This article originally appeared at techfreedom.org.

Today, the D.C. Circuit Court of Appeals stayed, for the second time, an FCC Order attempting to lower prison payphone phone calling rates. Back in 2003, Martha Wright had petitioned the FCC for relief, citing the exorbitant rates she was charged to call her incarcerated grandson. Finally, in 2012, the FCC sought comment on proposed price caps. In 2013, when Commissioner Mignon Clyburn took over as acting chairman, she rushed through an orderthat implemented rate-of-return regulation, a different approach on which the FCC had not yet sought public comment.

“ Once again, the D.C. Circuit has reminded the FCC that good intentions are not enough,” said Berin Szoka, President of TechFreedom. “The FCC must follow basic requirements of administrative law. When it fails to do so, all its talk of protecting consumers is just that: empty talk.”

When the FCC issued its 2013 order, TechFreedom issued the following statement:

If justice delayed is justice denied, the FCC has once again denied justice to the millions of Americans and their families who pay far too much for prison payphone calls. The FCC’s elaborate system of price controls was not among the ideas on which the FCC sought comment last December, nor is it supported by the record. Thus, today’s long-overdue order will very likely be struck down in court — and the Commission will have wasted nine years sitting on Martha Wright’s 2003 payphone justice petition, nine months proposing an illegal solution, and who-knows-how-long litigating about it — only to wind up right back where we started, with payphone operators paying up to two-thirds of their revenue in kickbacks to state prisons, in exchange for the monopoly privilege of gouging a truly captive audience. This is just the latest example of the FCC’s M.O. of “Ready, Fire, Aim.” The FCC consistently dawdles, then suddenly works itself up into a rush to regulate in ways that are either illegal or unwise — and usually both. Once again, good intentions, the desire to make headlines, disregard for basic principles of legal process, and a deep-seated ideological preference for returning to rate-of-return price controls, have triumphed over common sense, due process and, sadly, actually helping anyone.

In January 2014, the appeals court stayed key provisions of the order. The FCC then went back to the drawing board and, in October 2015, issued a second report and order and third NPRM that, among other things, established price caps for inmate calling services. Affected service providers challenged the order and sought a stay from the D.C. Circuit, which is granted only if, as the court said here, “petitioners have satisfied the stringent requirements for a stay pending court review,” which means showing a strong likelihood of success on the merits.

“ The stay issued by the D.C. Circuit isn’t a certain death knell for the inmate calling order, but it certainly casts a grim pall over the order’s future,” said Tom Struble, Policy Counsel at TechFreedom. “This FCC has proven more than willing to tout noble goals to justify its procedural shortfalls, but the courts are less willing to bless such an outcome-driven approach. The rules for administrative procedure are there for a reason, and agencies can’t simply disregard them when it suits their interests. If something is worth doing, they should take the time to do it right.”

“It’s worth noting that Judge Tatel was among the three judges voting for today’s stay,” concluded Szoka, noting that Tatel also sits on the D.C. Circuit panel hearing challenges to the FCC’s Open Internet Order. “Even though today’s stay order addresses unrelated issues, it may suggest that the D.C. Circuit is taking a harsher look at the FCC’s procedure, and while the court didn’t grant an initial stay in the challenge to the Open Internet Order, the FCC could still lose on the merits of that case when it comes to the threshold question of whether it provided adequate notice of Title II reclassification, and rules that went well beyond ‘net neutrality.’ If so, the court might simply kick the matter back to the FCC and set the stage for a fourth court battle over the key legal questions. It’s anyone’s bet as to which issue, prison payphones (started in 2003) or net neutrality (started in 2005) the FCC will actually manage to resolve first, after more than a decade of heated fulmination exceeded only by the FCC’s incompetence.”

This article originally appeared at techfreedom.org.

Today, the Supreme Court declined to review a Second Circuit decision that held Apple violated the antitrust laws by fixing ebook prices when, in preparing to launch its own iBookstore, it negotiated a deal with publishers that would allow them to set prices above Amazon’s one-size-fits-all $9.99 price. The appeals court reached its decision by applying the strict per se rule, which ignores any procompetitive justifications of a challenged business practice. The dissent had argued that Apple “was unwilling to [enter the ebook market] on terms that would incur a loss on e-book sales (as would happen if it met Amazon’s below-cost price),” and thus that Apple’s agreement with major publishers actually benefitted consumers by facilitating competition in the ebooks market, even if it meant higher prices for some ebooks.

The Supreme Court’s refusal to hear the case means the 2013 verdict against Apple, resulting in a $450 million dollar class-action settlement, will stand. The case began in 2010 when Apple negotiated with five major publishers, adopting an agency pricing model in which the publishers set a book’s price and gave a sales commission to Apple. This pricing model is distinct from Amazon’s previously dominant model, where t was allowed to unilaterally set e-book prices — often for below cost as a loss leader strategy to encourage sales of its own Kindle reader and promote the overall Amazon platform. The Justice Department claimed that Apple’s agency model amounted to antitrust conspiracy — and the Second Circuit agreed. Meanwhile, Apple’s entry reduced Amazon’s share of the ebooks market from 90% to 60%.

“ The question here wasn’t actually whether Apple should win, but whether Apple should even be allowed to argue that its arrangement could benefit consumers,” said TechFreedom President Berin Szoka. “Apple made a strong case that its deal with publishers was critical to allowing it compete with Amazon. The Supreme Court might or might not have found those arguments convincing, but it should have at least weighed them under antitrust’s flexible rule of reason. By letting the rigid per se deal stand as the controlling legal standard, the Court has ensured that antitrust law in general will put obsolete legal precedents from the pre-digital era above consumer welfare.”

“ Business model innovation is no less essential for progress than technological innovation,” concluded Szoka. “Indeed, the two usually go hand in hand. And new business models are usually essential to unseating the first mover in new markets like ebook publishing, especially when the first mover sets artificially low prices. Categorically banning deals that attempt to rebalance pricing power between distributors and publishers in multi-sided markets likely means strangling competition in its crib. Unfortunately, the real costs of today’s decision will go unseen: without an opportunity to defend new business models, innovative companies like Apple will be less likely to attempt to disrupt the dominance of entrenched incumbents. Consumers will simply never know how much today’s decision cost them.”

Read more about the argument for reversing the Second Circuit and applying a rule of reason to novel business arrangements in the amicus brief filed by the International Center for Law & Economics and eleven leading antitrust scholars. Truth on the Market, a blog dedicated to law and economics, held ablog symposium on the case last month.

This article originally appeared at techfreedom.org.

Today, Rep. Michael McCaul (R-TX) and Sen. Mark Warner (D-VA) introduced legislation to create a blue ribbon commission that would examine the challenges encryption and other forms of digital security pose to law enforcement and national security. The sixteen-member commission will be made up of experts from law enforcement, the tech industry, privacy advocacy and other important stakeholders in the debate and will be required to present an initial report after six months and final recommendations within a year.

In today’s Tech Policy Podcast, TechFreedom President Berin Szoka and Ryan Hagemann, the Niskanen Center’s technology and civil liberties policy analyst, discussed the commission’s potential.

“ I see this commission as an ideal resting place for this debate,” Hagemann said. “Certainly what we’re trying to avoid is pushing through any sort of knee-jerk legislation that Senators Feinstein or Burr would propose, especially in the wake of a new terrorist attack.”

“I share the chairman’s concerns that since we’re not making any headway on these issues in the public forum, what is really needed here is for Congress to take some level of decisive action and get all of the people who have something to gain as well as something to lose in this debate to just sit down and talk through the issues that all parties have,” he continued.

“ I think it’s going to come out and say that there is no middle ground on end-to-end encryption, but it’s probably going to deal with the Apple situation very specifically,” Szoka said. “I think you’re going to see some standard that is going to be probably a little more demanding upon law enforcement than what law enforcement wants under the All Writs Act.”

This article originally appeared at techfreedom.org.

Today, the FCC voted on a Notice of Proposed Rulemaking that would  force pay-tv or multichannel video programming distributors (MVPDs) to change their existing equipment to allow third-party set-top boxes to carry their signals. Currently, MVPD subscribers typically pay $15–20/month to lease set-top boxes from their cable, satellite, or telco video provider. Those set-top boxes allow subscribers to view video programming on their TVs and, in some cases, also provide access to online video distributors (OVDs) such as Netflix and Hulu. However, Chairman Wheeler and some interest groups say those leasing fees are too high, that MVPDs have a stranglehold on video programming, and that the set-top box market must be opened to competition from third parties.

“Regulating set-top boxes may do serious damage to video programmers, especially small ones and those geared to minorities,” said Berin Szoka. “That’s why Congressional Democrats, minority groups and other voices have urged caution. Yet FCC Chairman Tom Wheeler blithely dismisses these concerns, insisting that ‘this is just the beginning of a fact-finding process.’ Do not believe him. If that were true, the FCC would issue a Notice of Inquiry to gather data to inform a regulatory proposal. Instead, the FCC has issued a Notice of Proposed Rulemaking. That means the FCC Chairman has already made up his mind, and that the agency is unlikely to adjust course.”

“ This is simply the latest example of the FCC abusing the rulemaking process by bypassing the Notice of Inquiry,” concluded Szoka. “Every time the FCC does this, it means the gun is already loaded, and ‘fact-finding’ is a mere formality. It’s high time Congress put a stop to this pretense of objectivity and require the FCC to begin all major rulemakings with an NOI. That key reform was at the heart of an FCC reform bill initially proposed by Republicans in 2013 — but, tellingly, removed at the insistence of Congressional Democrats.”

The FCC’s proposal is based on the recommendations of the Downloadable Security Technology Advisory Committee (“DSTAC”), which was directed to investigate this issue by Congress in the STELA Reauthorization Act of 2014.

