April 2012

Big Data, Innovation, Competitive Advantage & Privacy Concerns

by Adam Thierer on April 27, 2012 · 8 comments

This morning I spoke at a U.S. Chamber of Commerce event on “Responsible Data Uses: Benefits to Consumers, Businesses and the Economy.” In preparing for the event, I dusted off some old working notes for speeches I had delivered at other events about privacy policy and “big data” and expanded them a bit to account for recent policy developments. For what it’s worth, I figured I would post those notes here. (I apologize about the informality but I never write out my speeches, I just work from bullet points.)

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Benefits of “Big Data”

“big data” has numerous micro- and macroeconomic benefits
Micro benefits:
- data aggregation of all varieties has powerful social and economic benefits that are sometimes invisible to consumers and citizens but are nonetheless enjoyed by them
- big data can positively impact the 3 key micro variables – quality, quantity & price – and benefit consumers / citizens in the process

Macro benefits:
- Data is the lifeblood of the information economy and it has an increasing bearing on the global competitiveness of companies and countries
- In the old days, when we talked about comparative and competitive advantage, the focus was on natural resources, labor, and capital.
- Today, we increasingly talk about another variable: information
- Data is increasing one of the most important resources that can benefit economic growth, innovation, and the competitive advantage of firms and nations.

Privacy Concerns

of course, “big data” also raises big privacy concerns for many groups and individuals
this has led to calls for regulatory action and virtually all levels of government – federal, state, local, and international – are considering expanded controls on data collection and aggregation

Continue reading →

8 comments

Book Review: Infrastructure: The Social Value of Shared Resources, by Brett Frischmann

by Adam Thierer on April 25, 2012 · 8 comments

The folks at the Concurring Opinions blog were kind enough to invite me to participate in a 2-day symposium they are holding about Brett Frischmann’s new book, Infrastructure: The Social Value of Shared Resources. In my review, I noted that it’s an important book that offers a comprehensive and highly accessible survey of the key issues and concepts, and outlines much of the relevant literature in the field of infrastructure policy. Frischmann’s book deserves a spot on your shelf whether you are just beginning your investigation of these issues or if you have covered them your entire life. Importantly, readers of this blog will also be interested in the separate chapters Frischmann devotes to communications policy and Net neutrality regulation, as well as his chapter on intellectual property issues.

However, my review focused on a different matter: the book’s almost complete absence of “public choice” insights and Frischmann’s general disregard for thorny “supply-side” questions. Frischmann is so focused on making the “demand-side” case for better appreciating how open infrastructures “generate spillovers that benefit society as a whole” and facilitate various “downstream productive activities,” that he short-changes the supply-side considerations regarding how infrastructure gets funded and managed. I argue that: Continue reading →

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Naomi Cahn on the digital afterlife

by Jerry Brito on April 24, 2012

On the podcast this week, Naomi Cahn, John Theodore Fey Research Professor of Law at George Washington University, discusses her new paper entitled, “Postmortem Life Online.” Cahn first discusses what could happen to online accounts like Facebook once a person dies. According to Cahn, technology is outpacing the law in this area and it isn’t very clear what can happen to an online presence once the account holder passes away. She discusses the various problems family members face when trying to access a deceased loved one’s account, and also the problems online companies face in trying to balance the deceased’s privacy rights with the need to settle an estate. Cahn claims that terms of service often dictate what will happen to an online account after death, but these terms may not be in line with account holder wishes. She then suggests some steps to take in making sure online accounts are taken care of after death, including taking inventory of all online accounts and determining who should have access to those accounts after death.

Why Do ISPs Impose Data Caps?

by Eli Dourado on April 24, 2012 · 14 comments

There is a Senate Commerce Committee hearing today on online video, and our friends at Free Press, Consumers Union, Public Knowledge, and New America Foundation argue that it should be used to investigate ISP-imposed data caps.

If data caps had a legitimate economic justification, they might be just a necessary annoyance. But they do not have such a justification. Arbitrary caps and limits are imposed by multichannel video providers that also provide broadband Internet access, because the providers have a strong incentive and ability to protect their legacy, linear video distribution models from emerging online video competition.

As someone who uses an ISP with a data cap and who is a paid subscriber to three different online video services, you might think that I too would concerned about these caps. But to the contrary, I think there are some legitimate economic reasons ISPs might impose data caps, and I don’t see a reason to stop ISPs from setting the price and policies for the services they offer.

