Avoiding Silicon Valley’s ‘Suicidal Impulse’: Strategies to Reduce Tech Cronyism

by on January 29, 2013 · 2 comments

In an important essay this week entitled “Silicon Valley’s ‘Suicide Impulse’,” Wall Street Journal columnist L. Gordon Crovitz warns that “Silicon Valley has long prided itself on avoiding the lumbering relationship between big government and most industries, but somehow it has become one of the top lobbyists in Washington.” Crovitz is worried that Internet and technology companies are falling prey to what Milton Friedman labeled “The Business Community’s Suicidal Impulse”: the persistent propensity to persecute one’s competitors using regulation or the threat thereof. “Rather than lobby government to go after one another,” Crovitz argues, “Silicon Valley lobbyists should unite to go after overreaching government. Instead of the ‘suicide impulse’ of lobbying for more regulation, Silicon Valley should seek deregulation and a long-overdue freedom to return to its entrepreneurial roots.”

Crovitz’s essay touches upon a dangerous trend I have written about here and elsewhere in the past: the increasing politicization of the Internet and information technology sectors and the gradual rise of rent-seeking (i.e., favor-seeking) over time. I’ve written about this problem in essays like:

These essays have documented how tech companies are increasingly vying for the attention of legislators and regulators in Washington, statehouses, and international capitals across the globe.

Why should we care about the increasing politicization of the information technology sector? Continue reading →

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My Next 7 Law Review Articles

by on January 28, 2013 · 0 comments

A couple of folks have asked me why I’ve gone silent over the past few months and posted so little here on the TLF. Simply put, I over-committed myself to one law review after another. I had submitted a few working papers to law reviews late last year and then was simultaneously approached by a few others who were soliciting specific pieces. And I said ‘yes’ to everybody!  That’s meant zero time for casual blogging of any sort. I hope to get back on the beat soon, but I still am putting the wraps on two of these, so it may be awhile before I get back to blogging regularly. Anyway, to the extent anyone is interested in what I am working on, here are my next seven law review articles, plus a book chapter:

  1. “Technopanics, Threat Inflation, and the Danger of an Information Technology Precautionary Principle,” 14 Minnesota Journal of Law, Science & Technology, 309-386, (Winter 2013).
  2. “The Perils of Classifying Social Media Platforms as Public Utilities,” forthcoming, The CommLaw Conspectus: Journal of Communications Law and Policy, (Spring 2013).
  3. “Uncreative Destruction: The Misguided War on Vertical Integration in the Information Economy,” with Brent Skorup, 65 Federal Communications Law Journal, 157-201, (April 2013).
  4. “The Pursuit of Privacy in a World Where Information Control Is Failing,” 35 Harvard Journal of Law & Public Policy, 409-455, (2013).
  5. “A Framework for Benefit-Cost Analysis in Digital Privacy Debates,” 20 George Mason University Law Review, 1055-1105 (2013).
  6. “A History of Cronyism & Capture in the Information Technology Sector,” with Brent Skorup, [Mercatus Working Paper, July 2013. Looking for a home for this one, possibly in a poly sci or history journal instead of a law review.]
  7. “Internet Policy Paradigms: The First Half Century of Internet Governance Visions”  [Looking for a home for this one, too, but still far from done with it.]
  • [Book chapter] “A Framework for Responding to Online Safety Risks,” [forthcoming book chapter in: Youth And The Internet – Regulating Online Opportunities And Risks (Springer Press, 2013)]

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James Grimmelmann on Aaron Swartz

by on January 28, 2013 · 0 comments

New York University law professor James Grimmelmann eulogizes Aaron Swartz, the open information and internet activist who recently committed suicide in the face of a computer trespass prosecution.

Grimmelmann describes Swartz’s journey from “wunderkind prodigy who came out of nowhere when he was 14” to “classic activist-organizer,” paying special attention to the ideas that motivated his work. According to Grimmelmann, Swartz was primarily interested in power being held by the wrong people and how to overcome it through community organizing. Swartz was dedicated to his personal theory of change and believed that people who know how to use computers have a duty to undermine the closed-access system from within.

It was this ardent belief that led Swartz to surreptitiously download academic articles from JSTOR. Grimmelmann closely analyzes the case, providing a balanced view of both the prosecution’s and Swartz’s view of the issue. Grimmelmann additionally suggests possible policy reforms brought to light by Schwartz’s case.