“ The FCC is also abusing the advisory committee process—once again,” argued Tom Struble, Policy Counsel at TechFreedom. “The Commission acts as if the DSTAC unanimously supported the NPRM’s proposal. In fact, the DSTAC recommended two alternative approaches, only one of which was taken up by the FCC. This is only the most recent example of the FCC abusing the advisory committee process, denying broad input from stakeholders and steering the committee to issue recommendations that suit the administration’s policy preferences. The FCC should have used an NOI to seek comment on both the DSTAC recommendations. But at the very least, Chairman Wheeler should drop his absurd pretense that the FCC is merely beginning a fact-finding process.”

This article originally appeared at techfreedom.org.

TechFreedom has sued the Federal Aviation Administration (“FAA”) to overturn the agency’s recently adopted “interim” drone regulations, which require that drones that weigh over 250 grams be registered for a $5 fee.

“ Whether or or not requiring drone registration is a wise policy, the rules the FAA rushed out before Christmas are unlawful,” said Berin Szoka, President of TechFreedom. “They exceed the authority Congress has given the FAA. Moreover, the agency illegally bypassed the most basic transparency requirement in administrative law: that it provide an opportunity for the affected public to comment on its regulations. That means the FAA could not fully consider the real-world complexities of regulating drones. Thus, the FAA’s rules could lead to a host of unintended consequences.”

“ The notice-and-comment rulemaking process serves an important role in ensuring that regulation doesn’t do more harm than good,” said Tom Struble, Policy Counsel at TechFreedom. “It ensures that the agency is exposed to viewpoints from all the relevant stakeholders, and it forces the agency to weigh competing considerations before issuing a rule. The holiday rush did not justify the FAA bypassing standard notice-and-comment rulemaking, and the paltry cost-benefit analysis contained in the IFR does not pass muster. The D.C. Circuit should set aside these interim rules and force the FAA to go back to the drawing board.”

See TechFreedom’s petition for review here.

This article originally appeared at techfreedom.org.

Twenty years ago today, President Clinton signed the Telecommunications Act of 1996. John Podesta, his chief of staff immediately saw the problem: “Aside from hooking up schools and libraries, and with the rather major exception of censorship, Congress simply legislated as if the Net were not there.”

Here’s our take on what Congress got right (some key things), what it got wrong (most things), and what an update to the key laws that regulate the Internet should look like. The short version is:

• End FCC censorship of “indecency”
• Focus on promoting competition
• Focus regulation on consumers rather than arbitrary technological silos or political whim
• Get the FCC out of the business of helping government surveillance

Trying, and Failing, to Censor the Net

Good: The Act is most famous for Section 230, which made Facebook and Twitter possible. Without 230, such platforms would have been held liable for the speech of their users — just as newspapers are liable for letters to the editor. Trying to screen user content would simply have been impossible. Sharing user-generated content (UGC) on sites like YouTube and social networks would’ve been tightly controlled or simply might never have taken off. Without Section 230, we might all still be locked in to AOL!

Bad: Still, the Act was very much driven by a technopanic over “protecting the children.”

• Internet Censorship. 230 was married to a draconian crackdown on Internet indecency. Aimed at keeping pornography away from minors, the rest of the Communications Decency Act — rolled into the Telecom Act — would have required age verification of all users, not just on porn sites, but probably any UGC site, too. Fortunately, the Supreme Court struck this down as a ban on anonymous speech online.
• Broadcast Censorship. Unfortunately, the FCC is still in the censorship business for traditional broadcasting. The 1996 Act did nothing to check the agency’s broad powers to decide how long a glimpse of a butt or a nipple is too much for Americans’ sensitive eyes.

Unleashing Competition—Slowly

Good: Congress unleashed over $1.3 trillion in private broadband investment, pitting telephone companies and cable companies against each other in a race to serve consumers — for voice, video andbroadband service.

• Legalizing Telco Video. In 1984, Congress had (mostly) prohibited telcos from providing video service — largely on the assumption that it was a monopoly. Congress reversed that, which eventually meant telcos had the incentive to invest in networks that could carry video — and super-fast broadband.
• Breaking Local Monopolies. Congress also barred localities from blocking new entry by denying a video “franchise.”
• Encouraging Cable Investment. The 1992 Cable Act had briefly imposed price regulation on basic cable packages. This proved so disastrous that the Democratic FCC retreated — but only after killing a cycle of investment and upgrades, delaying cable modem service by years. In 1996, Congress finally put a stake through the heart of such rate regulation, removing investment-killing uncertainty.

Bad: While the Act laid the foundations for what became facilities-based network competition, its immediate focus was pathetically short-sighted: trying to engineer artificial competition for telephone service.

• Unbundling Mandates. The Act created an elaborate set of requirements that telephone companies “unbundle” parts of their networks so that resellers could use them, at sweetheart prices, to provide “competitive” service. The FCC then spent the next nine years fighting over how to set these rates.
• Failure of Vision. Meanwhile, competing networks provided fierce competition: cable providers gained over half the telephony market with a VoIP service, and 47% of customers have simply cut the cord — switching entirely to wireless. Though the FCC refuses to recognize it, broadband is becoming more competitive, too: 2014 saw telcos invest in massive upgrades, bringing 25–75 Mbps speeds to more than half the country by pushing fiber closer to homes. The cable-telco horse race is fiercer than ever — and Google Fiber has expanded its deployment of a third pipe to the home, while cable companies are upgrading to provide gigabit-plus speeds and wireless broadband has become a real alternative for rural America.
• Delaying Fiber. The greatest cost of the FCC’s unbundling shenanigans was delaying the major investments telcos needed to keep up with cable. Not until 2003 did the FCC make clear that it would not impose unbundling mandates on fiber — which pushed Verizon to begin planning its FiOS fiber-to-the-home network. The other crucial step came in 2006, when the Commission finally clamped down on localities that demanded lavish ransoms for allowing the deployment of new networks, which stifled competition.

Regulation

Good: With the notable exception of unbundling mandates, the Act was broadly deregulatory.

• General thrust. Congress could hardly have been more clear: “It is the policy of the United States… to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by Federal or State regulation.”
• Ongoing Review & Deregulation. Congress gave the FCC broad discretion to ratchet down regulation to promote competition.

Bad: The Clinton Administration realized that technological change was rapidly erasing the lines separating different markets, and had proposed a more technology-neutral approach in 1993. But Congress rejected that approach. The Act continued to regulate by dividing technologies into silos: broadcasting (Title III), telephone (Title II) and cable (Title VI). Title I became a catch-all for everything else. Crucially, Congress didn’t draw a clear line between Title I and Title II, setting in motion a high-stakes fight that continues today.

• Away from Regulatory Silos. Bill Kennard, Clinton’s FCC Chairman, quickly saw just how obsolete the Act was. His 1999 Strategic Plan remains a roadmap for FCC reform.
• Away from Title II. Kennard also indicated that he favored placing all broadband in Title I — mainly because he understood that Title II was designed for a monopoly and would tend to perpetuate it. Vibrant competition between telcos and cable companies could happen only under Title I. But it was the Bush FCC that made this official, classifying cable modem as Title I in 2002 and telco DSL in 2005.
• Net Neutrality Confusion. The FCC spent a decade trying to figure out how to regulate net neutrality, losing in court twice, distracting the agency from higher priorities — like promoting broadband deployment and adoption — and making telecom policy, once an area of non-partisan pragmatism, a fiercely partisan ideological cesspool.
• Back to Title II. In 2015, the FCC reclassified broadband under Title II — not because it didn’t have other legal options for regulating net neutrality, but because President Obama said it should. He made the issue part of his re-assertion of authority after Democrats lost the 2014 midterm elections. Net neutrality and Title II became synonymous, even though they have little to do with each other. Now, the FCC’s back in court for the third time.
• Inventing a New Act. Unless the courts stop it, the FCC will exploit the ambiguities of the ‘96 Act to essentially write a new Act out of thin air: regulating way up with Title II, using its forbearance powers to temporarily suspend politically toxic parts of the Act (like unbundling), and inventing wholly new rules that give the FCC maximum discretion—while claiming the power to do anything that somehow promotes broadband. The FCC calls this all “modernization” but it’s really a staggering power grab that allows the FCC to control the Internet in the murkiest way possible.
• Bottom line: The 1996 Act gives the FCC broad authority to regulate in the “public interest,” without effectively requiring the FCC to gauge the competitive effects of what it does. The agency’s stuck in a kind of Groundhog Day of over-regulation, constantly over-doing it without ever learning from its mistakes.

Time for a #CommActUpdate

Censorship. The FCC continues to censor dirty words and even brief glimpses of skin on television because of a 1978 decision that assumes parents are helpless to control their kids’ media consumption. Today, parental control tools make this assumption obsolete: parents can easily block programming marked as inappropriate. Congress should require the FCC to focus on outright obscenity — and let parents choose for themselves.

Competition. If the 1996 Act served to allow two competing networks, a rewrite should focus on driving even fiercer cable-telco competition, encouraging Google Fiber and others to build a third pipe to the home, and making wireless an even stronger competitor.

• Title II. If you wanted to protect cable companies from competition, you couldn’t find a better way to do it than Title II. Closing that Pandora’s Box forever will encourage companies like Google Fiber to enter the market. But Congress needs to finish what the 1996 Act started: it’s not enough to stop localities from denying franchises video service (and thus broadband, too).
• Local Barriers. Congress should crack down on the moronic local practices that have made deployment of new networks prohibitive — learning from the success of Google Fiber cities, which have cut red tape, lowered fees and generally gotten out of the way. Pending bipartisan legislationwould make these changes for federal assets, and require federal highway projects to include Dig Once conduits to make fiber deployment easier. That’s particularly helpful for rural areas, which the FCC has ignored, but making deployment easier inside cities will require making municipal rights of way easier to use. Instead of rushing to build their own broadband networks, localities should have to first at least try to stimulate private deployment.

Regulation. Technological silos made little sense in 1993. Today, they’re completely obsolete.

