Miscellaneous

By Brent Skorup and Melody Calkins

Tech-optimists predict that drones and small aircraft may soon crowd US skies. An FAA administrator predicted that by 2020 tens of thousands of drones would be in US airspace at any one time. Further, over a dozen companies, including Uber, are building vertical takeoff and landing (VTOL) aircraft that could one day shuttle people point-to-point in urban areas. Today, low-altitude airspace use is episodic (helicopters, ultralights, drones) and with such light use, the low-altitude airspace is shared on an ad hoc basis with little air traffic management. Coordinating thousands of aircraft in low-altitude flight, however, demands a new regulatory framework.

Why not auction off low-altitude airspace for exclusive use?

There are two basic paradigms for resource use: open access and exclusive ownership. Most high-altitude airspace is lightly used and the open access regime works tolerably well because there are a small number of players (airline operators and the government) and fixed routes. Similarly, Class G airspace—which varies by geography but is generally the airspace from the surface to 700 feet above ground—is uncontrolled and virtually open access.

Valuable resources vary immensely in their character–taxi medallions, real estate, radio spectrum, intellectual property, water–and a resource use paradigm, once selected requires iteration and modification to ensure productive use. “The trick,” Prof. Richard Epstein notes, “is to pick the right initial point to reduce the stress on making these further adjustments.” If indeed dozens of operators will be vying for variable drone and VTOL routes in hundreds of local markets, exclusive use models could create more social benefits and output than open access and regulatory management. NASA is exploring complex coordination systems in this airspace but, rather than agency permissions, lawmakers should consider using property rights and the price mechanism.

The initial allocation of airspace could be determined by auction. An agency, probably the FAA, would:

  1. Identify and define geographic parcels of Class G airspace;
  2. Auction off the parcels to any party (private corporations, local governments, non-commercial stakeholders, or individual users) for a term of years with an expectation of renewal; and
  3. Permit the sale, combination, and subleasing of those parcels

The likely alternative scenario—regulatory allocation and management of airspace–derives from historical precedent in aviation and spectrum policy:

  1. First movers and the politically powerful acquire de facto control of low-altitude airspace,
  2. Incumbents and regulators exclude and inhibit newcomers and innovators,
  3. The rent-seeking and resource waste becomes unendurable for lawmakers, and
  4. Market-based reforms are slowly and haphazardly introduced.

For instance, after demand for commercial flights took off in the 1960s, a command-and-control quota system was created for crowded Northeast airports. Takeoff and landing rights, called “slots,” were assigned to early airlines but regulators did not allow airlines to sell those rights. The anticompetitive concentration and hoarding of airport slots at terminals is still being slowly unraveled by Congress and the FAA to this day. There’s a similar story for government assignment of spectrum over decades, as explained in Thomas Hazlett’s excellent new book, The Political Spectrum.

The benefit of an auction, plus secondary markets, is that the resource is generally put to its highest-valued use. Secondary markets and subleasing also permit latecomers and innovators to gain resource access despite lacking an initial assignment and political power. Further, exclusive use rights would also provide VTOL operators (and passengers) the added assurance that routes would be “clear” of potential collisions. (A more regulatory regime might provide that assurance but likely via complex restrictions on airspace use.) Airspace rights would be a new cost for operators but exclusive use means operators can economize on complex sensors, other safety devices, and lobbying costs. Operators would also possess an asset to sublease and monetize.

Another bonus (from the government’s point of view) is that the sale of Class G airspace can provide government revenue. Revenue would be slight at first but could prove lucrative once there’s substantial commercial interest. The Federal government, for instance, auctions off its usage rights for grazing, oil and gas retrieval, radio spectrum, mineral extraction, and timber harvesting. Spectrum auctions alone have raised over $100 billion for the Treasury since they began in 1994.

Guest post from Sasha Moss, R Street Institute (Originally published on TechDirt on 5/24/07)

The U.S. Senate is about to consider mostly pointless legislation that would make the nation’s register of copyrights—the individual who heads the U.S. Copyright Office, officially a part of the Library of Congress—a presidential appointment that would be subject to Senate confirmation.

