March 2017

Some background on broadband privacy changes

by on March 29, 2017 · 0 comments

Congress passed joint resolutions to rescind FCC online privacy regulations this week, which President Trump is expected to sign. Ignore the hyperbole. Lawmakers are simply attempting to maintain the state of Internet privacy law that’s existed for 20-plus years.

Since the Internet was commercialized in the 1990s, the Federal Trade Commission has used its authority to prevent “unfair or deceptive acts or practices” to prevent privacy abuses by Web companies and ISPs. In 2015, that changed. The Obama FCC classified “broadband Internet access service” as a common carrier service, thereby blocking the FTC’s authority to determine which ISP privacy policies and practices are acceptable.

Privacy advocates failed to convince the Obama FTC that de-identified browsing history is “sensitive” data. (The FTC has treated SSNs, medical information, financial information, precise location, etc. as “sensitive” for years and companies must handle these differently.) The FCC was the next best thing and in 2016 they convinced the FCC to say that browsing history is “sensitive data,” but it’s sensitive only when ISPs have it.

This has contributed to a regulatory mess for consumers and tech companies. Technological convergence is here. Regulatory convergence is not.

Consider a plausible scenario. I start watching an NFL game via Twitter on my tablet on Starbucks’ wifi. I head home at halftime and watch the game from my cable TV provider, Comcast. Then I climb into bed and watch overtime on my smartphone via NFL Mobile from Verizon.

One TV program, three privacy regimes. FTC guidelines cover me at Starbucks. Privacy rules from Title VI of the Communications Act cover my TV viewing. The brand-new FCC broadband privacy rules cover my NFL Mobile viewing and late-night browsing.

Other absurdities result from the FCC’s decision to regulate Internet privacy. For instance, if you bought your child a mobile plan with web filtering, she’s protected by FTC privacy standards, while your mobile plan is governed by FCC rules. Google Fiber customers are covered by FTC policies when they use Google Search but FCC policies when they use Yelp.

This Swiss-cheese approach to classifying services means that regulatory obligations fall haphazardly across services and technologies. It’s confusing to consumers and to companies, who need to write privacy policies based on artificial FCC distinctions that consumers disregard.

The House and Senate bills rescind the FCC “notice and choice” rules, which is the first step to restoring FTC authority. (In the meantime, the FCC will implement FTC-like policies.) 

Considering that these notice and choice rules have not even gone into effect, the rehearsed outrage from advocates demands explanation: The theatrics this week are not really about congressional repeal of the (inoperative) privacy rules. Two years ago the FCC decided to regulate the Internet in order to shape Internet services and content. The leading advocates are outraged because FCC control of the Internet is slipping away. Hopefully Congress and the FCC will eliminate the rest of the Title II baggage this year.

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Who needs a telecom regulator? Denmark doesn’t.

by on March 27, 2017 · 0 comments

US telecommunications laws are in need of updates. US law states that “the Internet and other interactive computer services” should be “unfettered by Federal or State regulation,” but regulators are increasingly imposing old laws and regulations onto new media and Internet services. Further, Federal Communications Commission actions often duplicate or displace general competition laws. Absent congressional action, old telecom laws will continue to delay and obstruct new services. A new Mercatus paper by Roslyn Layton and Joe Kane shows how governments can modernize telecom agencies and laws.

Legacy Laws

US telecom laws are codified in Title 47 of the US Code and enforced mostly by the FCC. That the first eight sections of US telecommunications law are devoted to the telegraph, the killer app of 1850, illustrates congressional inaction towards obsolete regulations.

In the last decade, therefore, several media, Internet, and telecom companies inadvertently stumbled into Communications Act quagmires. An Internet streaming company, for instance, was bankrupted for upending the TV status quo established by the FCC in the 1960s; FCC precedents mean broadcasters can be credibly threatened with license revocation for airing a documentary critical of a presidential candidate; and the thousands of Internet service providers across the US are subjected to laws designed to constrain the 1930s AT&T long-distance phone monopoly.

US telecom and tech laws, in other words, are a shining example of American “kludgeocracy”–a regime of prescriptive and dated laws whose complexity benefits special interests and harms innovators. These anti-consumer results led progressive Harvard professor Lawrence Lessig to conclude in 2008 that “it’s time to demolish the FCC.” While Lessig’s proposal goes too far, Congress should listen to the voices on the right and left urging them to sweep away the regulations of the past and rationalize telecom law for the 21st century.

Modern Telecom Policy in Denmark

An interesting new Mercatus working paper explains how Denmark took up that challenge. The paper, “Alternative Approaches to Broadband Policy: Lessons on Deregulation from Denmark,” is by Denmark-based scholar Roslyn Layton, who served on President Trump’s transition team for telecom policy, and Joe Kane, a masters student in the GMU econ department. 

