February 2012

Tomorrow Sen. John McCain, along with five other Republican senators, [plans to unveil a cybersecurity bill](http://techdailydose.nationaljournal.com/2012/02/gop-senators-to-unveil-rival-c.php) to rival the Lieberman-Collins bill that Majority Leader Harry Reid has said he plans to bring to the Senate floor without an official markup by committee.

At a hearing earlier this month, Sen. McCain criticized the Lieberman-Collins bill for not giving the NSA authority over civilian networks. And as we’ve heard this week, the NSA has been aggressively seeking this authority–so aggressively in fact that the White House [publicly rebuked Gen. Keith Alexander](http://jerrybrito.com/2012/02/27/the-white-house-strikes-back/) in the pages of the *Washington Post*. But as CDT’s Jim Dempsey explains in a [blog post today](https://www.cdt.org/blogs/jim-dempsey/2902will-nsa-power-grab-imperil-cybersec-consensus),

>The NSA’s claims are premised on the dual assumptions that the private sector is not actively defending its systems and that only the NSA has the skills and the technology to do effective cybersecurity. The first is demonstrably wrong. The Internet and telecommunications companies are already doing active defense (not to be confused with offensive measures). The Tier 1 providers have been doing active defense for years – stopping the threats before they do damage – and the companies have been steadily increasing the scope and intensity of their efforts.

>The second assumption (that only the NSA has the necessary skills and insight) is very hard for an outsider to assess. But given the centrality of the Internet to commerce, democratic participation, health care, education and multiple other activities, it does not seem that we should continue to invest a disproportionate percentage of our cybersecurity resources in a military agency. Instead, we should be seeking to improve the civilian government and private sector capabilities.

The military, and especially the NSA, has great experience and useful intelligence that should leveraged to protect civilian networks. But that assistance should be provided at arms-length and without allowing the military to conduct surveillance on the private Internet. Military involvement in civilian security is as inappropriate in cyberspace as it is in the physical world.

As Gene Healy [has explained](http://www.thefreemanonline.org/featured/blurring-the-civilian-military-line/), civilian law enforcement and security agencies “are trained to operate in an environment where constitutional rights apply and to use force only as a last resort”, while the military’s objectives are to defeat adversaries. The NSA’s warrantless wiretapping scandal speaks to this difference. “Accordingly, Americans going back at least to the Boston Massacre of 1770 have understood the importance of keeping the military out of domestic law enforcement.” The Senate Republicans would do well to leave NSA involvement in civilian networks out of a new cybersecurity bill.

And FYI: I will be presenting at a Cato Institute Capitol Hill briefing on cybersecurity on March 23rd along with Jim Harper and Ryan Radia. [Full details and RSVP are here](http://www.cato.org/event.php?eventid=9060).

**[Cross posted from JerryBrito.com](http://jerrybrito.com/2012/02/29/keeping-the-nsa-out-of-civilian-cybersecurity-theres-a-reason/)**

Sen. Carl Levin wants Facebook to pay an extra $3 billion in taxes on its Initial Public Offering (IPO). The Senator claims the Facebook IPO illustrates why we need to close what he calls the “stock-option loophole.” (He explains that “Stock options grants are the only kind of compensation where the tax code allows companies to claim a higher expense for tax purposes than is shown on their books.”) He wants Facebook to pay its “fair share” and insists that “American taxpayers will have to make up for what Facebook’s tax deduction costs the Treasury.”

One could object, on principle, to Levin’s premise that tax deductions “cost” the Treasury money—as if the “national income” were all money that belonged to the government by default. One could also point out that Mark Zuckerberg, will pay something like $2 billion in personal income taxes on money he’ll earn from this stock sale—and that California is counting on the $2.5 billion in tax revenue the IPO is supposed to bring to the state over five years.

But the broader point here is that Sen. Levin wants to increase taxes on IPOs—and any economist will tell you that taxing something will produce less of it. IPOs are the big pay-off that fuels early-stage investment in risky start-ups—you know, those little companies that drive innovation across the economy, but especially in Silicon Valley? So, while Sen. Levin singles out Facebook as an obvious success story, his IPO tax would really hurt countless small start-ups who struggle to attract investors as well as employees with the promise of large pay-offs in the future.

It’s especially ironic that Sen. Levin proposed his IPO tax just a day after GOP Majority Leader Eric Cantor introduced the “JOBS Act,” a compilation of assorted bi-partisan proposals designed to promote job creation by helping small companies attract capital. That’s exactly where we should be heading: doing everything we can to encourage job creation by rewarding entrepreneurship. Sen. Levin would, in the name of fairness do just the opposite—and, in the long-run, almost certainly produce less revenue by slowing economic growth.

