Yesterday, President Barack Obama announced two nominations to the Federal Communications Commission: Jessica Rosenworcel, replacing Democratic Commissioner Michael Copps, and Ajit Pai, replacing Republican Commissioner Meredith Attwell Baker.
The FCC faces a unique challenge: Because it regulates the communications industry, essentially every rule it issues implicates the free speech values at the heart of our Constitutional heritage. The First Amendment was intended to be a shield against government meddling, not a sword for regulatory activism, however well-intentioned. Moreover, the FCC regulates an industry being transformed by the Digital Revolution.
We at TechFreedom look forward to working with these new Commissioners to ensure that FCC regulations serve consumers by advancing competition and innovation while respecting free speech rights. The Commission should ask, and explicitly answer, the following questions whenever considering the need for new, or existing, regulations:
What free speech rights are at stake?
How substantial is the government’s interest? Has the market failed?
Can regulation, always slow to start and slower to adapt, really address the problem better than technological change?
Will the regulation’s benefits outweigh its costs, considering its likely unintended consequences?
Are there less-restrictive and more speech-protective ways government can achieve its interest, such as enforcing existing antitrust and consumer protection laws, supporting consumer education, empowering users to make their own decisions, or compelling disclosure to consumers?
Over a week ago the Washington Post published an interview with Google’s Eric Schmidt to which I’ve been meaning to draw your attention. He’s reflecting on the relationship between Silicon Valle and D.C. days after his Senate testimony, and it’s incredibly candid, perhaps because as the Post noted, “He had just come from the dentist. And had a toothache.” Here are some choice quotes:
On getting told to testify:
So we get hauled in front of the Congress for developing a product that’s free, that serves a billion people. Okay? I mean, I don’t know how to say it any clearer. I mean, it’s fine. It’s their job. But it’s not like we raised prices. We could lower prices from free to…lower than free? You see what I’m saying?
On regulation:
And one of the consequences of regulation is regulation prohibits real innovation, because the regulation essentially defines a path to follow—which by definition has a bias to the current outcome, because it’s a path for the current outcome.
On the D.C. shakedown:
And privately the politicians will say, ‘Look, you need to participate in our system. You need to participate at a personal level, you need to participate at a corporate level.’ We, after some debate, set up a PAC, as other companies have.
On political startups:
Now there are startups in Washington. And these startups have the interesting property that they’re founded by people who were policymakers, let’s say in telecommunications. They’re very clever people, and they’ve figured out a way in regulation to discriminate, to find a new satellite spectrum or a new frequency or whatever. They immediately hired a whole bunch of lobbyists. They raised some money to do that. And they’re trying to innovate through the regulation. So that’s what passes for innovation in Washington.
There’s a real sense of exasperation that is almost absurd–that is, an exhausting attempt to find rationality in political decision making. Of course, there is rational decision making, it’s just on a different margin. Here is Schmidt on expanding H-1B visas:
I’m so tired of this argument. I’m tired of making it. I’ve been making it for twenty years. In the current cast of characters, the Republicans are on our side, our local Democrats support us because our arguments are obvious, and the other Democrats don’t—because they don’t get it. The president understands the argument and would like to support us, he says, but there are various political issues. That’s roughly the situation. That’s been true for twenty years, through different presidents and different leaders. It’s stupid.
Today my colleague [Tate Watkins](http://shortsentences.org/) and I are releasing [a new working paper on cybersecurity policy](http://mercatus.org/publication/loving-cyber-bomb-dangers-threat-inflation-cybersecurity-policy). Please excuse my patently sleep-deprived mug while I describe it here:
Over the past few years there has been a steady drumbeat of alarmist rhetoric coming out of Washington about potential catastrophic cybersecurity threats. For example, at a Senate Armed Services Committee hearing last year, Chairman Carl Levin said that “cyberweapons and cyberattacks potentially can be devastating, approaching weapons of mass destruction in their effects.” Proposed responses include increased federal spending on cybersecurity and the regulation of private network security practices.
The rhetoric of “[cyber doom](http://mercatus.org/publication/beyond-cyber-doom)” employed by proponents of increased federal intervention, however, lacks clear evidence of a serious threat that can be verified by the public. As a result, the United States may be witnessing a bout of threat inflation.
