The Internet tax issue is not as hot and sexy as it was a few years back, but we can still give it a big KISS (Keep it Simple Stupid). Yesterday’s hearing of the Senate Finance Committee shows that there is still some thunderous passion over taxing the ‘Net. The hearing–consisting of two full panels of witnesses, one devoted to sales tax and another toward the business activity tax–featured state tax collectors and offline companies versus online companies and direct marketers. The legislative thrust of the one panel related to sales taxes is S. 2152, a bill introduced by Senator Michael Enzi.
The hearing revealed that the Streamlined Sales Tax Project (the SSTP, an attempt to make sales taxes more easily collectable by out-of-state sellers), just isn’t simple enough. In particular, I’ll direct TLF readers to the informative (and anti-SSTP) testimony of George Isaacson, tax counsel for the Direct Marketing Association.
The uninitiated can easily be caught up by all the different arguments advanced by proponents for the SSTP. Supporters say that a system that allows remote sellers to evade collecting sales tax from consumers hurts state tax revenues and is unfair to offline “Main Street” retailers that may have higher prices because they do have to collect the tax. But fortunately, while this high-tech debate may be fashioned by the seemingly borderless jurisdiction of digital networks, the old fashioned U.S. Constitution has something to say about this form of interstate commerce. A little background is required though.
Continue reading →
Today Adobe finally released its statement on the whole debacle with Microsoft regarding its inclusion of PDF support into upcoming versions of Office and the Vista operating system. The statement is not completely unintelligible gibberish (despite the inclusion in my blog entry’s title of “double talk.”) Indeed, the statement is a remarkable product:of…CAPITALISM.
This concern over open standards may come across as an obscure, geek-infested issue, but at its core is good old fashioned competition. Adobe vs. Microsoft has brought out the real incentives behind open standards. It’s not about the good, pure route toward a better society. It’s about money. Make no mistake about it, companies are willingly pushing open standards to governments for corporate leverage.
Here’s a relevant part of the statement:
Adobe is committed to open standards. Adobe publishes the complete PDF specification and makes it available for free, without restrictions, without royalties, to anyone who cares to use it. Because we license the PDF specification so openly, it has become a de facto standard, used by hundreds of independent software vendors worldwide. PDF is incorporated into a number of ISO standards, and Adobe encourages developers, independent software vendors and publishers to support and embrace it.
The above is Adobe’s pitch that it has created a successful product that it wants everybody to use – except Microsoft. Because as the statement continues:
Continue reading →
Following up on Sonia’s and Andrew’s recent posts on reports of the PDF spat between Adobe’s and Microsoft. What’s interesting in all of this is that Microsoft wants to implement PDF into its product offering. But what is it implementing? Is it a closed standard dressed up like it is an open one? Or is the version that Microsoft plans to offer (now via a free download, not as a part of Office or Vista) an open standard? When it comes to PDF, what’s the difference? The problem is that there are many different versions of PDF. Time for a little history lesson:
The PDF 1.4 specification is used in the AIIM created, and ISO approved ISO 19005-1 PDF/A and PDF/X standard. The PDF/A is generally considered the “archive” standard, PDF/X a focused subset of PDF designed specifically for reliable prepress data interchange. They are application standards, as well as a file format standard. In other words, it defines how applications creating and reading files should behave.
The PDF 1.5 specification was first a part of Adobe Acrobat 6.0, which was introduced in April 2003
PDF 1.6 was released in November 2004 and is supported by Adobe Acrobat 7.0, the current version. The AIIM committee has begun work on ISO 19005-2 based on PDF Reference 1.6.
Continue reading →
Last night a FCC commissioner came out in favor of…DRM? Yes, at a reception sponsored by the DC Bar Association in her honor, Commissioner Deborah Taylor Tate, the newest addition to the FCC, spoke eloquently on a number of issues but perhaps most remarkable was her advocacy for strong copyright protections. Hailing from The Music City, Nashville, this former Tennessee Regulatory Commissioner proclaimed her love for country music and the artists that wish to use DRM to protect their content.
Now I have no beef with DRM and think content owners should be free to utilize any scheme they want if informed consumers are willing to spend money on it. But regardless of your views of DRM (and TLF bloggers differ I know), I don’t think any of us here want the FCC to get more involved in this matter. The broadcast flag was an FCC rule that allowed the recording of digital broadcasts only by approved hardware devices that could recognize whether or not a certain data stream can be recorded, or if there are any restrictions on recorded content. That rule was invalidated last year in a case before the D.C. Circuit Court of Appeals, which found that the FCC had exceeded its authority by creating this rule.