• Unchecked Discretion. The FCC’s right about one thing: rigid rules don’t make sense either, given how fast technology is changing. But giving the FCC sweeping discretion is even more dangerous: it makes regulating the Internet inherently political, subject to presidential whim and highly sensitive to elections.
• The Fix. There’s a simple solution: write clear standards that let the FCC work across all communications technologies, but that require the FCC to prove that its tinkering actually makes consumers better off. As long as the FCC can do whatever it claims is in the “public interest,” the Internet will never be safe.
• Rethinking the FCC. Indeed, Congress should seriously consider breaking up the FCC, transferring its consumer protection functions to the Federal Trade Commission and its spectrum functions to the Commerce Department.

Encryption. Since 1994, the FCC has had the power to require “telecommunications services” to be wiretap-ready — and the discretion to decide how to interpret that term. Today, the FBI is pushing for a ban on end-to-end encryption — so law enforcement can get backdoor access into services like Snapchat. Unfortunately, foreign governments and malicious hackers could use those backdoors, too. Congress is stalling, but the FCC could give law enforcement exactly what it wants — using the same legal arguments it used to reclassify mobile broadband under Title II. Law enforcement is probably already using this possibility to pressure Internet companies against adopting secure encryption. Congress should stop the FCC from requiring back doors.

This article originally appeared at techfreedom.org.

Today, TechFreedom and a coalition of free-market groups urged Congress to protect Americans against malicious or frivolous litigation that threatens to stifle free speech and undermine the digital economy. In a letter to the House Judiciary Committee, the coalition called for passage of H.R. 2304, the SPEAK FREE Act, which would give defendants across the nation access to a special motion to dismiss SLAPPs (strategic lawsuits against public participation). The bill would also empower courts to shift fees, so that defendants who prevail on an anti­-SLAPP motion would not have to face legal costs.

The coalition letter reads:

Each year, a multitude of Americans fall victim to lawsuits called SLAPPs (strategic lawsuits against public participation) that are aimed at unfairly intimidating and silencing them. These kinds of lawsuits are highly effective, despite being without merit, since the legal costs, invasion of privacy, and hassle associated with fighting them is rarely considered a worthwhile use of individuals’ time.

“ SLAPPs threaten online free speech and the business models that thrive on consumer reviews,” said Tom Struble, Policy Counsel at TechFreedom. “Without an easy judicial mechanism to dismiss groundless lawsuits and shift fees, consumers and small businesses often have no choice but to relent to the demands of companies with deeper pockets. 28 states have already adopted anti-SLAPP standards — it’s time for Congress to do the same.”

We can be reached for comment at media@techfreedom.orgb>media@techfreedom.org</b.

This article originally appeared at techfreedom.org.

Today, TechFreedom joined a coalition of over 40 organizations from across the country in urging Senate leadership to permanently ban taxes on Internet access. In a letter to Majority Leader Mitch McConnell and Minority Leader Harry Reid, the coalition voiced support for a permanent extension of the Internet Tax Freedom Act (ITFA), which bans states and localities from imposing Internet access taxes and discriminatory taxes on electronic commerce. The bill is currently embedded in H.R. 644, the Trade Facilitation and Enforcement Act.

The letter reads:

After decades of progress in connecting more Americans to the Internet, the lack of a permanent ban on Internet access taxes could reverse this progress. Numerous studies continue to show that cost remains an obstacle to Internet access and, if taxes on the Internet go up, even fewer people will be able to afford to go online. This would impede our nation’s long held goal of universal Internet access.

“ Americans’ broadband bills shouldn’t be used as bargaining chips by Senators who want to impose online sales taxes,” said Tom Struble, Policy Counsel at TechFreedom. “For 17 years, the Internet access tax ban has helped encourage broadband adoption and investment. If Senators want an online sales tax, then pass it on the merits — but handcuffing a broadband tax with sales tax is irresponsible. Consumers are already facing the prospect of higher bills, as the FCC is likely to soon impose universal service fees on broadband as part of its Title II regime imposed in the name of ‘net neutrality.’ Let’s not make that problem worse. The Senate should act quickly to end the uncertainty and pass permanent, Internet tax freedom.”

This article was originally posted on techfreedom.org

On January 11, TechFreedom joined nearly 200 organizations, companies, and experts from more than 40 countries in urging world leaders to support strong encryption and to reject any law, policy, or mandate that would undermine digital security. In France, India, the U.K, China, the U.S., and beyond, governments are considering legislation and other proposals that would undermine strong encryption. The letter is now open to public support and is hosted at https://www.SecureTheInternet.org.

The letter concludes:

Strong encryption and the secure tools and systems that rely on it are critical to improving cybersecurity, fostering the digital economy, and protecting users. Our continued ability to leverage the internet for global growth and prosperity and as a tool for organizers and activists requires the ability and the right to communicate privately and securely through trustworthy networks.

“ There’s no middle ground on encryption,” said Tom Struble, Policy Counsel at TechFreedom. “You either have encryption or you don’t. Any vulnerability imposed for government use can be exploited by those who seek to do harm. Privacy in communications means governments must not ban or restrict access to encryption, or mandate or otherwise pressure companies to implement backdoors or other security vulnerabilities into their products.”

This article originally appeared at techfreedom.org

Yesterday, the FTC reiterated its age-old formula: there are benefits, there are risks, and here are some recommendations on what we regard as best practices. The report summarizes the workshop the agency held in October 2014, “Big Data: A Tool for Inclusion or Exclusion?”

Commissioner Ohlhausen issued a separate statement, saying the report gave “undue credence to hypothetical harms” and failed to “consider the powerful forces of economics and free-market competition,” which might avoid some of the hypothetical harms in the report.

“ The FTC is essentially saying, ‘there are clear benefits to Big Data and there may also be risks, but we have no idea how large they are,’” said Berin Szoka. “That’s not surprising, given that not a single economist participated in the FTC’s Big Data workshop. The report repeats a litany of ‘mights,’ ‘concerns’ and ‘worries’ but few concrete examples of harm from Big Data analysis — and no actual analysis. Thus, it does little to advance understanding of how to address real Big Data harms without inadvertently chilling forms of ‘discrimination’ that actually help underserved and minority populations.”

“Most notably,” continued Szoka, “the report makes much of a single news piece suggesting that Staples charged higher prices online to customers who lived farther away from a Staples store — which was cherry-picked precisely because it’s so hard to find examples where price discrimination results in higher prices for poor consumers. The report does not mention the obvious response: if consumers are shopping online anyway, comparison shopping is easy. So why would we think this would be an effective strategy for profit-maximizing firms?”

“ The FTC can do a lot better than this,” concluded Szoka. “The agency has an entire Bureau of Economics, which the Bureau of Consumer Protection stubbornly refuses to involve in its work — presumably out of the misguided notion that economic analysis is somehow anti-consumer. That’s dead wrong. As with previous FTC reports since 2009, this one’s ‘recommendations’ will have essentially regulatory effect. Moreover, the report announces that the FTC will bring Section 5 enforcement actions against Big Data companies that have ‘reason to know’ that their customers will use their analysis tools ‘for discriminatory purposes.’ That sounds uncontroversial, but all Big Data involves ‘discrimination’; the real issue is harmful discrimination, and that’s not going to be easy for Big Data platforms to assess. This kind of vague intermediary liability will likely deter Big Data innovations that could actually help consumers — like more flexible credit scoring.”

This article originally appeared at techfreedom.org

On December 15, the European Commission announced that it had reached agreement with the European Parliament and the Council on a new EU Data Protection regulation. The new regulation, which is not yet public, has been under negotiation since January 2012, and would replace Europe’s 1995 Data Protection directive, which left implementation up to nation states.

“ Europe has a collective insecurity complex about the Internet,” said Berin Szoka, President of TechFreedom. “The problem isn’t that Europeans aren’t innovative, but that Europe’s most innovativeusually leave the gray continent to start web businesses in the U.S., where innovation doesn’t require permission. Now, it seems, European governments have thrown in the towel: instead of trying to stop the digital brain drain by making Europe more open to innovation, they’re cracking down on the data flows that drive web companies. Their hodgepodge of new measures will prove either crippling, counter-productive or utterly unworkable.”

“ The worst idea is banning young teens from using social media without parental consent,” continued Szoka. “We already know that kids 13 and under simply lie about their age to get access to the sites they want to use. Teens will do the same, making the promise of parental control utterly illusory. That, in turn will undermine social media platforms’ efforts to offer age-appropriate experiences for their users. The only way to avoid this will be to age-verify all users, which means tyingeveryone’s Internet use to a verified identity — in short, ending online anonymity. Similarly, the ‘right to be forgotten’ sounds great, but in practice, means giving users a right to censor speech about them they don’t like.”

“ The new regulations will harm startups most,” concluded Szoka. “Allowing fines of up to 4% of a company’s global revenue will make all companies reluctant to experiment with new offerings that unsettle established norms. From Google’s Street View to Facebook’s NewsFeed, yesterday’s ‘creepy’ has proved to be today’s ‘awesome.’ Now, that line will be drawn by bureaucrats rather than consumers. Ironically, it’s established, American companies that will be most able to deal with the burden of compliance — which is why, of course, these heavy-handed regulations will no doubt be enforced arbitrarily. Regulatory discretion will be used as a tool of digital protectionism — yet another way for regulators to vent their frustration as Europe falls further and further behind Silicon Valley. Ordinary Europeans will be told that only tougher measures will bridge the gap, and Europe’s sad spiral of digital self-destruction will go on, and on, and on…”

This article originally appeared at techfreedom.org

WASHINGTON D.C. — Yesterday, the Federal Trade Commission announced that it had reached a settlement with Wyndham Hotels over charges that the company had “unreasonable” data security. In 2009, Russian hackers stole customer information, including credit card numbers, from Wyndham hotel systems. The company initially refused to settle an FTC enforcement action, becoming the first to challenge the FTC’s approach to data security in federal court. The FTC has used a decade of settlements with dozens of companies to establish fuzzy de facto standards for data security. In August, the Third Circuit denied Wyndham’s appeal of the district court’s decision to let the case proceed.