Threat inflation, [according to Thrall and Cramer](http://books.google.com/books?id=EzUtuTOIfTEC&lpg=PP1&ots=3AQmVD2Slb&dq=AMERICAN%20FOREIGN%20POLICY%20AND%20THE%20POLITICS%20OF%20FEAR&pg=PP1#v=onepage&q&f=false), is a concept in political science that refers to “the attempt by elites to create concern for a threat that goes beyond the scope and urgency that a disinterested analysis would justify.” Different actors—including members of Congress, defense contractors, journalists, policy experts, academics, and civilian, military, and intelligence officials—will each have their own motives for contributing to threat inflation. When a threat is inflated, the marketplace of ideas on which a democracy relies to make sound judgments—in particular, the media and popular debate—can become overwhelmed by fallacious information. The result can be unwarranted public support for misguided policies.
The run-up to the Iraq War illustrates the dynamic of threat inflation. After 9/11, the Bush Administration decided to invade Iraq to oust Saddam Hussein. Lacking any clear casus belli, the administration sought popular and congressional support for war by promoting several rationales that ultimately proved baseless. Continue reading →
This week, my colleague Jerry Brito asked me to guest lecture to his George Mason University law school class on regulatory process. He asked me to talk about one of my favorite topics: the sad, sordid history of regulatory capture. Regular readers will recall the compendium I posted here a few months ago [and that I continue to update] of selected passages from books and papers penned by various economists and political scientists who have studied this issue.
Again, it doesn’t make for pretty reading, but the lesson that history teaches is vital: No matter how noble the “public interest” goals of regulatory advocates or their specific proposals, the only thing that really counts is what regulation means in practice. Regrettably, all too often, regulation is “captured” by various interests and used to their advantage, or at least to the disadvantage of potential competitors, new entrants, and innovation.
While I was gathering some materials for the case study portion of my lecture — which incorporates the history of telecommunications monopolization, broadcast industry regulatory shenanigans, and transportation / airlines fiascos — I figured I had to post a passage from one of my favorite books on regulation of all-time: Thomas K. McCraw’s brilliant Pulitzer Prize-winning 1984 book, Prophets of Regulation. In his chapter on the late great Alfred Kahn, the father of airline deregulation, McCraw recounts the history of the Civil Aeronautics Board (CAB) from its creation in the 1940s up until the time of Kahn’s ascendency to CAB chairman in the Carter Administration (and then the CAB’s eventual deregulation and abolition). Here’s the key passage from that history: Continue reading →
Jack Shafer brought to my attention this terrific new Politico column by Michael Kinsley entitled, “How Microsoft Learned ABCs of D.C.” In the editorial, Kinsley touches on some of the same themes I addressed in my recent piece here “On Facebook ‘Normalizing Relations’ with Washington” as well as in my Cato Institute essay from last year on”The Sad State of Cyber-Politics.” Kinsley notes how Microsoft was originally bashed by many for not getting into the D.C. lobbying game early enough:
there even was a feeling that, in refusing to play the Washington game, Microsoft was being downright unpatriotic. Look, buddy, there is an American way of doing things, and that American way includes hiring lobbyists, paying lawyers vast sums by the hour, throwing lavish parties for politicians, aides, journalists and so on. So get with the program.
But after doing exactly that, Kinsley notes, the company got blasted for for being too aggressive in D.C.!
So that’s what Microsoft did. It moved its “government affairs” office out of distant Chevy Chase and into the downtown K Street corridor. It bulked up on lawyers and hired the best-connected lobbyists. Soon, Microsoft was coming under criticism for being heavy-handed in its attempts to buy influence.
“But the sad thing is that it seems to have worked. Microsoft is no longer Public Enemy No. 1,” Kinsley notes, and he continues on to reiterate a point I made in my last two essays: Google is the Great Satan now! Continue reading →
The New York Times reports that, “Facebook is hoping to do something better and faster than any other technology start-up-turned-Internet superpower. Befriend Washington. Facebook has layered its executive, legal, policy and communications ranks with high-powered politicos from both parties, beefing up its firepower for future battles in Washington and beyond.” The article goes on to cite a variety of recent hires by Facebook, its new DC office, and its increased political giving.