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Sports Channels and A La Carte Cable Pricing

by on January 26, 2013 · 4 comments

Matt Yglesias today responded with a post of his own to a NYT article about sports channels and cable pricing by Brian Stelter that Yglesias believed had “bad analysis.” I’m here to defend Stelter a little bit because I think Yglesias was too harsh and that Yglesias erred in his own post about the nature of cable bundling. Yglesias’ posts on cable bundling are good, and especially valuable because his Slate and ThinkProgress audiences are not the most receptive to economic justifications for perceived unfair corporate pricing schemes. In part due to him I suspect, you rarely hear econ and business bloggers calling for a la carte pricing of cable channels.

And Yglesias is certainly right that you can’t really complain about the price of your cable package, which includes the few channels you watch plus the sports channels you don’t watch, because you obviously value the channels more than the price you pay per month, even if the sports are a “waste.” He falters when he says

So since those channels are worth $60 to you, even if unbundling happens your cable provider is going to find a way to charge you approximately $60 for them. Because at the end of the day, you’re paying your cable provider for access to the channels you do watch—not for access to the channels you don’t watch. The channels you don’t watch are just there. If the channels you do watch are worth $60 to you, then $60 is what you’ll pay for them.

Continue reading →

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What Does Netflix’s Decision to Block Internet Content Tell Us About Internet Policy?

by on January 23, 2013 · 112 comments

I posted an analysis of Netflix’s new Internet blocking strategy last week. I concluded that Netflix is attempting to leverage net neutrality regulations to gain an anticompetitive price advantage in the marketplace. In my view, this harm is an unintended consequence of the FCC’s decision to abandon its free market approach to the Internet and adopt net neutrality rules that enhance the market power of so-called “edge” companies. As Neil Stevens said in his Tech at Night column: “Told you so.”

Harold Feld apparently agrees that Netflix is threatening competition, and he has is own case of Cassandrafreude (“told you so,” but with a smile). In his view, however, the problem is that the FCC didn’t go far enough. He believes this situation could have been avoided if the FCC had applied common carrier regulation to the Internet (also known as Title II), which would regulate the Internet using statutes written for the old monopoly telephone network.

Though Harold Feld and I disagree on the appropriate level of Internet regulation (I would prefer less rather than more), it appears we do agree on several issues raised by Netflix’s decision to block access to its Super HD service. The unintended consequence of Netflix’s decision is that the ensuing debate has clarified some important Internet policy issues. Continue reading →

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Larry Downes on Privacy – Capitol Hill January 23rd

by on January 22, 2013 · 0 comments

Attendees at the State of the ‘Net conference will be thrilled to know that Larry Downes will be making an encore performance Wednesday afternoon, January 23rd, in the Rayburn House Office Building. The noontime briefing is entitled “A Rational Response to the Privacy ‘Crisis’.” It’s appropriately named because he’ll be discussing ideas from his recent Cato policy analysis: “A Rational Response to the Privacy ‘Crisis’.”

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Screw results, motives matter

by on January 21, 2013 · 5 comments

“Mixed Response to Comcast in Expanding Net Access.” That’s a headline in The New York Times today.

What an utterly disgraceful hit piece. According to the article, participants in Comcast’s broadband program for low income families, as well as school administrators and city officials, are happy with the program. So what’s this “mixed response”?

>But as the program gains popularity, the company has come under criticism, accused of overreaching in its interactions with local communities — handing out brochures with the company logo during parent-teacher nights at public schools, for instance, or enlisting teachers and pastors to spread the word to students and congregations.

That’s the sixth paragraph, and its passive voice foreshadows that we’re never told who is criticizing nor what exactly is the critique (besides, perhaps, the fact that Comcast is a for-profit business and that it is advertising its low-income program). The gall! How dare Comcast inform people about a product offering! And these teachers and pastors being “enlisted” by Comcast, do they really think the program might benefit their students and congregations?

Then there’s this:

>Broadband service is “a natural monopoly” controlled by a handful of private companies, said Mr. Karaganis, of the American Assembly, adding that Internet Essentials gave Comcast access to people in community settings where it could use the lure of low prices to tap into a new consumer base.

