Senior Fellow in Technology & Innovation at the R Street Institute in Washington, DC. Formerly a senior research fellow at the Mercatus Center at George Mason University, President of the Progress & Freedom Foundation, Director of Telecommunications Studies at the Cato Institute, and a Fellow in Economic Policy at the Heritage Foundation.
Last week, it was my great honor to speak at the 2011 State of the Net 2011 event, where I participated in a panel discussion about the future of the online video marketplace. In an earlier essay, I mentioned how some of the discussion that day revolved around the Comcast-NBCU merger, which had just been approved by the FCC, but with unprecedented strings being attached. The heart of the panel discussion, however, was a debate about the future of online video and regulation of the video marketplace more generally. Also joining me on the panel were Susan Crawford of Cardozo Law School, William Lehr of MIT, Marvin Ammori of Nebraska Law School, and Richard Bennett of ITIF.
During my response time on the panel, which begins around 28:45 of the video, I made a couple of key points: Continue reading →
At this week’s excellent State of the Net 2011 event, I participated in a panel discussion about the future of the online video marketplace. Unsurprisingly, a great deal of time was spent discussing the Federal Communications Commission’s (FCC) recent approval of the proposed merger of Comcast and NBC Universal (NBCU). On Tuesday, the agency voted 4-1 to approve the deal with myriad conditions and “voluntary” concessions being attached. The FCC voted on the matter and issued a short press release and late today issued its final 279-page order.
The Commission’s Comcast-NBCU order represents an unprecedented regulatory shakedown of a company that obviously would have done just about anything to gain approval of the deal. I believe the conditions the FCC has imposed on the deal, which are to run for seven years, are tantamount to a death by a thousand cuts for the deal and, ultimately, could lead to its failure. That’s because the requirements placed on the new entity make it practically impossible for Comcast to leverage the content it is acquiring from NBCU and profit from it such that they can recoup the significant costs associated with the deal.
In essence, Comcast-NBCU was forced to preemptively surrender much of its intellectual property rights by agreeing to share most of their content properties with others on terms someone else will determine. That’s a recipe for disaster. If Comcast-NBCU doesn’t have the right and ability to cut deals on terms that they find advantageous to the company and its shareholders, then why go through with this deal at all? Isn’t the whole point of such a deal with get some additional in-house content properties — something Comcast almost completely lacked previously — such that it would have some content gems to highlight and leverage in an attempt to attract new customers (or just keep old ones)? If someone else is constantly setting the terms of their deals, it will limit the inherent value of the IP owned by Comcast-NBCU and sap most of the value from the deal. Continue reading →
Washington Post cartoonist Tom Toles is certainly no fan of free markets, but his contribution to today’s paper offers us this humorous take on the dangers of regulatory capture, a subject we’ve spent much time documenting here on the TLF.
Federal policy makers, state legislators, and state attorneys general have recently shown interest in regulating commercial advertising and marketing. Several new regulatory initiatives are being proposed, or are already underway, that could severely curtail or restrict advertising or marketing on a variety of platforms. The consequences of these stepped-up regulatory efforts will be profound and will hurt consumer welfare both directly and indirectly.
I go on to note that “advertising can be an easy target for politicians or regulatory activist groups who make a variety of (typically unsubstantiated) claims about its negative impact on society,” but then continue on to explain how “the role of commercial speech in a free-market economy is often misunderstood or taken for granted.” I outline how, despite regulators’ concerns, consumers actually derive three important types of benefits from advertising and marketing: (1) Informational / Educational Benefits; (2) Market Choice / Pro-Competitive Benefits; and (3) Media Promotion / Cross-Subsidization. After discussing each benefit, I conclude that:
For these reasons, a stepped-up regulatory crusade against advertising and marketing will hurt consumer welfare since it will raise prices, restrict choice, and diminish marketplace competition and innovation—both in ad-supported content and service markets, and throughout the economy at large. Simply stated, there is no free lunch.
Read the entire 1,800-word essay here. I have also embedded the document down below in a Scribd reader.
Over at the Brain Pickings blog, Maria Popova has posted an amazing 1972 documentary based on Alvin Toffler’s famous 1970 book, Future Shock. The documentary, like the book, focuses on many of the themes we hear Internet optimists and pessimists debating all the time today: “information overload,” excessive consumerism, artificial intelligence and robotics, biotechnology, cryonics, the nature of humanity and how technology impacts it, etc, etc. Again, all the same stuff people are still fighting about today.
Popova correctly notes that “The film, darkly dystopian and oozing techno-paranoia, is a valuable reminder that… societies have always feared new technology but ultimately adapted to it.” Indeed, at one point in the film we hear, “The future has burst upon us… [but] is technology always desirable?” And that’s just in reference to the (now-obsolete) supersonic jet transport, or Concorde! “Changes bombard our nervous systems, clamoring for decisions. New values, new technologies, flood into our lives… Escape from change in today’s society become more and more impossible. But change itself is out of control.” Geez.. how did we make it past 1972!
The documentary is narrated by Orson Welles, which makes it even more fun. Welles had a presence that just made everything seem larger than life, and his voice-of-God narration here really added a nice touch to this film.
It’s an absolutely great find. Here’s the first 10-minute segment from the documentary. Watch all five segments over at Brain Pickings.