“ The FTC has, once again, avoided having a federal court definitively answer fundamental questions about the constitutionality of the FTC’s approach to data security,” said Berin Szoka, President of TechFreedom, which joined an amicus brief in the case. “The FTC will no doubt claim the Third Circuit vindicated its approach, but all the court really said was that Wyndham’s specific practices may have been unfair. Indeed, the appeals court agreed with Wyndham that the FTC’s so-called ‘common law of consent decrees’ cannot provide the ‘fair notice’ required by the Constitution’s Due Process clause. This implied that the FTC needs to do much more to guide companies on what ‘reasonable’ data security would be. By settling the case, the FTC avoided having the district court resolve those questions.”

“ It’ll take years for another case to work its way through the courts,” explained Szoka. “LabMD’srecent victory before the FTC’s chief administrative law judge is encouraging, and may allow a federal court to weigh in on the requirements of Section 5’s amorphous unfairness standard, if the full Commission overrules the ALJ. But that case focuses more on how the FTC weighs costs and benefits in each enforcement action than on the issue of how much guidance it provides guidance to industry.”

“ It’s high time Congress reasserted itself here,” concluded Szoka. “The FTC has demonstrated little willingness to change from within, and we can’t wait for the courts to address these questions. Congress needs to put the FTC on sounder footing across the board — from data security to privacy and other consumer protection issues. Far from hamstringing the agency, requiring better explanation of what the law requires and weighing of costs and benefits would actually help consumers — both by promoting better business practices and by avoiding FTC actions that end up harming consumers. Such common sense reforms should be bipartisan, just as they were back in 1980, the last time Congress really checked the FTC’s vast discretion.”

Szoka is co-author, along with Geoffrey Manne and Gus Hurwitz, of the FTC: Technology & Reform Project’s initial report, “Consumer Protection & Competition Regulation in a High-Tech World: Discussing the Future of the Federal Trade Commission,” which critiques the FTC’s processes and suggests areas where the FTC, the courts and Congress could improve how the FTC applies its sweeping unfairness and deception powers in data security, privacy and other cases, especially related to technology.

This article originally appeared at techfreedom.org

Today, the House voted to extend key, but narrow, privacy rights to citizens of “covered countries.” The Judicial Redress Act, passed by a voice vote, would allow the Attorney General to work with other federal agencies to determine countries whose citizens can enforce their data protection rights in U.S. courts under the Privacy Act of 1974. Since that statute specifically exempts sensitive issues regarding law enforcement and national security, extending Privacy Act rights to citizens of selected countries poses no significant concerns.

“ Today, the House took one small step toward repairing America’s tarnished image on data privacy,” said Berin Szoka, President of TechFreedom. “Since the Snowden disclosures, our government’s inaction on surveillance reform has provoked an international crisis — one that could lead to a European blockade of American Internet companies.”

Two weeks ago, in the Schrems case, the European Court of Justice struck down the Safe Harbor agreement that has, since 2000, allowed U.S. companies to receive and use data about European citizens. Lack of redress rights for Europeans is among the chief reasons why the ECJ found that the Commission had failed to update its finding that U.S. privacy protections were “adequate.”

Without a new agreement, U.S. companies will be at the mercy of each and every European Data Protection Authority, which, under Schrems, can now decide how to regulate cross-border data flows. This burden will likely fall heaviest on U.S. tech startups, who can ill afford this risk. If the Digital Protection Authorities (DPAs) start cracking down, American companies may simply decide to forego the European market, or to split their services into two pieces that don’t allow users to interact — especially new companies that haven’t yet launched their services. That, in turn, could mean a regionalization of what has, until now, been an inherently global medium.

“ Passage of the Judicial Redress Act is ‘table stakes’ for the U.S.,” continued Szoka. “Without it, the State Department will have no credibility at the bargaining table in negotiating with the Europeans over a replacement for Safe Harbor. However, Privacy Act rights are necessary but not sufficient: Congress will need to move on to other privacy reforms immediately, starting with ensuring that law enforcement must obtain a warrant before accessing stored data of both American and European citizens. Congress will also need to finish the surveillance reforms it started with USA FREEDOM, specifically regarding Section 702.”

We can be reached for comment at media@techfreedom.orgb>media@techfreedom.org</b. See more of our work on privacy, especially:

• “Only Congressional Privacy Reforms Can Prevent  EU Internet Blockade of US,” a statement from TechFreedom on the ECJ striking down Safe Harbor

This Wednesday, TechFreedom joined Niskanen Center and a coalition of free market groups in urging the White House to endorse the use of strong encryption and disavow efforts to intentionally weaken encryption, whether by installing “back doors,” “front doors,” or any security vulnerabilities into encryption products.

The coalition letter concludes:

We urge your Administration to consider the full ramifications of weakening or limiting encryption. There is no such thing as a backdoor that only the US government can access: any attempt to weaken encryption means making users more vulnerable to malicious hackers, identity thieves, and repressive governments. America must stand for the right to encryption — it is nothing less than the Second Amendment for the Internet.

“ The White House’s silence on encryption is deafening,” said Tom Struble, Policy Counsel at TechFreedom. “The President’s hitherto failure to endorse strong encryption has given ammunition to European regulators seeking to restrict cross-border data flows and require that data on EU citizens be stored in their own countries. Just yesterday, the European Court of Justice struck down a longstanding agreement that made it easier for Europeans to access American Internet services. If the White House continues to dawdle, it will only further embolden ‘digital protectionism’ across the pond.”

The letter’s signatories include: Niskanen Center, TechFreedom, FreedomWorks, R Street Institute, Students For Liberty, Citizen Outreach, Downsize DC, Institute for Policy Innovation, Less Government, Center for Financial Privacy and Human Rights, and American Commitment.

The last several months have been a busy time for tech policy. Major policies have been enacted, particularly in the areas of surveillance and Internet regulation. While we haven’t checked in here on TLF in some time,TechFreedom has been consistently fighting for the policies that make innovation possible.

1. Internet Independence: On July 4th, we launched  the Declaration of Internet Independence , a grassroots petition campaign calling on Congress to restore the light-touch approach to Internet regulation that resulted in twenty years of growth and prosperity.
2. Internet Regulation: This February the FCC issued its Open Internet Order, reclassifying broadbandas a communications service under Title II of the 1934 Communications Act, despite opposition from many in the tech sector, including supporters of our “ Don’t Break the Net ” campaign. In response, we’ve joined CARI.net and several leading internet entrepreneurs in litigation against the FCC   to ask the Court to strike down the Order.
3. Surveillance: Section 215 of the PATRIOT Act, which authorized bulk collection of phone records, sunset this May, giving privacy advocates the opportunity to enact meaningful surveillance reform. TechFreedom voiced support for such reforms, including the USA FREEDOM Act, which will end all bulk collection of Americans’ telephone records under any authority.
4. Broadband Deployment: Making fast, affordable Internet available to everyone is a goal that we all share. We’ve been urging government at all levels to make it easier for private companies to do just that through policies like Dig Once conduits , while cautioning that government-run broadband should only be a last resort.
5. FTC Reform: The FTC is in dire need of reform. We’ve recommended changes to ensure that the agency fulfills its duty to protect consumers from real harm without a regulatory blank check, which stifles innovation and competition. While progress has been made , there’s still a long way to go. The agency can start by helping to unshackle the sharing economy from legacy regulations.

Telephone companies have already begun transitioning their networks to Internet Protocol. This could save billions while improving service for consumers and promoting faster broadband, but has raised a host of policy and legal questions. How can we ensure the switch is as smooth and successful as possible? What legal authority do the FCC and other agencies have over the IP Transition and how should they use it?

Join TechFreedom on Monday, May 19, at its Capitol Hill office for a lunch event to discuss this and more with top experts from the field. Two short technical presentations will set the stage for a panel of legal and policy experts, including:

• Jodie Griffin, Senior Staff Attorney, Public Knowledge
• Hank Hultquist, VP of Federal Regulatory, AT&T
• Berin Szoka, President, TechFreedom
• Christopher Yoo, Professor, University of Pennsylvania School of Law
• David Young, VP of Federal Regulatory Affairs, Verizon

The panel will be livestreamed (available here). Join the conversation on Twitter with the #IPTransition hashtag.

When: Monday, May 19, 2014 11:30am – 12:00pm — Lunch and registration 12:00pm – 12:20pm — Technical presentations by AT&T and Verizon 12:20pm – 2:00 pm — Panel on legal and policy issues, audience Q&A

Where: United Methodist Building, Rooms 1 & 2 100 Maryland Avenue NE Washington, DC 20002

RSVP today!

Questions? Email mail@techfreedom.org.

Monday, TechFreedom submitted comments urging the White House to apply economic thinking to its inquiry into “Big Data,” also pointing out that the worst abuses of data come not from the private sector, but government. The comments were in response to a request by the Office of Science and Technology Policy.

“On the benefits of Big Data, we urge OSTP to keep in mind two cautions. First, Big Data is merely another trend in an ongoing process of disruptive innovation that has characterized the Digital Revolution. Second, cost-benefit analyses generally, and especially in advance of evolving technologies, tend to operate in aggregates which can be useful for providing directional indications of future trade-offs, but should not be mistaken for anything more than that,” writes TF President Berin Szoka.

The comments also highlight the often-overlooked reality that data, big or small, is speech. Therefore, OSTP’s inquiry must address the First Amendment analysis. Historically, policymakers have ignored the First Amendment in regulating new technologies, from film to blogs to video games, but in 2011 the Supreme Court made clear in Sorrell v. IMS Health that data is a form of speech. Any regulation of Big Data should carefully define the government’s interest, narrowly tailor regulations to real problems, and look for less restrictive alternatives to regulation, such as user empowerment, transparency and education. Ultimately, academic debates over how to regulate Big Data are less important than how the Federal Trade Commission currently enforces existing consumer protection laws, a subject that is the focus of the ongoing FTC: Technology & Reform Project led by TechFreedom and the International Center for Law & Economics.