And just to underscore the drop-off in tech IPOs since the heydey of the dot-com “bubble” in the late 90s, check out the following BusinessInsider Chart: Continue reading →

Paying close attention to language can reveal what’s going on in the world around you.

Note the simple but important differences between the phrases “open government” and “open government data.” In the former, the adjective “open” modifies the noun “government.” Hearing the phrase, one would rightly expect a government that’s more open. In the latter, “open” and “government” modify the noun “data.” One would expect the data to be open, but the question whether the government is open is left unanswered. The data might reveal something about government, making government open, or it may not.

David Robinson and Harlan Yu document an important parallel shift in policy focus through their paper: “The New Ambiguity of ‘Open Government.'”

Recent public policies have stretched the label “open government” to reach any public sector use of [open] technologies. Thus, “open government data” might refer to data that makes the government as a whole more open (that is, more transparent), but might equally well refer to politically neutral public sector disclosures that are easy to reuse, but that may have nothing to do with public accountability.

It’s a worthwhile formal articulation and reminder of a trend I’ve noted in passing once or twice.

There’s nothing wrong with open government data, but the heart of the government transparency effort is getting information about the functioning of government. I think in terms of a subject-matter trio—deliberations, management, and results—data about which makes for a more open, more transparent government. Everything else, while entirely welcome, is just open government data.

Time Warner Cable (TWC) has announced it will once again attempt an experiment with usage-based pricing (UBP) for its broadband services. (News coverage here, here, and here.) The company gave UBP a shot a few years ago and some consumers, regulatory advocates, and lawmakers howled in protest. The radical activist group Free Press called for immediate policy action and former Rep. Eric Massa’s (D-NY) was happy to oblige with his proposed “Broadband Internet Fairness Act,” which would have let the FCC decide whether such pricing plans were permissible.

For their latest UBP experiment, TWC goes out of its way to avoid controversy, primarily by making it clear the plan is entirely optional. Here’s what their consumers are offered as part of what is being labelled it’s “Value Edition” plan:

  • Up to 5GB/month of data transmission for a $5/month discount from one’s current monthly bill. All Standard, Basic and Lite broadband customers will be eligible. Turbo, Extreme and Wideband customers will continue as always, with access to unlimited broadband and no optional tiered plan or discounts.
  • The ability to opt-in and opt-out of a tiered package at any time.
  • A “meter” that tracks usage on a daily, monthly, weekly or even hourly basis, enabling customers to accurately gauge usage. Below is an example of the hourly meter:
  • A 60 day/2 billing-cycle grace period to allow customers to adjust usage patterns. During this time we will notify customers of overages but won’t charge for them.
  • Overages will cost $1 per GB, not to exceed a maximum of $25/month.

It’s hard to see how anyone could be against this and I was pleased to see that Harold Feld of Public Knowledge didn’t automatically dismiss it and, in fact, had some rather favorable things to say about it. Continue reading →

On the podcast this week, Clay Johnson, co-founder of Blue State Digital and former director of Sunlight Labs at the Sunlight Foundation, discusses his new book, The Information Diet. According to Johnson, America’s diet of mass-produced unhealthy food has resulted in an obesity epidemic and we may be seeing the same thing when it comes to our media diet. He believes the problem is not too much information, rather it is the quality of information that people choose to consume. Johnson encourages more responsibility in choosing information intake, similar to what is required to make healthy food choices. He ends by outlining a plan of action and offers tips on consuming “healthy” information.

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[UPDATE: 2/14/2013: As noted here, this paper was published by the Minnesota Journal of Law, Science & Technology in their Winter 2013 edition. Please refer to that post for more details and cite this final version of the paper going forward.]

I’m pleased to report that the Mercatus Center at George Mason University has just released my huge new white paper, “Technopanics, Threat Inflation, and the Danger of an Information Technology Precautionary Principle.” I’ve been working on this paper for a long time and look forward to finding it a home in a law journal some time soon.  Here’s the summary of this 80-page paper:

Fear is an extremely powerful motivating force, especially in public policy debates where it is used in an attempt to sway opinion or bolster the case for action. Often, this action involves preemptive regulation based on false assumptions and evidence. Such fears are frequently on display in the Internet policy arena and take the form of full-blown “technopanic,” or real-world manifestations of this illogical fear. While it’s true that cyberspace has its fair share of troublemakers, there is no evidence that the Internet is leading to greater problems for society.

This paper considers the structure of fear appeal arguments in technology policy debates and then outlines how those arguments can be deconstructed and refuted in both cultural and economic contexts. Several examples of fear appeal arguments are offered with a particular focus on online child safety, digital privacy, and cybersecurity. The  various  factors  contributing  to  “fear  cycles”  in these policy areas are documented.