Continue reading →

14 comments

The Kochs, Cato, and Miscalculation—Part III

by Jim Harper on April 20, 2012 · 9 comments

In previous posts about the battle for control of the Cato Institute, I’ve noted (Part I) that the “Koch side” is a variety of different actors with different motivations who collectively seem not to apprehend the Cato Institute’s value. Next (Part II), I looked at why the Koch side is fairly the object of the greater scrutiny: their precipitous filing of the original lawsuit.

My premise has been that the Koch side cares. That is, I’ve assumed that they want to preserve Cato and see its role in the libertarian movement continue. Some evidence to undercut that assumption has come around, namely, their filing of a second lawsuit—and now a third! [Update: Mea culpa—there hasn’t been a third lawsuit. Just a new report of the second one. I had assumed the second was filed in state court and thus thought this was distinct. I’m not following the legal issues, obviously, which matter very little.]

The Koch side may be “on tilt.” Lawsuit-happy, win-at-any-cost. We will just have to wait and see.

For the time being, I will continue to assume that the Koch side has the best interests of liberty in mind and explore the dispute from that perspective. I owe the world some discussion of Cato-side miscalculation—of course, there is some—but before I get to that in my next post, I think it’s worth talking about the burden of proof in the Kochs’ campaign to take control of Cato.

Only fringies will deny that the Cato Institute adds some value to the liberty movement. It does. The question—if preservation of liberty is the goal—is how well it will do so in the future. The central substantive issue in the case—there are many side issues—is how Cato will operate in the future.

Now, here’s a quick primer on public campaigns and the difference between the “yes” side and the “no” side. Continue reading →

9 comments

The Closing of the Spectrum Frontier

by Larry Downes on April 19, 2012 · 0 comments

Frederick Jackson Turner (1861-1932)

On Fierce Mobile IT, I’ve posted a detailed analysis of the NTIA’s recent report on government spectrum holdings in the 1755-1850 MHz. range and the possibility of freeing up some or all of it for mobile broadband users.

The report follows from a 2010 White House directive issued shortly after the FCC’s National Broadband Plan was published, in which the FCC raised the alarm of an imminent “spectrum crunch” for mobile users.

By the FCC’s estimates, mobile broadband will need an additional 300 MHz. of spectrum by 2015 and 500 MHz. by 2020, in order to satisfy increases in demand that have only amped up since the report was issued. So far, only a small amount of additional spectrum has been allocated. Increasingly, the FCC appears rudderless in efforts to supply the rest, and to do so in time. Continue reading →

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Spencer Weber Waller on Facebook and antitrust

by Jerry Brito on April 17, 2012 · 18 comments

On the podcast this week, Spencer Weber Waller, Professor and Director at the Institute for Consumer Antitrust Studies at Loyola University Chicago School of Law, discusses his new paper entitled, Antitrust and Social Networking. The discussion centers on the likelihood of Facebook being charged by the government as having a monopoly over the social networking market. Waller first explains antitrust law, which, among other things, prohibits monopolization to protect competition. Waller then discusses the difficulty of defining the market for social networks. He claims that Facebook is dominant in the market, but he also says there are multiple markets for Facebook’s participation, like consumer use and advertising. Waller goes on to explain how a court would analyze an antitrust violation. According to Waller, there is a two-step process involved where courts ask whether there is market power, and whether a company is doing anything with that power to interfere with competition. Waller ends the discussion by analyzing the likelihood of Facebook ever being charged with antitrust violations. Waller also briefly gives his thoughts on the recent antitrust suit filed by the DOJ against Apple.

Landline rules won’t work for telecoms, or for Susan Shaw

by Hance Haney on April 17, 2012 · 47 comments

Cecilia Kang of the Washington Post reports that

the telecom industry is forcing policymakers to re-examine what has long been a basic guarantee of government – that every American home should have access to a phone, along with other utilities such as water or electricity.

Industry executives and state lawmakers who support this effort want to expand the definition of the phone utility beyond the century-old icon of the American home to include Web-based devices or mobile phones.

The quid pro quo for a monopoly franchise was an obligation to provide timely service upon reasonable request to anyone, subject to regulated rates, terms and conditions. The Telecommunications Act of 1996 eliminated the monopoly franchise, but the obligation to serve remains in the statute books of most states. Telecom providers, aka carriers-of-last-resort (COLR), are stuck with the quid without the quo.