While the measure has earned praise from some in the content industry, including the Motion Picture Association of America, unless senators can find better ways to modernize our copyright system, they really should just go back to the drawing board.

The Register of Copyrights Selection and Accountability Act of 2017 already cleared the U.S. House in April by a 378-48 margin. Under the bill and its identical Senate companion, the power to select the register would be taken away from Librarian of Congress Dr. Carla Hayden. Instead, the president would select an appointment from among three names put forward by a panel that includes the librarian, the speaker of the House and the majority and minority leaders of both the House and Senate. And the register would now be subject to a 10-year term with the option of multiple reappointments, like the Librarian of Congress.

The legislation is ostensibly the product of the House Judiciary Committee’s multiyear series of roundtables and comments on modernizing the U.S. Copyright Office. In addition to changes to the process of selecting the register, the committee had recommended creating a stakeholder advisory board, a chief economist, a chief technology officer, making information technology upgrades at the office, creating a searchable digital database of ownership information to lower transaction costs in licensing and royalty payments, and creating a small claims court for relatively minor copyright disputes. Continue reading →

Guest post from Joe Kane, R Street Institute

We seldom see a cadre of deceased Founding Fathers petition the Federal Communications Commission, but this past week was an exception. All the big hitters—from George Washington to Benjamin Franklin—filed comments in favor of a free internet. Abraham Lincoln also weighed in from beyond the grave, reprising his threat “to attack with the North” if the commission doesn’t free the internet.

These dead Sons of Liberty likely are pleased that the FCC’s proposed rules take steps to protect innovation and free the internet from excessive regulation. But it shouldn’t surprise us that politicians have strong opinions. What about some figures with a broader perspective?

Jesus weighed in with forceful, if sometimes incomprehensible, views that take both sides on the commission’s Notice of Proposed Rulemaking, which seeks comment on scaling back the FCC’s 2015 decision to subject internet service to the heavy hand of Title II of the Communications Act of 1934. Satan, on the other hand, was characteristically harsher, entreating the commissioners to “rot in Florida.”

Our magical friends across the pond also chimed with some thoughts. Harry Potter, no doubt frustrated with the slow Wi-Fi at Hogwarts, seems strongly in favor of keeping Title II. His compatriot Hermione Granger, however, is more supportive of the current FCC’s efforts to move away from laws designed to regulate a now defunct telephone monopoly, perhaps because she realizes the 2015 rules won’t do much to improve internet service. Dumbledore used his comments to give a favorable evaluation of both Title II and the casting of Jude Law to portray his younger self in an upcoming film.

A few superheroes also deigned to join the discourse. Wonder Woman, Batman and Superman joined a coalition letter which made up with brevity what it lacked in substance. The same can’t be said for the FCC’s notice itself, which contains dozens of pages of analysis and seeks comments on many substantive suggestions designed to reduce regulatory burdens on infrastructure investment and the next generation of real time, internet-based services. Another, more diverse, coalition letter was joined by Morgan Freeman, Pepe the Frog, a “Mr. Dank Memes” and the Marvel villain (and Norse trickster god) Loki. It contained a transcript of Jerry Seinfeld’s Bee Movie.

Speaking of villains, Josef Stalin made known his preference that no rules be changed. But Adolf Hitler attacked Stalin’s position like it was 1941.

Then there are those with advanced degrees. Doctor Bigfoot and Doctor Who filed separate comments in support of net neutrality.

In a debate too often characterized by shrill and misleading rhetoric, it’s heartening to see the FCC’s comment process is engaging such lofty figures to substantively inform the policymaking process. I mean, it sure would be a shame if taxpayer money supporting the mandatory review of the 1,500,000+ comments in this proceeding was wasted on fake responses.

This post was originally posted at the R Street blog.

There is reporting suggesting that the Trump FCC may move to eliminate the FCC’s complex Title II regulations for the Internet and restore the FTC’s ability to police anticompetitve and deceptive practices online. This is obviously welcome news. These reports also suggest that FCC Chairman Pai and the FTC will require ISPs add open Internet principles to their terms of service, that is, no unreasonable blocking or throttling of content and no paid priority. These principles have always been imprecise because federal law allows ISPs to block objectionable content if they wish (like pornography or violent websites) and because ISPs have a First Amendment right to curate their services.