The “Nordic model” is often caricatured by American conservatives (and progressives like Bernie Sanders) as socialist control of industry. But as AEI’s James Pethokoukis and others point out, it’s time both sides updated their 1970s talking points. “[W]hen it comes to regulatory efficiency and business freedom,” Tyler Cowen recently noted, “Denmark has a considerably higher [Heritage Foundation] score than does the U.S.”

Layton and Kane explore Denmark’s relatively free-market telecom policies. They explain how Denmark modernized its telecom laws over time as technology and competition evolved. Critically, the center-left government eliminated Denmark’s telecom regulator in 2011 in light of the “convergence” of services to the Internet. Scholars noted,

Nobody seemed to care much—except for the staff who needed to move to other authorities and a few people especially interested in IT and telecom regulation.

Even-handed, light telecom regulation performs pretty well. Denmark, along with South Korea, leads the world in terms of broadband access. The country also has a modest universal service program that depends primarily on the market. Further, similar to other Nordic countries, Denmark permitted a voluntary forum, including consumer groups, ISPs, and Google, to determine best practices and resolve “net neutrality” controversies.

Contrast Denmark’s tech-neutral, consumer-focused approach with recent proceedings in the United States. One of the Obama FCC’s major projects was attempting to regulate how TV streaming apps functioned–despite the fact that TV has never been more abundant and competitive. Countless hours of staff time and industry time were wasted (Trump’s election killed the effort) because advocates saw the opportunity to regulate the streaming market with a law intended to help Circuit City (RIP) sell a few more devices in 1996. The biggest waste of government resources has been the “net neutrality” fight, which stems from prior FCC attempts to apply 1930s telecom laws to 1960s computer systems. Old rules haphazardly imposed on new technologies creates a compliance mindset in our tech and telecom industries. Worse, these unwinnable fights over legal minutiae prevent FCC staff from working on issues where they can help consumers. 

Americans deserve better telecom laws but the inscrutability of FCC actions means consumers don’t know what to ask for. Layton and Kane illuminate that alternative frameworks are available. They highlight Denmark’s political and cultural differences from the US. Nevertheless, Denmark’s telecom reforms and pro-consumer policies deserve study and emulation. The Danes have shown how tech-neutral, consumer-focused policies not only can expand broadband access, they reduce government duplication and overreach.

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Federal spectrum sales can help fund Trump’s infrastructure investments

by on March 9, 2017 · 1 comment

The Wall Street Journal reported yesterday that the White House is crafting a plan for $1 trillion in infrastructure investment. I was intrigued to learn that President Trump “inquired about the possibility of auctioning the broadcast spectrum to wireless carriers” to help fund the programs. Spectrum sales are the rare win-win-win: they stimulate infrastructure investment (cell towers, fiber networks, devices), provide new wireless services and lower prices to consumers, and generate billions in revenue for the federal government.

Broadcast TV spectrum is good place to look for revenue but the White House should also look at federal agencies, who possess about ten times what broadcasters hold.

Large portions of spectrum are underused or misallocated because of decades of command-and-control policies. Auctioning spectrum for flexible uses, on the other hand, is a free-market policy that is often lucrative for the federal government. Since 1993, when Congress authorized spectrum auctions, wireless carriers and tech companies have spent somewhere around $120 billion for about 430 MHz of flexible-use spectrum, and the lion’s share of revenue was deposited in the US Treasury.

A few weeks ago, the FCC completed the $19 billion sale of broadcast TV spectrum, the so-called incentive auction. Despite underwhelming many telecom experts, this was the third largest US spectrum auction ever in terms of revenue and will transfer a respectable 70 MHz from restricted (broadcast TV) use to flexible use.

The remaining broadcast TV spectrum that President Trump is interested in totals about 210 MHz. But even more spectrum is under the President’s nose.

As Obama’s Council of Advisors on Science and Technology pointed out in 2012, federal agencies possess around 2,000 MHz of “beachfront” (sub-3.7 GHz) spectrum. I charted various spectrum uses in a December 2016 Mercatus policy brief.

This government spectrum is very valuable if portions can be cleared of federal users. Federal spectrum was part of the frequencies the FCC auctioned in 2006 and 2015, and the slivers of federal spectrum (around 70 MHz of the federal total) sold for around $27 billion combined.

The Department of Commerce has been analyzing which federal spectrum bands could be used commercially and the Mobile Now Act, a pending bill in Congress, proposes more sales of federal spectrum. These policies have moved slowly (and the vague language about unlicensed spectrum in the Mobile Now bill has problems) but the Trump administration has a chance to expedite spectrum reallocation processes and sell more federal spectrum to commercial users.

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