Commissioner Tate said that despite the FCC’s lack of legal authority, she can still use her bully pulpit to bring awareness to content protection issues. Fair enough–policymakers, even Supreme Court justices, use their position of prominence to discuss many issues. The convergence of communications and copyright is indeed a legitimate policy issue. Hopefully Commissioner Tate will use her pulpit to advocate for market-driven solutions, not greater FCC authority. She would be effective at this too. She comes across as warm and engaging and persuasive.
Copyright protection shouldn’t be hindered by government through some sort of affirmative access requirement (see France). However, copyright protection shouldn’t be mandated by government either–hardware companies and content interests must learn to play together with the marketplace, not the Grand Ole FCC, as their venue.
Championing “openness” is in vogue now, be it net neutrality (in the telecom sense) or what is occurring in France with its online copyright bill that would mandate the sharing of proprietary digital rights management systems (call it DRM Neutrality?). But do we really want openness mandated by government? What happens to the freedom to innovate via closed systems?
Being “open” sounds great in theory. But it seems to me that the notion of openness has been hijacked by competitors (and those politicians that receive Dollars or Euros from these competitors) of those successful companies that employ closed systems.
Why be pro-closed? Well, it is often closed systems that can deliver greater value to consumers and society. One of the benefits of closed systems is to take what appears to be separate parts and bundle them together into one easy to consume package.
Let me state the obvious. iTunes was designed primarily to play Apple’s proprietary, rights restricted media and to interoperate with Apple’s own iPod hardware device:and consumers love it! Unfortunately, many regulators overlook the benefits of bundling and tying products together. This was a subject of a recent article of mine.
Innovation prospers when we allow firms to engage in different cost recovery strategies. Check out this history of iPod–Apple has clearly been innovative to the benefit of consumers.
But we know that this really isn’t about consumers – in Europe, competition law is about harm to competitors whereas in the U.S. the legal standard refers to consumer harm. Sometimes, though, helping competitors in the name of competition may hurt consumers. How is iTunes going to convince the music and movie industries to license it content if there’s no assurance that Apple can make of down-the-line protection?
Interestingly, the French law addresses copyright, not competition law. According to a Reuters news article, a French politician said that this modification to copyright law “should prevent the emergence of a monopoly in the supply of online culture.” Why effectuate competition law through copyright law? If there is anticompetitive behavior, it seems to me that the more principled route is through direct enforcement of antitrust law, not broad-strokes legislation in a different (albeit related) area of the law.
CEI will be hosting a lunch event on the Hill this Friday at noon. The focus will be on how we should be thinking about telecom reform in evolutionary terms, of phasing-out current law while not adding new laws to cover new technologies. I’ll be speaking and so will fellow TLF member James Gattuso, Randy May of PFF and Blair Levin of Legg Mason. The discussion of telecommunications regulation can quickly get bogged down by details. And while details are important, we must keep true to a broad deregulatory vision that I outlined (along with my colleague Wayne Crews) in Communications without Commissions: A National Plan for Reforming Telecom Regulation. The essence of my proposal is a series of phased deregulatory initiatives: 1) Setting jurisdictional boundaries; 2) Removing current economic and social policy regulation; and 3) Reforming the FCC and Spectrum Management. This deregulatory vision has been absent from the two main bills that have been proposed, though Senator Ensign’s bill is more deregulatory than the House Commerce Committee Discussion Draft bill.
On October 25 the DOJ and FTC are jointly holding a workshop on competition policy and the real estate industry. A topic that the workshop will consider is one that I have written about a few times in the past: state laws that restrict competition among buyers’ and sellers’ brokers. Licensing laws that aim to protect consumers have had the ulterior motive of discriminating against online web-based companies that enable the real estate transaction without the need for traditional real estate agents. New York is one such state with onerous licensing laws. A few months ago I filed comments in a rulemaking aimed at updating the law. Unfortunately, the NY Department of State still does not get it. One example from my comments:
the NPRM requires actual or electronic signatures. However, businesses and consumers communicate their desire to form a relationship in a multitude of ways. For communications over the Internet, consumers almost always show their assent to contractual terms by clicking “I Accept” or other similar language evidencing agreement. The AIV rules must recognize that a binding contract is formed when this online assent occurs. Indeed, courts of law routinely uphold these “clickwrap” agreements to be legally binding agreements.