My colleague Dr. Richard Williams, who serves as the Director of Policy Research at the Mercatus Center, has just released an excellent little primer on “The Impact of Regulation on Investment and the U.S. Economy.” Those who attempt to track and analyze regulation in the communications and high-tech arenas will find the piece of interest since it provides an framework for how to evaluate the sensibility of new rules.
Williams, who is an expert in benefit-cost analysis and risk analysis, opens the piece by noting that:
The total cost of regulation in the United States is difficult to calculate, but one estimate puts the cost at $1.75 trillion in 2008. Total expenditures by the U.S. government were about $2.9 trillion in 2008. Thus, out of a total of $4.6 trillion in resources allocated by the federal government, 38% of the total is for regulations.
If regulations always produced goods and services that were valued as highly as market-produced goods and services, then this would not be a cause for alarm. But that is precisely what is not known. In fact, there is evidence to the contrary for many regulations. Where regulations take resources out of the private sector for less valuable uses, overall consumer welfare is diminished. … Regulation also impacts the creation and sustainability of jobs… [which] can have very real consequences for the economy.
He also explains how regulation can affect international competitiveness, especially when burdensome rules limit the ability of companies to attract capital for new innovations and investment. Continue reading →
A group of regulatory advocates that includes Free Press, Media Access Project and the New America Foundation, have fired off a letter to the Federal Communications Commission (FCC) requesting action against the nation’s #5 mobile provider, MetroPCS. These regulatory groups claim that “new service plans being offered by mobile provider MetroPCS block and discriminate against Internet content, applications and websites.” Wired’s Ryan Singel summarizes what the fight is about:
At issue are new, tiered 4G data plans from the nation’s fifth largest mobile carrier, which specializes in pay-as-you-go mobile-phone service. The new plans offer “unlimited web usage” for all three tiers, which cost $40, $50 and $60 a month. But MetroPCS’s terms exclude video sites other than YouTube from “unlimited web usage,” and block the use of internet-telephony services such as Skype and Tango. The terms of service also make it very unclear whether users would be allowed to use online-radio services such as Pandora.
The parties petitioning the FCC for regulatory intervention claim that “MetroPCS appears to be in violation of the Commission’s recently adopted open Internet rules” even though they note that “these rules have not yet taken effect.”
There are four things I find interesting about this hullabaloo: Continue reading →
The Technology Policy Institute has released an interesting new study from Robert Crandall and Charles Jackson on “Antitrust in High-Tech Industries,” which takes a close look at the impact of antitrust law in the three most high-profile technology cases of the last half century: IBM, AT&T and Microsoft. Crandall and Jackson conclude:
In each of our three cases, the ultimate source of major changes in the competitive landscape appears to have been innovation and new technology — technology that was apparently not unleashed by the antitrust litigation. In each case, the government did not and probably could not see how technology would develop over time. Therefore, it was difficult for the government to design remedies that would accelerate competition when this competition developed from new technologies.
I enjoyed the paper and encourage others to read the entire thing. It’s very much in line with what we’ve written here in the past on the antitrust and high-tech markets. See, for example, my review of Gary Reback’s recent book on antitrust and high-tech markets. As I noted there, the crucial, ‘conflict of visions‘ issue comes down to an appreciation for dynamic competition and technological evolution over the sort of static competition, fixed-pie mindset that so many antitrust defenders espouse. Those of us who believe in dynamic competition see markets in a constant state of flux and expect that sub-optimal market developments or configurations are exactly the spark that incentivizes new form of market entry, innovation, technological disruption, price competition, and so on. But the static competition crowd looks at the same situation and imagines that the only hope is to wheel in the wrecking ball of antitrust regulation since they have little faith that things might change for the better. Moreover, they ignore the profound costs associated with such regulation and litigation. Crandall and Jackson’s paper explains why patience is the better policy.
TLF blogger and Heritage Foundation senior fellow James Gattuso gets his 15 seconds of fame — or at least 9 seconds — in this recent clip that appeared on the “Tonight Show with Jay Leno.” Probably not the sort of media impact he was looking for, but I bet he’ll take it!
Reading through the respective December 2010 privacy reports from the Federal Trade Commission (FTC) and Department of Commerce (DoC), one cannot help but be struck by the Obama Administration’s seeming desire to make America’s tech sector — and the regulatory regime that governs it — more closely resemble Europe’s. The push for an ambitious new “privacy framework” and set of “fair information practices” is just a riff borrowed from the EU data directive. And although the Obama team stops short of calling privacy a “dignity right” as many European policymakers are prone to do, it’s clear from both the FTC and DoC reports that that’s were they want to take us.
It’s interesting to me, though, that the Obama Administration relies on two fundamentally flawed rationales for the “European-ification” of American privacy law. In this regard, I’ll reference some passages from the DoC’s report that appear in the section on “The Economic Imperative” for a new regime, which appears on pages 13-16 of the report.
Myth #1: Privacy Regs Are Needed to Get More People Online or Using Digital Technology
First, the DoC pulls out the old saw about the need for expanded privacy regs to ensure greater online trust and, as a result, promote increased online interactions. The report claims that “maintaining consumer trust is vital to the success of the digital economy” and that “an erosion of trust will inhibit the adoption of new technologies” (p. 15) The problem with the theory that online commerce or consumer interactions online are somehow being thwarted by a lack of more privacy regulation is that it is plainly contradicted by the facts. Continue reading →
The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology. Learn more about TLF →
The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.