Whatever the exact wording, there shouldn’t be a per se ban of paid priority. Whatever policy develops should limit anticompetitive paid priority, not all paid priority. Paid prioritization is simply a form of consideration payment, which is economists’ term for when upstream producers pay downstream retailers or distributors for special treatment. There’s economics literature on consideration payments and it’s an accepted business practice in many other industries. Further, consideration payments often benefit small providers and niche customers. Some small and large companies with interactive IP services might be willing to pay for end-to-end service reliability.

The Open Internet Order’s paid priority ban has always been short sighted because it attempts to preserve the Internet as it existed circa 2002. It resembles the FCC’s unfounded insistence for decades that subscription TV (ie, how the vast majority of Americans consume TV today) was against “the public interest.” Like the defunct subscription TV ban, the paid priority ban is an economics-free policy that will hinder new services. 

Despite what late-night talk show hosts might say, “fast lanes” on the Internet are here and will continue. “Fast lanes” have always been permitted because, as Obama’s US CTO Aneesh Chopra noted, some emerging IP services need special treatment. Priority transmission was built into Internet protocols years ago and the OIO doesn’t ban data prioritization; it bans BIAS providers from charging “edge providers” a fee for priority.

The notion that there’s a level playing field online needing preservation is a fantasy. Non-real-time services like Netflix streaming, YouTube, Facebook pages, and major websites can mostly be “cached” on servers scattered around the US. Major web companies have their own form of paid prioritization–they spend millions annually, including large payments to ISPs, on transit agreements, CDNs, and interconnection in order to avoid congested Internet links.

The problem with a blanket paid priority ban is that it biases the evolution of the Internet in favor of these cache-able services and against real-time or interactive services like teleconferencing, live TV, and gaming. Caching doesn’t work for these services because there’s nothing to cache beforehand. 

When would paid prioritization make sense? Most likely a specialized service for dedicated users that requires end-to-end reliability. 

I’ll use a plausible example to illustrate the benefits of consideration payments online–a telepresence service for deaf people. As Martin Geddes described, a decade ago the government in Wales developed such a service. The service architects discovered that a well-functioning service had quality characteristics not supplied by ISPs. ISPs and video chat apps like Skype optimize their networks, video codecs, and services for non-deaf people (ie, most customers) and prioritize consistent audio quality over video quality. While that’s useful for most people, deaf people need basically the opposite optimization because they need to perceive subtle hand and finger motions. The typical app that prioritizes audio, not video, doesn’t work for them.

But high-def real-time video quality requires upstream and downstream capacity reservation and end-to-end reliability. This is not cheap to provide. An ISP, in this illustration, has three options–charge the telepresence provider, charge deaf customers a premium, or spread the costs across all customers. The paid priority ban means ISPs can only charge customers for increased costs. This paid priority ban unnecessarily limits the potential for such services since there may be companies or nonprofits willing to subsidize such a service.

It’s a specialized example but illustrates the idiosyncratic technical requirements needed for many real-time services. In fact, real-time services are the next big challenge in the Internet’s evolution. As streaming media expert Dan Rayburn noted, “traditional one-way live streaming is being disrupted by the demand for interactive engagement.”  Large and small edge companies are increasingly looking for low-latency video solutions. Today, a typical “live” event is broadcast online to viewers with a 15- to 45-second delay. This latency limits or kills the potential for interactive online streaming services like online talk shows, pet cams, online auctions, videogaming, and online classrooms.

If the FTC takes back oversight of ISPs and the Internet it should, as with any industry, permit any business practice that complies with competition law and consumer protection law. The agency should disregard the unfounded belief that consideration payments online (“paid priority”) are always harmful.

Today marks the 10th anniversary of the launch of the Apple iPhone. With all the headlines being written today about how the device changed the world forever, it is easy to forget that before its launch, plenty of experts scoffed at the idea that Steve Jobs and Apple had any chance of successfully breaking into the seemingly mature mobile phone market.