This has become a problem as more and more consumers are “cutting the cord” in favor of wireless or VoIP services. AT&T, for example, has lost nearly half of its consumer switched access lines since the end of 2006. However, most of the loops, switches, cables and other infrastructure which comprise the telephone network must be maintained if telecom providers have to furnish telephone service to anyone who wants it within days. Continue reading →

47 comments

Event Notice: 2nd Annual GMU Conference on Competition, Search & Social Media

by Adam Thierer on April 16, 2012 · 12 comments

The fine folks at George Mason University School of Law’s Henry G. Manne Program in Law & Economics Studies have put together another stellar agenda and lineup of speakers for their Second Annual Conference on Competition, Search & Social Media. The event will be held at GMU’s School of Law on Wednesday, May 16th from 8:00 A.M. to 5:00 P.M. Panel topics are listed as follows:

PANEL 1: Antitrust and Platform Competition in Search and Social Media (This panel will discuss issues involving market definition, network effects, and dynamic considerations when analyzing search and social media platform competition.)

PANEL 2: Search, Duties to Deal, and Essential Facilities (This panel will explore the extent to which search engines should be viewed as utilities, and whether they may have a legal duty to assist their rivals under the essential facilities doctrine as it survives after Trinko and Linkline.)

PANEL 3: The Interface Between Privacy and Competitive Analysis in Search and Social Media (This panel will explore the extent to which privacy should be germane to antitrust analysis of online search and social networks, including whether privacy can be viewed as a dimension of quality and the extent to which privacy regulation may affect competition.)

PANEL 4: Are There Workable Remedies for “Search Engine Bias”? (This panel will discuss economic, legal (including First Amendment), and practical issues surrounding potential remedies to allegedly “biased” search engine results.)

I’m honored to have been asked to moderate the second panel since it focuses on an issue I’ve been given a lot of thought to lately. (See my recent working paper, “The Perils of Classifying Social Media Platforms as Public Utilities.“)

Seriously, you’d be hard-pressed to find a better set of speakers on these topics. Check them all out here, where you can also RSVP if you’re interested.

12 comments

Antitrust & Innovation in the New Economy: The Problem with the Static Equilibrium Mindset

by Adam Thierer on April 16, 2012 · 0 comments

In this new Money Morning article, “The Antitrust Curse: What Apple Can Learn From Microsoft, IBM,” David Zeiler wonders whether the antitrust lawsuit filed against Apple and several book publishers by the U.S. Department of Justice last week could open the door to a broader case against Apple or, at a minimum, simply become a major distraction to the firm and it’s ability to innovate going forward. He uses IBM and Microsoft as case studies in this regard and notes that, “the problem with being in the DOJ’s gunsight is that it distracts management, makes the company hesitant to innovate, and blemishes the company’s public image. While antitrust woes may not have been entirely responsible for Microsoft and IBM ceding their dominant positions in tech, they were clearly a major factor,” he says. “And worse for Apple, the e-book case could be just the beginning.”

Quite right. I raised the same concern in my recent Forbes column,”Regulatory, Antitrust and Disruptive Risks Threaten Apple’s Empire,” which Zeiler was kind enough to quote in his essay. In that piece, I argued:

Even if Apple beats back [the eBooks] investigation, broader questions are being raised about the company’s power that could invite a much broader investigation. The danger for Apple is that antitrust becomes an omnipresent threat that must be factored into all ongoing business decisions. Antitrust is a particular danger to Apple because the firm is highly vertically integrated and that integration is the source of many of their innovations. As earlier tech titans like IBM and Microsoft learned, when antitrust hangs like the Sword of Damocles, every decision about how to evolve and innovate becomes a calculated gamble.

Regarding the earlier impact that antitrust Sword of Damocles had on Microsoft, Zeiler unearthed this terrific 2005 quote from Mark Kroese, a general manager of information services at the Microsoft Network, who described the impact of the MS antitrust case on innovation at the firm as follows: “Working at Microsoft today vs. five years ago is different,” Kroese said. “If anyone thinks the antitrust case hasn’t slowed us down, you’re wrong. If I want to meet with a products manager for Windows, there needs to be three lawyers in the room. We have to be so careful, we err on the side of caution. We are on such a fine line of conduct.” Regarding how antitrust chilled IBM, Zeiler cites veteran tech journalist Steve Wildstrom of Tech.pinions who noted, “Twelve years of litigation were an enormous distraction in a time of rapid technological and business change. IBM management became cautious and over-lawyered, constantly looking over its shoulder-a condition that persisted for years after the case ended. The antitrust case was almost certainly a major cause of the serious decline of IBM in the late 1980s and early 90s,” Wildstrom said.

Of course, it is impossible to scientifically determine to what degree antitrust harassment contributed to either IBM or Microsoft’s inability to innovate and adapt to the rapidly changing market conditions. And let’s be clear: both IBM and MS have found ways to rebound and innovate in other ways. But one wonders what was lost in the process as the threat of antitrust constantly loomed and potentially chilled innovative efforts that could have kept both firms on the cutting-edge. Continue reading →