One company that has been on the frontlines in New York is mlx.com. The owner, LaLa Wang, has a great blog about the politics of real estate and law called askLaLa.
Minimum service laws are also protectionist measures aimed to hurt online competitors. The Michigan state legislature has proposed legislation to limit competition in real estate by forcing new requirements on low-cost, online brokers.
Let’s hope there’s something good that comes out of this workshop (there will be if I have a say in it, as I hope to be selected as a panelist).
The September 15 discussion draft from the House Energy & Commerce Committee is aimed at reforming the nation’s telecom and cable laws. While it does change and “update” the law, is also succeeds at creating no less than 30 new mandatory and discretionary FCC powers!
It creates new complicated, technology-based rules to replace old ones (see Randy May in his PFF blog entry where he warns against regulatory techno-functional definitions–classifications). Congress should not expand the powers of the FCC by giving it a new role to regulate the latest technologies. But this is precisely what the discussion draft does (and Adam seems to concur in his post that the draft goes way too far in imposing new rules on broadband service and video providers).
At least 30 new functions for the FCC! Talk about full employment for FCC attorneys and economists (and their private sector equivalents). These new powers can be categorized as the ability of the FCC to a) create explicit rules, b) establish procedures, c) increase jurisdictional authority, and d) involve itself in determination proceedings and market oversight.
a) Rules: The draft mandates 18 different rulemakings or official inquiries, such as requiring that the FCC establish rules regarding intercarrier compensation, mandating the terms for franchise licensing, creating national consumer protection rules, devising a federal registration form for companies providing communications service, and any such regulations “as are necessary to implement this Act.”
b) Procedures: The FCC must invent procedures for overseeing the design of broadband infrastructure, for mediating and arbitrating disagreements regarding the exchange of VoIP traffic, and for resolving disputes over consumer complaints.
c) Jurisdiction: The draft bill provides the FCC increased authority to involve itself in standards setting, and even investigate and resolve disputes over network equipment standards.
d) Market Oversight: The FCC would have considerable powers overseeing broadband market decisions, such as the reliability and integrity of communication networks and to whom and on what basis to offer video service.
Continue reading →
CNET News.com reports that the vote to create a .xxx top-level domain has been delayed–again. This is the second delay, no doubt for the same reason as the initial delay in voting–political pressure from the U.S. government.
In a previous post, I ranted about the dangers of governments getting into the business of Internet governance. There are serious censorship concerns, folks, when there is political intervention in the Internet’s core technical administrative functions. And that’s why I urge you to read and sign this online petition by the Internet Governance Project.
Is the delay in approving/denying the .xxx application really the start of Internet governance gone bad? That’s my fear, and combined with (1) a controversial “Declaration of Principles” wherein the US argued that in order to preserve the “security and stability” of the Internet and the economic transactions that take place on it, it would exercise unilateral control over the DNS, and (2) a World Society of the Information Summit meeting this November where the international community will want to wrestle control from the U.S. and assert UN dominance, and we may have a battle royal in the making. Fellow TLF member Adam, in an article with Solveig Singleton, agrees that this fight could become bitter given the current global environment of anti-Americanism. Stay tuned….
It’s amazing that small companies can compete in today’s regulatory climate. We all know about the way that Steve Jobs and Stephen Wozniak created the first Apple computer in the Jobs family garage . Such small business success (now a big corporation of course) happens despite the disproportionate regulatory burden they share compared to their larger competitors. A study released last week by the Office of Advocacy of the U.S. Small Business Administration shows that small firms bear the largest per employee burden.
According to the study, firms with fewer than 20 employees annually spend $7,647 per employee to comply with federal regulations, compared with the $5,282 spent by firms with more than 500 employees. Thus small business faces a 45 percent greater burden than their larger business counterparts.
This is to be expected. The regulatory overhead required for attorneys, accountants, and HR to interpret and implement federal regulation is enormous. The fixed costs of regulatory compliance become increasingly dispersed with each employee hired. Even with employment law carveouts for companies under 50 or so employees, the burden of overall compliance is high.
Businesses with less than 500 employees generate 60 to 80 percent of net new jobs annually over the last decade. Many of these are in the tech industry. Here on the Tech Liberation Front, we often focus on tech-related regulatory burdens on the tech and telecom industries. As the SBA study shows, the burden is also tax, environmental, workplace and general economic-related laws.
The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.