More important than the private sector’s use of Big Data is the government’s abuse of it, the group says, referring to the NSA’s mass surveillance programs and the Administration’s opposition to requiring warrants for searches of Americans’ emails and cloud data. Last December, TechFreedom and its allies garnered over 100,000 signatures on a WhiteHouse.gov petition for ECPA reform. While the Administration has found time to reply to frivolous petitions, such as asking for the construction of a Death Star, it has ignored this serious issue for over three months. Worse, the administration has done nothing to help promote ECPA reform and, instead, appears to be actively orchestrating opposition to it from theoretically independent regulatory agencies, which has stalled reform in the Senate.

“This stubborn opposition to sensible, bi-partisan privacy reform is outrageous and shameful, a hypocrisy outweighed only by the Administration’s defense of its blanket surveillance of ordinary Americans,” said Szoka. “It’s time for the Administration to stop dodging responsibility or trying to divert attention from the government-created problems by pointing its finger at the private sector, by demonizing private companies’ collection and use of data while the government continues to flaunt the Fourth Amendment.”

Szoka is available for comment at media@techfreedom.org. Read the full comments and see TechFreedom’s other work on ECPA reform.

Join TechFreedom on Thursday, December 19, the 100th anniversary of the Kingsbury Commitment, AT&T’s negotiated settlement of antitrust charges brought by the Department of Justice that gave AT&T a legal monopoly in most of the U.S. in exchange for a commitment to provide universal service.

The Commitment is hailed by many not just as a milestone in the public interest but as the bedrock of U.S. communications policy. Others see the settlement as the cynical exploitation of lofty rhetoric to establish a tightly regulated monopoly — and the beginning of decades of cozy regulatory capture that stifled competition and strangled innovation.

So which was it? More importantly, what can we learn from the seventy year period before the 1984 break-up of AT&T, and the last three decades of efforts to unleash competition? With fewer than a third of Americans relying on traditional telephony and Internet-based competitors increasingly driving competition, what does universal service mean in the digital era? As Congress contemplates overhauling the Communications Act, how can policymakers promote universal service through competition, by promoting innovation and investment? What should a new Kingsbury Commitment look like?

Following a luncheon keynote address by FCC Commissioner Ajit Pai, a diverse panel of experts moderated by TechFreedom President Berin Szoka will explore these issues and more. The panel includes:

• Harold Feld, Public Knowledge
• Rob Atkinson, Information Technology & Innovation Foundation
• Hance Haney, Discovery Institute
• Jeff Eisenach, American Enterprise Institute
• Fred Campbell, Former FCC Commissioner

Space is limited so RSVP now if you plan to attend in person. A live stream of the event will be available on this page. You can follow the conversation on Twitter on the #Kingsbury100 hashtag.  

When: Thursday, December 19, 2013 11:30 – 12:00Registration & lunch 12:00 – 1:45Event & live stream

The live stream will begin on this page at noon Eastern.

Where: The Methodist Building 100 Maryland Ave NE Washington D.C. 20002

Questions? Email contact@techfreedom.org.

How do DC and SF think about the future? Are their visions of how to promote, and adapt to, technological change compatible? Or are America’s policymakers fundamentally in conflict with its innovators? Can technology ultimately trump politics?

In the near-term, are traditional left/right divides breaking down? What are the real fault lines in technology policy? Where might a divided Congress reach consensus on tech policy issues like privacy, immigration, copyright, censorship, Internet freedom and biotech?

For answers and more questions, join moderator Declan McCullagh (Chief Political Correspondent for CNET), and a panel of technology policy experts: Berin Szoka (President, TechFreedom), Larry Downes (author, Laws of Disruption), and Mike McGeary (Co-Founder and Chief Political Strategist, Engine Advocacy). This event will include a complimentary lunch and is co-sponsored by TechFreedom, Reason Foundation, and the Charles Koch Institute.

Where? Hyatt Regency 5 Embarcadero Center San Francisco

When? Monday, October 28, 2013 12:00 PM to 1:30 PM (PDT)

RSVP here. A live stream for the event will be available here. You can follow the conversation on Twitter with #DCvSF.

The suicide of Aaron Swartz earlier this year has sparked a national debate about reforming the Computer Fraud and Abuse Act (CFAA). Most notably, in June, Reps. Zoe Lofgren and Jim Sensenbrenner joined Sen. Ron Wyden to introduce Aaron’s Law, which aims to rein in the excesses of the federal computer fraud law and ensure it targets real criminals, rather than researchers or tinkerers.

Would this bipartisan reform go far enough — or too far? Would Aaron’s Law preserve the government’s ability to prosecute harmful hacking? What can activists do to promote CFAA reform in Congress?

These are some of the questions that will be explored in a panel discussion hosted by TechFreedom and the Electronic Frontier Foundation at CNET’s San Francisco Headquarters on July 22. RSVP here.

You can join the conversation on Twitter on the #CFAA hashtag.

When: Monday, July 22, 2013 Drinks served at 6:00pm Panel 6:30pm – 7:30pm PDT

Where: CNET 235 2nd Street San Francisco, CA

Questions? Email contact@techfreedom.org.

Robert McDowell, one of the two Republican Commissioners on the Federal Communications Commission, announced on Wednesday that he would soon resign. In his seven years on the FCC, Commissioner McDowell has been a consistent critic of over-regulation and a champion of both Internet freedom and the rule of law. He’s earned a uniquely loyal following among policymakers and thought leaders alike in the free market tech policy community, not only in the U.S. but around the world.  Here are just a few tributes to this remarkably humble and personable regulator—the regulator who, again and again, cried, in the most mild-mannered-but-firm way possible: “Hold on a minute, have we really thought this one through?”

• Sen. John Thune (R-SD): “As we have seen with his recent leadership on efforts to prevent foreign government intervention in the operation and use of the Internet, Rob has been a consistent voice cautioning against unnecessary governmental regulations. I hope the president’s nominee to replace him will approach the job with the same passion and energy that Rob exhibited and will be similarly committed to finding market-based solutions to our nation’s communications challenges whenever possible.”

• Rep. Fred Upton (R-MI): “At a time when broadband and wireless technology are transforming voice, video, audio and data communications, we could not have asked for a better steward than Commissioner McDowell. With every decision, he has fought to ensure we are creating an environment for investment, innovation, and growth. And he has done so with both eloquence and good humor. No question that he has left the communications landscape better than he found it. We thank him for his service.”

• Rep. Greg Walden (R-OR): “For more than a half decade, Robert McDowell has embodied the consummate FCC commissioner. He has kept a steadfast eye on how to foster a vibrant communications marketplace for the American people and the American economy. He has always stood up to protect the freedom of the Internet for all, and at every turn he has made sure to respect good process, good policy, and the rule of law. The country is all the better for his service. With much gratitude, we wish him all the best wherever his path may take him.”

• Ajit Pai, FCC Commissioner: “Robert McDowell has served with honor and distinction since 2006. On issues as varied as Internet governance, spectrum policy, and media ownership, the American people have benefited from Rob’s steadfast leadership. I’m proud to call him a friend and a colleague.”

• Michael Powell, former FCC Chairman: “Rob McDowell is a man of vision and principle who has fully digested the lessons of free markets in a free society.  His commanding articulation of policy and his compelling advocacy for market mechanisms is not a product of ideology or cheap political theater.  Rather, It is the result of studious examination of what approaches best maximize the public interest.  The American people have been well-served by his stewardship.”

• Bryan Tramont, Former FCC Chief of Staff: “Commissioner McDowell has been a stalwart defender of freedom throughout his FCC career. He and his team have been both intellectually robust and consistent in standing for free markets, consumers, and the rule of law. His leadership and generosity of spirit will be sorely missed.”

• Berin Szoka, TechFreedom: “Rob McDowell has been the Internet’s best friend in Washington. He’s consistently warned against the Trojan Horse of regulations like Net Neutrality and the ‘ends-justify-the-means’ tactics behind them. From inside the regulatory ‘sausage factory,’ he cautioned that even the best-intentioned regulation is all too often captured by corporate interests—and always spreads.”

• Geoffrey Manne, International Center for Law & Economics: “Rob McDowell has been one of the most powerful voices of reason and restraint at the FCC. His speeches, statements and dissents demonstrate his unwavering recognition that regulators are constrained by ignorance of the future and the inevitability of unintended consequences—that the communications network to Hell is paved with Title II. Nowhere is this humility more important than in the regulation of the Internet. His voice will be sorely missed.”

• Adam Thierer, Mercatus Center: “Commissioner McDowell has been a great champion of freedom across the board, from traditional communications and media reform to cutting-edge Internet policy issues. On one issue after another, fans of liberty could count on Rob McDowell to perfectly articulate and defend the pro-freedom position on high-tech policy matters whenever and wherever he wrote or spoke.”

• Randolph May, The Free State Foundation: “Throughout his entire tenure, Commissioner McDowell brought a principled approach to his work, and his decisions were always thoughtful, and, yes, even scholarly. These attributes are to be valued in any Commissioner, and they are especially valued by think-tankers. The fact that Rob applied his principled approach in the service of advancing free market-oriented and First Amendment-friendly positions made his service that much more important, and his legacy that much more enduring.”

• Grover Norquist, Americans for Tax Reform: “Rob McDowell is that rare man in the alphabet soup (FCC, FDA, EPA) regulatory swamp of Washington who did not fall to “regulatory capture”—being captured by the interests of government over the american people. The goal is freedom, opportunity and not European social engineering. Rob McDowell never took his eye of the ball.”

• Katie McAuliffe, Digital Liberty: “One of the great things about Commissioner McDowell is that he knows how to let the market work.  At a panel when talking about Net Neutrality he said ‘There was no problem before the order, and no problem after the order. There was no market failure.’  And he has stayed consistent in this belief fighting for internet freedom at the ITU and UN meetings.  As a champion of Internet Freedom he will be sorely missed.”

