and interactions that don’t require or benefit from tracking become trackable anyway. We lose a structural protection of privacy.

Luckily, the designers of the IPv6 protocol thought of that. Christopher Parsons explains in a thorough post from last year that the IPv6 protocol calls for rolling assignment of randomized numbers for initiators of communications. A Web server has to have a fixed address, of course. It’s the target of communications requests, and people need to know where to find it. But the computers that ask for content from such servers do not. IPv6 allows those devices to have transient, pretty darn random numbers that change with regularity. This way, the records of your surfing that come to rest in servers all over the world cannot be combined into a dossier of everything you ever did online. Your computer’s IP address does not become your de facto worldwide identifier.

But here’s the question: To what extent is this part of IPv6 being implemented? Are the organizations implementing IPv6 including randomized numbers for initiators of communications? Parsons has a clever turn of phrase suggesting one reason why they may not: “the ‘security institutions’ are better at dissolving privacy protections than the privacy community is at enshrining privacy in law.” It could also be simply that there’s some cost associated with IPv6’s randomization.

So, does anyone know the status of randomization in the IPv6 protocol? Is it being implemented?

The good news, I think, is that it seems fairly easy to test whether an ISP is deploying IPv6 in full or short-cutting on randomization. Set up a server out there, ping it with a consistent communication, and see if it sees the communication coming from a consistent IP address. If it does, then IPv6 randomization is not working. That’s a problem.

Given the wisdom of “trust but verify,” I suppose this is not only an appeal for information about present practice, but a request that some group of technical smarties out there set up a system for routine verification that IPv6 randomization is fully and properly implemented by Internet service providers and other major deployers of Internet protocol. If you’ve already done it, do tell! Thanks!

The U.S. government doesn’t need to pick winners and losers and the last thing we should think about doing is messing up the Internet with inappropriate regulation.

Amen, sister! The above quote comes from Victoria Espinel, the U.S. Intellectual Property Enforcement Coordinator for the Office of Management and Budget (AKA the Copyright Czar), speaking at the World Copyright Summit in Brussels about how corporate innovation is often more effective than laws. She went on to explain that the cloud-based music services now offered by Apple, Amazon, and Google “may have the effect of reducing privacy by giving value to consumers …” Espinel is an Obama appointee, which calls into question the concerns voiced a year ago that the RIAA is taking over the Department of Justice.

The next stop on her speaking tour should be the Federal Communications Commission.

On May 26th, it was my great pleasure to participate in a panel discussion on “Growing Up with the Mobile Net,” which was co-sponsored by the Congressional Internet Caucus and Common Sense Media. It was a conversation about kids’ privacy, online safety, teen free speech rights, anonymity, and the possibility of expanding the Children’s Online Privacy Protection Act (COPPA) and implementing the so-called “Internet Eraser Button.”

I was joined on the panel by Jules Polonetsky, Co-chair and Director of the Future of Privacy Forum, and Alan Simpson, Vice President of Policy at Common Sense Media. And the session was very ably moderated, as always, by the supremely objective Tim Lordan.*  We really unpacked the “Eraser Button” and “right to be forgotten” notion and thought through the ramifications. And the discussion about the extent of First Amendment rights for teenagers was also interesting.

The video for this 48-minute session can be found on the Congressional Internet Caucus YouTube page here and is embedded below.

Note: During the session, Tim Lordan claimed that he takes no position and that if anyone says he take positions on issues that he will slap a super-injunction on them. Well, I say Tim Lordan is brimming with positions and he’s letting them fly at every juncture. In fact, I’ve never met someone so full of controversial positions in my life as Tim Lordan! OK, so sue me Tim!

Over at his blog, our old TLF colleague Tim Lee has been discussing the AT&T – T-Mobile merger and the ways libertarians should think about antitrust more generally.  In his latest post, he pushes back against a brief comment I posted on a previous essay. You can head over to his site and read that exchange and then see my latest comment. But I thought I would also post it here for those interested.

____________

Tim… My thinking on antitrust is very much shaped by the choice between ex ante vs. ex post regulation. How much faith should we place in sector-specific regulators to get things right through preemptive, prophylactic regulation versus allowing things to play out and then — on the rare occasions when intolerable monopolies over essential goods develop — letting antitrust regulators devise a remedy?

More than any other economic value, I care about experimentation. I am completely under the sway of the Austrian School of thinking about markets and competition as an ongoing experiment, an evolutionary journey, a discovery process.  How are we to know if intolerable monopolies over essential goods will actually develop unless we let things play out?

As I argued in my critiques of the Lessig/Zittrain/Wu school of thinking, we need to be a bit more humble and have a little faith that ongoing experimentation and discovery will help us evolve into a better equilibrium. It’s during what some regard as a market’s darkest hour when some of the most exciting forms of disruptive technologies and innovation are developing. [I’ve elaborated more on this point in this lengthy discussion about Gary Reback’s recent book on antitrust.] Continue reading →

On this week’s podcast, Larry Downes, who writes for CNet, blogs at Forbes.com and the Technology Liberation Front, and is the author of several books, including most recently, The Laws of Disruption, discusses enforcement of intellectual property rights online. Downes talks about the Protect IP Act, a bill recently introduced into Congress that aims to curtail infringement of intellectual property rights online by so-called rogue websites. Downes argues that forcing intermediaries to blacklist domain names has the potential to “break the internet.” He discusses how the rogue website problem could better be addressed and how the proposed bill could be improved.

Related Links

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

In my latest weekly Forbes column is entitled “The Internet Isn’t Killing Our Culture or Democracy” and it’s a short review of the new book, The Filter Bubble: What the Internet is Hiding from You, by MoveOn.org board president Eli Pariser. As I note in my essay, Pariser’s book covers some very familiar ground already plowed by others in the burgeoning Internet pessimism movement:

[The Filter Bubble] restates a thesis developed a decade ago in both Cass Sunstein’s Republic.com and Andrew L. Shapiro’s The Control Revolution, that increased personalization is breeding a dangerous new creature—Anti-Democratic Man. “Democracy requires citizens to see things from one another’s point of view,” Pariser notes, “but instead we’re more and more enclosed in our own bubbles.”  Pariser worries that personalized digital “filters” like Facebook, Google, Twitter, Pandora, and Netflix are narrowing our horizons about news and culture and leaving “less room for the chance encounters that bring insights and learning.” “Technology designed to give us more control over our lives is actually taking control away,” he fears.

Pariser joins a growing brigade of Internet pessimists. Almost every year for the past decade a new book has been published warning that the Internet is making us stupid, debasing our culture, or destroying social interaction.  Many of these Net pessimists—whose ranks include Andrew Keen (The Cult of the Amateur), Lee Siegel (Against the Machine), Jaron Lanier (You Are Not a Gadget) and Nicholas Carr (The Shallows)—lament the rise of “The Daily Me,” or the rise of hyper-personalized news, culture, and information. They claim increased information and media customization will lead to close-mindedness, corporate brainwashing, an online echo-chamber, or even the death of deliberative democracy.

If you’ve read anything I’ve written on this topic in recent years, you will not be surprised to hear that I disagree with Pariser and these other Net pessimists when it comes to fears about hyper-personalization and user customization. As I noted in my recent book chapter, “ The Case for Internet Optimism, Part 1 – Saving the Net From Its Detractors“: Continue reading →