After all, those were the days when BlackBerry, Palm, Motorola, and Microsoft were on everyone’s minds. Perhaps, then, it wasn’t so surprising to hear predictions like these leading up to and following the launch of the iPhone:

  • In December 2006, Palm CEO Ed Colligan summarily dismissed the idea that a traditional personal computing company could compete in the smartphone business. “We’ve learned and struggled for a few years here figuring out how to make a decent phone,” he said. “PC guys are not going to just figure this out. They’re not going to just walk in.”
  • In January 2007, Microsoft CEO Steve Ballmer laughed off the prospect of an expensive smartphone without a keyboard having a chance in the marketplace as follows: “Five hundred dollars? Fully subsidized? With a plan? I said that’s the most expensive phone in the world and it doesn’t appeal to business customers because it doesn’t have a keyboard, which makes it not a very good e-mail machine.”
  • In March 2007, computing industry pundit John C. Dvorak argued that “Apple should pull the plug on the iPhone” since “There is no likelihood that Apple can be successful in a business this competitive.” Dvorak believed the mobile handset business was already locked up by the era’s major players. “This is not an emerging business. In fact it’s gone so far that it’s in the process of consolidation with probably two players dominating everything, Nokia Corp. and Motorola Inc.”

Continue reading →

One would think that if there is any aspect of Internet policy that libertarians could agree on, it would be that the government should not be in control of basic internet infrastructure. So why are Tech Freedom and a few other so-called “liberty” groups making a big fuss about the plan to complete the privatization of ICANN? The IANA transition, as it has become known, would set the domain name system root, IP addressing and Internet protocol parameter registries free of direct governmental control, and make those aspects of the Internet transnational and self-governing.

Yet, the same groups that have informed us that net neutrality is the end of Internet freedom because it would have a government agency indirectly regulating discriminatory practices by private sector ISPs, are now trying to tell us that retaining direct U.S. government regulation of the content of the domain name system root, and indirect control of the domain name industry and IP addressing via a contract with ICANN, is essential to the maintenance of global Internet freedom. It’s insane.

One mundane explanation is that TechFreedom, which is known for responding eagerly to anyone offering them a check, has found some funding source that doesn’t like the IANA transition and has, in the spirit of a true political entrepreneur, taken up the challenge of trying to twist, turn and spin freedom rhetoric into some rationalization for opposing the transition. But that doesn’t explain the opposition of Senators Cruz and other conservatives who feign a concern for Internet freedom. No, I think this split represents something bigger. At bottom, it’s a debate about the role of nation-states in Internet governance and the state’s role in preserving freedom.

In this regard it would be good to review my May 2016 blog post at the Internet Governance Project, which smashes the myths being asserted about the US government’s role in ICANN. In it, I show that NTIA’s control of ICANN has never been used to protect Internet freedom, but has been used multiple times to limit or attack it. I show that the US control of the DNS root was never put into place to “protect Internet freedom,” but was established for other reasons, and that the US explicitly rejected putting a free expression clause in ICANN’s constitution. I show that the new ICANN Articles of Incorporation created as part of the transition contain good mission limitations and protections against content regulation by ICANN. Finally, I argued that in the real world of international relations (as opposed to the unilateralist fantasies of conservative nationalists) the privileged US role is a magnet for other governments, inviting them to push for control, rather than a bulwark against it.

Another libertarian tech policy analyst, Eli Dourado, has also argued that going ahead with the IANA transition is a ‘no-brainer.’

Assistant Secretary of Commerce Larry Strickling’s speech at the US Internet Governance Forum last month goes through the FUD being advanced by TechFreedom and the nationalist Republicans one by one. Among other points, he contends that if the U.S. tries to retain control, Internet infrastructure will become increasingly politicized as rival states, such as China, Russia and Iran, argue for a sovereignty-based model and try to get internet infrastructure in the hands of intergovernmental organizations:

Privatizing the domain name system has been a goal of Democratic and Republican administrations since 1997. Prior to our 2014 announcement to complete the privatization, some governments used NTIA’s continued stewardship of the IANA functions to justify their demands that the United Nations, the International Telecommunication Union or some other body of governments take control over the domain name system. Failing to follow through on the transition or unilaterally extending the contract will only embolden authoritarian regimes to intensify their advocacy for government-led or intergovernmental management of the Internet via the United Nations.