• Dominique Lazanski, TaxPayers’ Alliance (UK): “Rob is an international leader and a strong defender of freedom. He has accomplished so much at the FCC because he has stood up for what he believes. He is a role model for free market policy internationally. He is an outspoken voice of reason in the ongoing ITU Internet governance debates. There is no doubt that he will continue to be a positive force on technology and communication policy in the future.”

• Alberto Mingardi, Instituto Bruno Leoni (Italy): “Limited government is an art that requires patience and care. Rob McDowell defended individual liberty and free markets in the terra incognita of telecommunications. He did so with passion and humility, understanding the fragility of the fabric of technological innovation. I hope Rob’s passion will gain him many imitators, all over the world.”

• John Stephenson, American Legislative Exchange Council: “Robert has been a leader for reform of our nation’s communications policies. He showed other policymakers how consumers and the Internet benefit from more market-based and innovative approaches to regulation. With his strong, thoughtful outlook, and sense of humor, Robert has also been a delight to know and hear speak.”

• Larry Downes, author, The Laws of Disruption: “Comm. McDowell is both a gentleman and a scholar. That, alas, is a very rare combination, perhaps even an endangered species.”

• Jeff Eisenach, American Enterprise Institute:  “Rob has shown an unsurpassed willingness to endure personal sacrifice in the cause of Internet freedom and the common weal.  With this in mind, and apologies to his family, I hereby nominate him for Chairman … of the ITU!”

Here are just few of McDowell’s greatest lines:

• “[W]e are losing the fight for Internet freedom…. The Internet is no longer at a crossroads – with freedom and prosperity down one avenue, and command and control government domination down the other” – Senate Testimony (2013)

• “The most common request we receive from industry is, ‘Please regulate my rival.’ Essentially, this request translates into, ‘My rival is running too fast, and I want government to slow him or her down to my level.'” – The Siren Call of “Please Regulate My Rival”: A Recipe for Regulatory Failure (Italy, 2012)

• “The most sublime of the first 10 amendments is, of course, the First. Instead of limiting rights, the Framers intended the Bill of Rights to act as a bulwark protecting the sovereignty of the individual from state intrusion.” – Defending the First Among Our Freedoms (2011)

• “To me, the core mission of the FCC is to promote freedom, especially the freedom of speech or the freedom to communicate. The freedom to communicate has been the singular fundamental right at the heart of every successful democracy over the centuries.” – Technology and the Sovereignty of the Individual (Sweden, 2011)

For more McDowelly goodness, check out his speeches, statements and testimony. Last year, we tried to distill the values McDowell has championed in our  Declaration of Internet Freedom, especially the top two:

Humility. First, do no harm. No one can anticipate what the future holds and what tradeoffs will accompany it. Don’t meddle in what you don’t understand — and what you can all too easily break, without even seeing what’s been lost. Often, government’s best response is to do nothing. Competition, disruptive technological change, and criticism from civil society tend to resolve problems better, and faster, than government can.
Rule of Law. When you must intervene, start small. Regulation and legislation are broad, inflexible, and prone to capture by incumbent firms and entrenched interests. The best kind of “law” evolves one case at a time, based on simple, economic principles of consumer welfare — alongside the codes of conduct and practices developed by companies under pressure from competitors and criticism. Worst of all, when regulators act without legal authority, or regulate by intimidation, they undermine the rule of law, no matter how noble their intentions.

Obama’s talked a big game about online privacy. He promised reform during the 2008 campaign. A year ago, the White House proposed a “Privacy Bill of Rights.” But so far, the Administration’s delivered little more than fine words. Worse, they’ve focused on the wrong problems.

Government has an important role to play in protecting consumer privacy, but its snooping and surveillance are far bigger problems—which have only grown worse. While Washington talks of a new commercial privacy “Bill of Rights,” the real Bill of Rights is in peril.

The American Revolution erupted, in large part, out of seething resentment at British privacy intrusions—without judicial supervision. Virginia adopted its own Bill of Rights shortly before the Declaration of Independence, including what later became Madison’s Fourth Amendment to the Constitution: “the right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated.” Law enforcement must generally obtain a warrant before conducting a search—which means convincing a judge that probable cause exists to believe a crime has been committed.

The Fourth Amendment applies to digital files just like paper files—but only if you don’t give them to a third party. That caveat makes some sense offline: if you gave your diary away, would you really expect it will stay secret? But online, it makes no sense at all: we increasingly store our most private communications on in the “cloud”—on servers owned by Dropbox, Google, Facebook, etc. Congress attempted to fill this judge-made gap in Fourth Amendment protections by passing the Electronic Communications Privacy Act in 1986. But the law protects only data held for short periods—and thus no longer protects us.

Meanwhile, government snooping has grown significantly. Google last week published an updated report showing the company received nearly two and a half times as many requests from law enforcement for user data as in the same period in 2009. Most of these came without a warrant. That isn’t necessarily a problem, since these numbers include both requests for “content” (emails, documents) and basic subscriber information (name, etc.)—and even the Fourth Amendment doesn’t require a warrant for the latter. (After all, law enforcement needs to be able to build an investigation to establish probable cause.) Google, like Facebook, Yahoo! and Microsoft all insist on getting warrants for content information. But smaller companies with fewer lawyers probably don’t. No one really knows how much unconstitutional snooping goes on because Google’s transparency report is quite unusual.

Those internet companies that do insist on warrants generally started doing so only after a federal appellate court in 2010 ruled that the Fourth Amendment requires them—despite that pesky “third party doctrine.” Shortly after the White House report, the Supreme Court handed down a landmark decision in U.S. v Jones requiring a warrant for planting a tracking device on a car. More importantly, five justices called on Congress to craft new legislative protections for location data. Justice Sotomayor lamented the lack of effective protection for content data.

There’s bipartisan support for such reforms but it’s thin. The Senate finally passed a warrant requirement for content in December, handing the matter over to the House. The good news is that the House Republican and Senate Democratic chairmen of the judiciary committees have pledged to work together on a fix. The bad news is that the issue hasn’t yet been made a priority by either party’s leadership. And the Republican-led bill to require a warrant for location data faces a harder fight from law enforcement agencies that still insist they shouldn’t have to bother convincing courts for permission to track our movements.

And still, the Administration has said nothing. The Commerce Department, which drafted the “Bill of Rights” report, is supposed to promote American competitiveness—but doesn’t realize that many American businesses hesitate to adopt cloud-based enterprise software solutions, lest they give a backdoor into their files to Obama’s regulators—who boldly talk about “crucifying ” American companies. That mistrust is an even bigger problem overseas: American companies like Amazon and Salesforce dominate the cloud computing market, yet struggle to get Europeans, in particular, to trust them. Respecting our Constitution would be good for business—if we did it.

Still worse is the mistrust at home and abroad created by the Foreign Intelligence Surveillance and Patriot Acts, which allow national security agencies to snoop online with little judicial oversight—and often without any notice to those whose online communications have been wiretapped. Obama just signed an extension to FISA, despite promises he made as a Senator to filibuster any such bill. Many worry the act legalizes a surveillance program that inadvertently sweeps up Americans’ communications even though its aim is to collect information outside the U.S. The Administration offered no support when a bipartisan coalition tried to “require a report on the impact of the FISA Amendments Act of 2008 on the privacy of the people of the United States.”

Europeans bitterly resent these laws, particularly because they deny recourse to non-U.S. citizens who might be spied on. They’re now threatening to block data transfers to the U.S., essentially shutting off digital trade, by deeming that the U.S. no longer has “adequate” privacy protections. Yet the Commerce Department and the Federal Trade Commission have stayed mum. Why?

As the chief U.S. privacy regulator, the FTC holds the bully pulpit. They haven’t been shy about calling for new legislation to grow their own powers—but haven’t said a word about the problem of unchecked government access. They’ve spent the last four years talking about the threat posed by tracking—by advertisers, not government, as if anyone ever went to jail because of getting the wrong online ad. They want to make our approach to privacy regulation more European to maintain our “adequacy” status—but ignore the Europeans’ bigger concern: government snooping.

They’ve also failed to focus on bigger privacy threats to consumers—like identity theft, the number one complaint at the FTC for over a decade. Under Bush, the FTC focused its limited resources on combating the theft and breach of sensitive online information. Obama’s FTC has held a flurry of privacy workshops, but none focused on identity theft. Congress has failed to pass legislation to set minimum standards for securing consumer data, and the FTC has not used its rulemaking power in the one area where regulation is quite justified. This has left the agency to set security standards piecemeal, in a series of enforcement actions that do little to guide companies on sound data security. The FTC now faces its first court challenge about this approach—and could lose.

In short, if 2012 was a good year for privacy, it’s only because the bar has been set so low—and it wasn’t because the Administration delivered the kind of “Change” he promised on the 2008 campaign. 2013 could turn out better. The ECPA content fix could pass quickly, especially if Republicans eager to shed their stodgy image decide to make it a signature issue. But ECPA reform will be incomplete until it includes the location fix and the other principles around which 77 civil liberties groups, companies and trade associations have rallied in the “Digital Due Process” coalition, founded nearly three years ago. FISA doesn’t seem likely to get better anytime soon, but there is some cause for celebration on government access: Late last year, Congress finally reconstituted the Privacy and Civil Liberties Oversight Board, a key recommendation of the 9/11 Commission. Congress now just needs to confirm the Board’s chairman and appropriate $2 million to fund it—a small price to pay for some degree of oversight on government access. Finally, the retirement of FTC Chairman Jon Leibowitz seems imminent. The new chairman’s confirmation hearings offer a golden opportunity to make clear that privacy protection from government is inextricably intertwined with protection by government against corporate abuses and the negligence that leads to real harms like identity theft.

Any of these developments would be well worth celebrating on Privacy Day 2014.

[Crossposted at Forbes.com]

By Berin Szoka and Ben Sperry

You’d think it would be harder for government to justify regulating the Internet than the offline world, right? Wrong—sadly. And Congress just missed a chance to fix that problem.