To the extent that these concerns are valid, they are best addressed by ongoing societal learning, experimentation, resiliency, and coping strategies rather than by regulation. If steps must be taken to address these concerns, education and empowerment-based solutions represent superior approaches to dealing with them compared to a precautionary principle approach, which would limit beneficial learning opportunities and retard technological progress.

The complete paper can be found on the Mercatus site here, on SSRN, or on Scribd.  I’ve also embedded it below in a Scribd reader. Continue reading →

Over at Forbes I have posted some thoughts on the new privacy framework (Consumer Data Privacy in a Networked World) that the Obama Administration released today. In my essay, “The Problem with Obama’s “Let’s Be More Like Europe” Privacy Plan,” I hammer home the same point I’ve made here before many times: Regulation is not a costless exercise. No matter how well-intentioned regulatory proposals may be, they can often have unforeseen, unintended consequences. This is equally true for privacy controls. I discuss how a new privacy regulatory regime could drive up prices for services that currently are free or inexpensive, limit new digital services and innovations, create barriers to entry for new entrants and entrepreneurs, negatively impact the competitiveness of existing U.S. Internet operators, and, more generally, increase the horizons of government power over the Internet.

For a more detailed analysis of these issues, I encourage you to check out my big Mercatus Center filing to the FTC last year on privacy and Do Not Track regulation. Also, here are few TLF essays that summarize my skepticism about expanded privacy controls:

The White House’s “Consumer Data Privacy in a Networked World” report outlines a revised framework for consumer privacy, proposes a “Consumer Privacy Bill of Rights,” and calls on Congress to pass new legislation to regulate online businesses. The following statement can be attributed to Berin Szoka, President of TechFreedom, and Larry Downes, TechFreedom Senior Adjunct Fellow:

This Report begins and ends as constitutional sleight-of-hand. President Obama starts by reminding us of the Fourth Amendment’s essential protection against “unlawful intrusion into our homes and our personal papers”—by government. But the Report recommends no reform whatsoever for outdated laws that have facilitated a dangerous expansion of electronic surveillance. That is the true threat to our privacy. The report dismisses it in a footnote.

Instead, the Report calls for extensive new regulation of Internet businesses to address little more than the growing pains of a vibrant emerging economy. “For businesses to succeed online,” President Obama asserts, “consumers must feel secure.”  Yet online businesses that rely on data to deliver innovative and generally free services are the one bright spot in a sour economy. Experience has shown consumers ultimately bear the costs of regulations imposed on emerging technologies, no matter how well-intentioned.

The report is a missed opportunity. The Administration should have called for increased protections against government’s privacy intrusions. Focusing on the real Bill of Rights would have respected not only the Fourth Amendment, but also the First Amendment. The Supreme Court made clear last year that the private sector’s use of data is protected speech—an issue also not addressed by this Report.

Szoka and Downes are available for comment at media@techfreedom.org.

Congress freed up much-needed electromagnetic spectrum for mobile communications services Friday (H.R. 3630), but it set the stage for years of wasteful lobbying and litigating over whether regulators should be allowed to pick winners and losers among mobile service providers.

The wireless industry has thrived in the near absence of any regulation since 1993.  But lately the Federal Communications Commission has been hard at work attempting to change that.

A leaked staff report in December helped sink AT&T’s attempted acquisition of T-Mobile.  And the commission has taken the extraordinary step of requesting public comments on an agreement between Comcast and Verizon Wireless to jointly market their respective cable TV, voice and Internet services, beginning in Portland and Seattle.  Nothing in the Communications Act prohibits cable operators and mobile phone service providers from jointly marketing their products.

FCC Chairman Julius Genachowski objected to a previous version of the spectrum bill which, among other things, would have prohibited the commission from manipulating spectrum auctions for the benefit of preferred entities.  The limitation was removed, and Sec. 6404 provides that nothing in the legislation “affects any authority the Commission has to adopt and enforce rules of general applicability, including rules concerning spectrum aggregation that promote competition.

Continue reading →

Ceci c’est un meme.

On Forbes today, I look at the phenomenon of memes in the legal and economic context, using my now notorious “Best Buy” post as an example. Along the way, I talk antitrust, copyright, trademark, network effects, Robert Metcalfe and Ronald Coase.

It’s now been a month and a half since I wrote that electronics retailer Best Buy was going out of business…gradually.  The post, a preview of an article and future book that I’ve been researching on-and-off for the last year, continues to have a life of its own.

Commentary about the post has appeared in online and offline publications, including The Financial Times, The Wall Street Journal, The New York Times, TechCrunch, Slashdot, MetaFilter, Reddit, The Huffington Post, The Motley Fool, and CNN. Some of these articles generated hundreds of user comments, in addition to those that appeared here at Forbes.
Continue reading →