This isn’t at all surprising and, in one sense, it’s almost impossible to argue with the logic of Facebook deciding to beef up its lobbying presence inside the Beltway. In fact, later in the Times story we hear the same two traditional arguments trotted out for why Facebook must do so: (1) Because everyone’s doing it! and (2) You don’t want be Microsoft, do you? But I’m not so sure whether “normalizing relations” with Washington is such a good idea for Facebook or other major tech companies, and I’m certainly not persuaded by the logic of those two common refrains regarding why every tech company must rush to Washington.
National Journal reports that the Department of Commerce (NTIA) will, at a Senate Commerce Committee hearing today, call for a “consumer privacy bill of rights”—a euphemism for sweeping privacy regulation:
“Having carefully reviewed all stakeholder comments to the Green Paper, the department has concluded that the U.S. consumer data privacy framework will benefit from legislation to establish a clearer set of rules for the road for businesses and consumers, while preserving the innovation and free flow of information that are hallmarks of the Internet,” [NTIA Administrator Larry] Strickling said in his prepared testimony obtained by Tech Daily Dose.
In other words: “We’ve taken the time to think this through very carefully and have reluctantly come to the conclusion that regulation is necessary.” Sorry, but I’m just not buying it—not just the wisdom of the recommendation but the process that produced it. Let’s consider the timeline here:
October 27, 2010 – NTIA Administrator Strickling announces Green Paper is coming but says nothing about timing and little about substance
December 16, 2010 – NTIA/Commerce releases its Privacy Green Paper
January 28, 2011 – deadline for public comments (28 non-holiday business days later)
??? – Commerce decides regulation is necessary
March 16, 2011 – Commerce is ready to ask Congress for legislation (31 non-holiday business days later)
The Commerce Department gave the many, many interested parties the worst four weeks of the year—including Christmas, New Year’s and Martin Luther King Day—to digest and comment on an 88 page, ~31,000 tome of a report on proposed regulation of how information flows in our… well, information economy. Oh, and did I mention that those same parties had already been given a deadline of January 31, 2011 to comment on the FTC’s 122 page, ~34,000 word privacy report back on December 1 (too bad for those celebrating Hanukkah)? In fairness, the FTC did, on January 21, extend its deadline to February 18—but that hardly excuses the Commerce Department’s rush to judgment. Continue reading →
I absolutely loved this quote about the dangers of regulatory capture from Holman Jenkins in today’s Wall Street Journal in a story (“Let’s Restart the Green Revolution“) about how misguided agricultural / environmental policies are hurting consumers:
When some hear the word “regulation,” they imagine government rushing to the defense of consumers. In the real world, government serves up regulation to those who ask for it, which usually means organized interests seeking to block a competitive threat. This insight, by the way, originated with the left, with historians who went back and reconstructed how railroads in the U.S. concocted federal regulation to protect themselves from price competition. We should also notice that an astonishingly large part of the world has experienced an astonishing degree of stagnation for an astonishingly long time for exactly such reasons.
Washington Post cartoonist Tom Toles is certainly no fan of free markets, but his contribution to today’s paper offers us this humorous take on the dangers of regulatory capture, a subject we’ve spent much time documenting here on the TLF.
But on this day when the Federal Communications Commission (FCC) is enshrining an audacious new regulatory regime for the Internet, I’m going to ignore the shoddy economics behind the effort, the unjustifiable legal basis for it, and the whole stinking undemocratic process leading up to it. Instead, I just want to focus on the one element of the fight that continues to interest me most, and which, ironically, the one thing that almost all intellectual combatants agree upon: Regulation is prone to excessive special interest influence. I cannot possibly articulate this concern more succinctly than professors David Farber and Gerald Faulhaber have in this Atlantic op-ed today, “Net Neutrality: No One Will Be Satisfied, Everyone Will Complain.” They note that:
“When the FCC asserts regulatory jurisdiction over an area of telecommunications, the dynamic of the industry changes. No longer are customer needs and desires at the forefront of firms’ competitive strategies; rather firms take their competitive battles to the FCC, hoping for a favorable ruling that will translate into a marketplace advantage. Customer needs take second place; regulatory ‘rent-seeking’ becomes the rule of the day, and a previously innovative and vibrant industry becomes a creature of government rule-making.”
The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology. Learn more about TLF →
The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.