For decades, regulators have been required to issue a cost-benefit analysis when issuing new regulations.  Some agencies are specifically required to do so by statute, but for most agencies, the requirement comes from executive orders issued by each new President—varying somewhat but each continuing the general principle that regulators bear the burden of showing that each regulation’s benefits outweigh its costs.

But the FCC, FTC and many other regulatory agencies aren’t required to do cost-benefit analysis at all.  Because these are “independent agencies”—creatures of Congress rather than part of the Executive Branch (like the Department of Justice)—only Congress can impose cost-benefit analysis on agencies.  A bipartisan bill, the Independent Agency Regulatory Analysis Act (S. 3486), would have allowed the President to impose the same kind of cost-benefit analysis on independent regulatory agencies as on Executive Branch agencies, including review by the Office of Information and Regulatory Affairs (OIRA) for “significant” rulemakings (those with $100 million or more in economic impact, that adversely affect sectors of the economy in a material way, or that create “serious inconsistency” with other agencies’ actions).

Republican Senators Rob Portman and Susan Collins joined with Democrat Mark Warner in this important cause—yet the bill has apparently died during this lame duck Congress. While some public interest groups have attempted to couch their objection on separation-of-powers grounds, their ultimate objection seems to be with subjecting the regulatory state’s rulemaking process to systematic economic analysis—because, after all, rigor makes regulation harder.  But what’s so wrong with a cost-benefit analysis? 

If there’s any agency that needs some analytical rigor in its work, it’s the FCC—whose underlying legal standard could scarcely be more vague: the “public interest.”  As Randy May said in testimony supporting a similar bill in 2011:

The FCC has had a pronounced tendency over the years, and certainly this tendency was evident with respect to the adoption late last year of new net neutrality regulations, to adopt rules without engaging in the type of meaningful analysis required by [a cost-benefit standard]. Certainly, the requirement that the Commission analyze any claimed market failure and consumer harm before adopting new rules should force the FCC to engage in a more rigorous economic analysis than it often does when it simply relies on the indeterminate public interest standard as authority.

The bill would apply to any “rule” as defined by the Administrative Procedures Act.  So it would require cost-benefit analysis for most of what the FCC does.  But little of what the FTC does is actually “rulemaking” (e.g., consumer protection or antitrust enforcement actions, merger review)  The FTC  does do APA rulemaking under statutes like the Children’s Online Privacy Protection Act, the Do Not Call Act, and the Fair Credit Reporting Act.  So, for example, the FTC would face an additional hurdle in the current COPPA rulemaking—where we have raised our own concerns about costs.  And if Congress ever does pass data security, data breach notification, or additional privacy legislation, any rulemakings under these statutes would be subject to this cost-benefit requirement. (Many pending privacy/security bills require the FTC to implement the statute with an initial rulemaking, just as the FTC did with COPPA and its other targeted statutes.)

Some privacy groups might experience a kneejerk reaction against anything that makes it harder for the FTC to protect consumers. As that great sage Homer Simpson put it: “If something’s hard to do, then it’s not worth doing.” Right? Wrong.  The FTC already, in principle is supposed to weigh costs with benefits whenever it applies its unfairness jurisdiction—according to the Unfairness Policy Statement the FTC itself developed in 1980, and which Congress codified in 1994.

Cost-benefit analysis is a tool, not an outcome.  Broad application of such analysis by regulatory agencies should lead to better policy because it encourages thinking about trade-offs rather than the mythical belief in magic bullet solutions. That’s why someone as thoughtful about regulation as Cass Sunstein, head of Obama’s Office of Information and Regulatory Affairs, demands applying such careful thinking to all agencies—including independent agencies like the FTC and FCC.  Cost benefit analysis is a formal process for implementing the kind of regulatory humility at the heart of our Declaration of Internet Freedom:

Humility. First, do no harm. No one can anticipate what the future holds and what tradeoffs will accompany it. Don’t meddle in what you don’t understand — and what you can all too easily break, without even seeing what’s been lost. Often, government’s best response is to do nothing. Competition, disruptive technological change, and criticism from civil society tend to resolve problems better, and faster, than government can.

Rule of Law. When you must intervene, start small. Regulation and legislation are broad, inflexible, and prone to capture by incumbent firms and entrenched interests. The best kind of “law” evolves one case at a time, based on simple, economic principles of consumer welfare.

Let’s hope Congress doesn’t drop the cost-benefit analysis issue.  The more regulations we slather onto the Internet, the more important it will become to think them through carefully. If Congress can’t implement the kind of cost-benefit requirement that can attract bipartisan support, pressure will continue to build on the Right for even more draconian limits on regulatory agencies.  The REINS Act, which passed the House by a 57-vote margin a year ago, would flip the presumption of the Congressional Review Act passed in 1994 as part of the Contract With America such that “significant” rulemakings would actually require Congressional approval (whereas the CRA currently allows a legislative veto).

By Geoffrey Manne, Matt Starr & Berin Szoka

“Real lawyers read the footnotes!”—thus did Harold Feld chastise Geoff and Berin in a recent blog post about our CNET piece on the Verizon/SpectrumCo transaction. We argued, as did Commissioner Pai in his concurrence, that the FCC provided no legal basis for its claims of authority to review the Commercial Agreements that accompanied Verizon’s purchase of spectrum licenses—and that these agreements for joint marketing, etc. were properly subject only to DOJ review (under antitrust).

Harold insists that the FCC provided “actual analysis of its authority” in footnote 349 of its Order. But real lawyers read the footnotes carefully. That footnote doesn’t provide any legal basis for the FTC to review agreements beyond a license transfer; indeed, the footnote doesn’t even assert such authority. In short, we didn’t cite the footnote because it is irrelevant, not because we forgot to read it.

First, a reminder of what we said:

The FCC’s review of the Commercial Agreements accompanying the spectrum deal exceeded the limits of Section 310(d) of the Communications Act. As Commissioner Pai noted in his concurring statement, “Congress limited the scope of our review to the proposed transfer of spectrum licenses, not to other business agreements that may involve the same parties.” We (and others) raised this concern in public comments filed with the Commission. Here’s the agency’s own legal analysis — in full: “The Commission has authority to review the Commercial Agreements and to impose conditions to protect the public interest.” There’s not even an accompanying footnote.

Even if Harold were correct that footnote 349 provides citations to possible sources of authority for the FCC to review the Commercial Agreements, it remains irrelevant to our claim: The FCC exceeded its authority under 310(d) and asserted its authority under 310(d) without any analysis or citation. Footnote 349 begins with the phrase, “[a]side from Section 310(d)….” It is no surprise, then, that the footnote contains no analysis of the agency’s authority under that section.

The FCC’s authority under 310(d) is precisely what is at issue here. The question was raised and argued in several submissions to the Commission (including ours), and the Commission is clearly aware of this. In paragraph 142 of the Order, the agency notes the parties’ objection to its review of the Agreements: “Verizon Wireless and the Cable Companies respond that the Commission should not review the Commercial Agreements because… the Commission does not have authority to review the agreements.” That objection, rooted in 310(d), is to the Commission extending its transaction review authority (unquestionably arising under only 310(d)) beyond that section’s limits. The Commission then answers the parties’ claim in the next paragraph with the language we quoted: “The Commission has authority to review the Commercial Agreements and to impose conditions to protect the public interest.” By doing so without reference to other statutory language, it seems clear that the FCC’s unequivocal, unsupported statement of authority is a statement of authority under 310(d).

This is as it should be. The FCC’s transaction review authority is limited to Section 310(d). Thus if the agency were going to review the Commercial Agreements as part of the transfer, the authority to do so must come from 310(d) alone. But 310(d) on its face provides no authority to review anything beyond the transfer of spectrum. If the Commission wanted to review the Commercial Agreements, it needed to provide analysis on how exactly 310(d), despite appearances, gives it the authority to do so. But the Commission does nothing of the sort.

But let’s be charitable, and consider whether footnote 349 provides relevant analysis of its authority to review the Commercial Agreements under any statute.

The Commission did cite to several other sections of the Communications Act in the paragraph (145) that includes footnote 349. But that paragraph relates not to the review of the transaction itself (or even the ability of the parties to enter into the Commercial Agreements) but to the Commission’s authority to ensure that Verizon complies with the conditions imposed on the transaction, and to monitor the possible effects the Agreements have on the market after the fact. Three of the four statutes cited in the footnote (47 U.S.C. §§ 152, 316, & 548) don’t appear to give the Commission authority for anything related this transaction. Only 47 U.S.C. § 201 is relevant. But having authority to monitor a wireless provider’s post-transaction business practices is far different from having the authority to halt or condition the transaction itself before its completion because of concerns about ancillary agreements. The FCC cites no statutes to support this authority—because none exist.

This is not simply a semantic distinction. By claiming authority to review ancillary agreements in the course of reviewing license transfers, the Commission gains further leverage over companies seeking license transfer approvals, putting more of the companies’ economic interests at risk. This means companies will more likely make the “voluntary” concessions (with no opportunity for judicial scrutiny) that they would not otherwise have made—or they might not enter into deals in the first place. As we (Geoff and Berin) said in our CNET article, “the FCC has laid down its marker, letting all future comers know that its bargaining advantage extends well beyond the stack of chips Congress put in front of it.” In merger reviews, the house has a huge advantage, and it is magnified if the agency can expand the scope of activity under its review.

Thus Harold is particularly off-base when he writes that “[g]iven that there is no question that the FCC has authority to entertain complaints going forward, and certainly has authority to monitor how the markets under its jurisdiction are developing, it is hard to understand the jurisdictional argument even as the worship of empty formalism.” This misses the point entirely. The difference between the FCC reviewing the Commercial Agreements in deciding whether to permit the license transfer (or demand concessions) and regulating the Agreements after the fact is no mere “formalism.”