Now, I really appreciate and respect Joe Karaganis’s research on copyright, but he needs to look up the definition of “natural monopoly.” If Comcast is so powerful, it’s kind of odd that they need to use “the lure of low prices to tap into a new consumer base.” Oh, the lure! Kvorka! What this really shows is how price discrimination can serve to [benefit lower-income folks](http://truthonthemarket.com/2008/11/30/price-discrimination-is-good-part-i/) (as well as those who don’t value broadband very much).

No, Comcast isn’t doing anything “out of the goodness of their hearts,” but why should that matter when what they’re doing is benefitting everyone involved?

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Mercatus Center at GMU will pay you to get an econ master’s degree

by on January 17, 2013 · 5 comments

Eli Dourado said it best:

More information available here. Some details:

The Mercatus Center’s MA Fellowship program is targeted toward students with an interest in gaining advanced training in economics, but who do not anticipate a career in academia. Students who anticipate working in public policy are ideal candidates for this fellowship. The two-year program offers full tuition towards an MA in applied economics from George Mason University, a generous stipend, and experience publishing policy articles and papers with Mercatus Center senior scholars. For more information please email MAFellows@mercatus.org.

The application deadline for Fall 2013 is March 1, 2013.

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Toward a Technology “Watchful Waiting” Principle

by on January 17, 2013 · 6 comments

When the smoke cleared and I found myself half caught-up on sleep, the information and sensory overload that was CES 2013 had ended.

There was a kind of split-personality to how I approached the event this year. Monday through Wednesday was spent in conference tracks, most of all the excellent Innovation Policy Summit put together by the Consumer Electronics Association. (Kudos again to Gary Shapiro, Michael Petricone and their team of logistics judo masters.)

The Summit has become an important annual event bringing together legislators, regulators, industry and advocates to help solidify the technology policy agenda for the coming year and, in this case, a new Congress.

I spent Thursday and Friday on the show floor, looking in particular for technologies that satisfy what I coined the The Law of Disruption: social, political, and economic systems change incrementally, but technology changes exponentially.

What I found, as I wrote in a long post-mortem for Forbes, is that such technologies are well-represented at CES, but are mostly found at the edges of the show–literally. Continue reading →

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Netflix Blocking Internet Access to HD Movies

by on January 17, 2013 · 605 comments

Unfortunately, most consumers won’t realize that Netflix is trying to impose its costs on all Internet consumers to gain an anticompetitive price advantage against its over-the-top competitors.

At the Consumer Electronic Show two weeks ago, Netflix announced that it would block consumer access to high definition and 3D movies (HD) for customers of Internet service providers (ISPs) that Netflix disfavors. Netflix’s goal is to coerce ISPs into paying for a free Internet fast lane for Netflix content. If Netflix succeeds, it would harm Internet consumers and competition among video streaming providers. It would also fundamentally alter the economics and openness of the Internet, “where consumers make their own choices about what applications and services to use and are free to decide what content they want to access, create, or share with others.”

Ironically, Netflix’s strategy is a variant of the doomsday narrative spun by net neutrality activists over the last decade. Their narrative assumes ISPs will use their gatekeeper control to block their customers from accessing Internet content distributed by competitors. Of course, ISPs have never blocked consumer access to competitive Internet content. Now that the FCC has distorted the Internet marketplace through the adoption of asymmetric net neutrality rules, Netflix, the dominant streaming video provider, has decided to block consumer access to its content.

This may not seem like a big deal given the relatively limited HD content currently available on Netflix. But that’s about to change in a very big way. Netflix recently announced a new multi-year licensing agreement that makes it the “exclusive American subscription TV service for first run live-action and animated features from the Walt Disney Studios.” In addition to Disney-branded content (e.g., The Lion King), the deal includes content produced by Pixar (e.g., Brave), Lucasfilm (e.g., Star Wars), and Marvel (e.g., The Avengers). Netflix also announced a multi-year deal with Turner Broadcasting and Warner Bros. that includes the Cartoon Network and exclusive distribution rights to TNT’s television series Dallas. As an analyst recently told Ars Technica, “These movies, if you’ve got young kids—you’ve got to have Netflix.”

Netflix has decided to use this new market power to force ISPs to pay for its own Internet fast lane. In classic double-speak, Netflix calls its fast lane the “Netflix Open Connect” content delivery network (CDN). Though Netflix uses the word “open” to describe its CDN, it is not part of the open Internet. It is only “open” to Netflix for the delivery of its content, and it is only “open” to ISPs who connect to it on terms dictated by Netflix. Continue reading →

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