Regardless, if the FCC were actually trying to rely on these other sections of the Communications Act for authority to review the Commercial Agreements, it would have cited them in Paragraph 143, where it asserted that authority—not two paragraphs later in a footnote supporting the agency’s order assigning post-transaction monitoring tasks to the Wireline Competition Bureau. Moreover, none of these alleged assertions of authority amounts to an analysis of the FCC’s jurisdiction. Given the debate that took place in the record over the issue, a simple list of statutes purporting to confer jurisdiction would be utterly insufficient in response. Not as insufficient as an unadorned, conclusory statement of authority without even such a list of statutes (what the FCC actually did) — but awfully close.

We stand by our claim that the Commission failed to cite — let alone analyze — its authority to review the Commercial Agreements in this transaction. The FCC’s role in transaction reviews has been hotly contested, at least partially inspiring the FCC Process Reform Act that passed this spring in the House. Given the controversy around the issue, the Commission should have gone out of its way to justify its assertion of authority, citing precedent and making a coherent argument — in other words, engaging in legal analysis. At least, that’s what “real lawyers” would do.

But in real politik, perhaps it was naïve of us to expect more analysis from the agency that tried to justify net neutrality regulation by pointing to a deregulatory statute aimed at encouraging the deployment of broadband and claiming that somewhere in there, perhaps, hidden between the lines, was the authority the agency needed—but which Congress never actually gave it.

When the FCC plays fast and loose with the law in issuing regulations, someone will likely sue, thus forcing the FCC to justify itself to a court. On net neutrality, the D.C. Circuit seems all but certain to strike down the FCC’s Open Internet Order for lacking any firm legal basis. But when the FCC skirts legal limits on its authority in merger review, the parties to a merger have every incentive to settle and keep their legal qualms to themselves; even when the FCC blocks a merger, the parties usually calculate that t isn’t worth suing or trying to make a point about principle. Thus, through merger review, the FCC gets away with regulation by stealth—footnotes about legal authority be damned. Groups like the Electronic Frontier Foundation rightly worry about the FCC’s expansive claims of authority as a “Trojan Horse,” even when they applaud the FCC’s ends. We know Harold doesn’t like this transaction, but why doesn’t he worry about where the FCC is taking us?

The privacy debate has been increasingly shaped by an apparent consensus that de-identifying sets of personally identifying information doesn’t work.  In particular, this has led the FTC to abandon the PII/non-PII distinction on the assumption that re-identification is too easy.  But a new paper shatters this supposed consensus by rebutting the methodology of Latanya Sweeney’s seminal 1997 study of re-identification risks, which in turn, shaped the HIPAA’s rules for de-identification of health data and the larger privacy debate ever since.

This new critical paper, “The ‘Re-Identification’ of Governor William Weld’s Medical Information: A Critical Re-Examination of Health Data Identification Risks and Privacy Protections, Then and Now” was published by Daniel Barth-Jones, an epidemiologist and statistician at Columbia University. After carefully re-examining the methodology of Sweeney’s 1997 study, he concludes that re-identification attempts will face “far-reaching systemic challenges” that are inherent in the statistical methods used to re-identify. In short, re-identification turns out to be harder than it seemed—so our identity can more easily be obscured in large data sets. This more nuanced story must be understood by privacy law scholars and public policy-makers if they want to realistically assess current privacy risks posed by de-identified data—not just for health data, but for all data.

The importance of Barth-Jones’s paper is underscored by the example of Vioxx, which stayed on the market years longer than it should have because of HIPAA’s privacy rules, thus resulting in  88,000 and 139,000 unnecessary heart attacks, and 27,000-55,000 avoidable deaths—as University of Arizona Law Professor Jane Yakowitz Bambauer explained in a recent Huffington Post piece.

Ultimately, overstating the risk of re-identification causes policymakers to strike the wrong balance in the trade-off of privacy with other competing values.  As Barth-Jones and Yakowitz have suggested, policymakers should instead focus on setting standards for proper de-identification of data that are grounded in a rigorous statistical analysis of re-identification risks.  A safe harbor for proper de-identification, combined with legal limitations on re-identification, could protect consumers against real privacy harms while still allowing the free flow of data that drives research and innovation throughout the economy.

Unfortunately, the Barth-Jones paper has not received the attention it deserves.  So I encourage you consider writing about this, or just take a moment to share this with your friends on Twitter or Facebook.

The Wall Street Journal reports that “The Justice Department is conducting a wide-ranging antitrust investigation into whether cable companies are acting improperly to quash nascent competition from online video.”  In particular, the DOJ is concerned that data caps may discourage consumers from switching to online video providers like Hulu and Netflix.  The following statement can be attributed to Berin Szoka, President of TechFreedom:

It’s hard to see how tiered broadband pricing keeps users tethered to their cable service. Even watching ten hours of Hulu or Netflix a day wouldn’t exceed Comcast’s 300 GB basic data tier. And Comcast customers can buy additional blocks of 50 GB for just $10/month—enough for nearly two more hours a day of streamed video. Such tiers provide a much-needed incentive for online content providers to economize on bandwidth. They also allow ISPs to offer fairer broadband pricing, charging light users less than heavy users. Consumers might have been better off if cable companies could have simply charged online video providers for wholesale bandwidth use, but the FCC’s net neutrality rules bar that.

Counting cable content against caps might seem more fair, but it’s not necessarily something the law should mandate. Discriminating against a competitor isn’t a problem under antitrust law unless, on net, it harms consumers. Would consumers really be better off if their cable viewing reduced the amount of data available for streaming competing online video services? As long as the basic tier’s cap is high enough, few users will ever exceed it anyway—leaving consumers free to experiment with alternatives to cable subscriptions, just as cable providers are experimenting with new ways of offering cable content on multiple devices at no extra charge.

We’ve been saying for years that net neutrality concerns are best addressed through antitrust principles. Those who think current antitrust mechanisms work too slowly should dust off the Digital Age Communications Act, a compromise proposal offered by The Progress & Freedom Foundation in 2005.  DACA allows the FCC to make rules to address widespread problems if it can prove harm to consumer welfare. With the D.C. Circuit poised to rule that FCC currently has no legal authority to regulate net neutrality, DACA may soon be revived as the obvious legislative vehicle for addressing concerns about online competition.

Szoka is available for comment at media@techfreedom.org.

In the lead essay for the “Cato Unbound” symposium this month, I analyze recent political movements that have been aided by Internet-based communication by positing a set of questions,

Activists played important roles in bringing down dictators in the Arab world, stopping the Stop Online Piracy Act (SOPA) in Congress and electing Barack Obama—just to name a few examples. But how much did the Internet matter in making these watershed events possible? How effective is it likely to be in the future? And how would we measure whether activism “works” for society—not just the activists?

I respond to the concerns raised by Evgeny Morozov in his iconoclastic 2010 book, The Net Delusion: The Dark Side of Internet Freedom (summarized in his short essay in TechFreedom’s free ebook The Next Digital Decade: Essays on the Future of the Internet).  In general, I suggest that we simply do not yet understand the Internet’s effect on activism well enough to make strong normative judgments about it.  But applying Public Choice theory can help us understand how developments in communication technologies are changing the relationship between an individual and the group in social movements. A few highlights:

• Social media lower organizational costs, especially of recruiting members, but also noticeability: “members’ ability to notice each other’s actions.” Even in 2003, there was little way to tell whether your friends actually followed through when you asked them to help join a cause. But today, it’s easy to encourage them to re-share material on Facebook or Twitter—and to “notice” whether they’ve done so.
• Social media allows members of large groups—think Twitter followers—to be continuously bombarded with propaganda about the worthiness of the cause creating social pressures not entirely unlike those that can be generated in a face-to face group.
• The Internet empowers large, dispersed groups (like dedicated Internet users) to organize against small but concentrated interests. As anyone who works in technology policy in Washington can attest, SOPA’s implosion made Congress more cautious—at least about Internet regulation, where fear of a digital activist backlash is greatest.
• Ultimately, the Internet does make coordination easier among like-minded people to provide reputational feedback about corporations and governments. However we must still be vigilant—governments can and do manipulate the Internet in overt and covert ways to stifle their populations.
• Activism works largely by imposing reputational costs on its targets.  Online reputation markets deliver information much faster and more cheaply than ever before.

I conclude by saying: “The Internet may not necessarily make the world a better place in every way, but the more we understand how it changes our relationships with each other, the better equipped we will be to steer its evolution in more humane directions.”

In the coming days, Jason Benlevi, Rebecca MacKinnon and John O. McGinnis will all respond, leading to a spirited debate on the topic of Internet activism and to what degree technology really does enhance freedom.

Today, the FCC issued a Notice of Inquiry, responding to an emergency petition filed last August regarding temporary shutdown of mobile services by officers of the San Francisco Bay Area Rapid Transit (BART) district. The petition asked the FCC to issue a declaratory ruling that the shutdown violated the Communications Act. The following statement can be attributed to Larry Downes, Senior Adjunct Fellow at TechFreedom, and Berin Szoka, President of TechFreedom:

What BART did clearly violated the First Amendment, and needlessly put passengers at risk by cutting off emergency services just when they were needed most. But we need a court to say so, not the FCC.

The FCC has no authority here. The state did not order the shutdown of the network, nor does the state run the network. BART police simply turned off equipment it doesn’t own—a likely violation of its contractual obligations to the carriers. But BART did nothing that violated FCC rules governing network operators. To declare the local government an “agent” of the carriers would set an extremely dangerous precedent for an agency with a long track-record of regulatory creep.

There are other compelling reasons to use the courts and not regulators to enforce free speech rights. Regulatory agencies move far too slowly. Here, it took the FCC six months just to open an inquiry! Worse, today’s Notice of Inquiry will lead, if anything, to more muddled rulings and regulations. These may unintentionally give cover to local authorities trying to parse them for exceptions and exclusions, or at least the pretense of operating within FCC guidelines.

It would have been far better to make clear to BART, either through negotiations or the courts, that their actions were unconstitutional and dangerous. Long before today’s action, BART adopted new policies that better respect First Amendment rights and common sense. But now the regulatory wheels have creaked into motion. Who knows where they’ll take us, or when?

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:

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.