The TechFreedom “coalition letter” raises no new arguments or issues – it is a nakedly political appeal for Congress to intervene to stop the transition, based mainly on partisan hatred of the Obama administration. But I think this debate is highly significant nevertheless. It’s not about rational policy argumentation, it’s about the diverging political identity of people who say they are pro-freedom.

What is really happening here is a rift between nationalist conservativism of the sort represented by the Heritage Foundation and the nativists in the Tea Party, on the one hand, and true free market libertarians, on the other. The root of this difference is a radically different conception of the role of the nation-state in the modern world. Real libertarians see national borders as, at best, administrative necessary evils, and at worst as unjustifiable obstacles to society and commerce. A truly classical liberal ethic is founded on individual rights and a commitment to free and open markets and free political institutions everywhere, and thus is universalist and globalist in outlook. They see the economy and society as increasingly globalized, and understand that the institution of the state has to evolve in new directions if basic liberal and democratic values are to be institutionalized in that environment.

The nationalist Republican conservatives, on the other hand, want to strengthen the state. They are hemmed in by a patriotic and exceptionalist view of its role. Insofar as they are motivated by liberal impulses at all – and of course many parts of their political base are not – it is based on a conception of freedom situated entirely on national-level institutions. As such, it implies walling the world off or, worse, dominating the world as a pre-eminent nation-state. The rise of Trump and the ease with which he took over the Republican Party ought to be a signal to the real libertarians that the Republican Party is no longer viable as a lesser-of-two-evils home for true liberals. The base of the Republican Party, the coalition of constituencies and worldviews of which it is composed, is splitting into two camps with irreconcilable differences over fundamental issues. Good riddance to the nationalists, I say. This split poses a tremendous opportunity for libertarians to finally free themselves of the social conservatism, nationalistic militarists, nativists and theocrats that have dragged them down in the GOP.

The FCC’s transaction reviews have received substantial scholarly criticism lately. The FCC has increasingly used its license transaction reviews as an opportunity to engage in ad hoc merger reviews that substitute for formal rulemaking. FCC transaction conditions since 2000 have ranged from requiring AOL-Time Warner to make future instant messaging services interoperable, to price controls for broadband for low-income families, to mandating merging parties to donate $1 million to public safety initiatives.

In the last few months alone,

  • Randy May and Seth Cooper of the Free State Foundation wrote a piece that the transaction reviews contravene rule of law norms.
  • T. Randolph Beard et al. at the Phoenix Center published a research paper about how the FCC’s informal bargaining during mergers has become much more active and politically motivated in recent years.
  • Derek Bambauer, law professor at the University of Arizona, published a law review article that criticized the use of informal agency actions to pressure companies to act in certain ways. These secretive pressures “cloak what is in reality state action in the guise of private choice.”

This week, in the Harvard Journal of Law and Public Policy, my colleague Christopher Koopman and I added to this recent scholarship on the FCC’s controversial transaction reviews. Continue reading →

The FCC has signaled that it may vote to overhaul the Lifeline program this month. Today, Lifeline typically provides a $9.25 subsidy for low-income households to purchase landline or mobile telephone service from eligible providers. While Lifeline has problems–hence the bipartisan push for reform–years ago the FCC structured Lifeline in a way that generally improves access and mitigates abuse (the same cannot be said about the three other major universal service programs).

A direct subsidy plus a menu of options is a good way to expand access to low-income people (assuming there are effective anti-fraud procedures). A direct subsidy is more or less how the US and state governments help lower-income families afford products and services like energy, food, housing, and education. For energy bills there’s LIHEAP. For grocery bills there’s SNAP and WIC. For housing, there’s Section 8 vouchers. For higher education, there’s Pell grants.

Programs structured this way make transfers fairly transparent, which makes them an easy target for criticism but also promotes government accountability, and gives low-income households the ability to consume these services according to their preferences. If you want to attend a small Christian college, not a state university, Pell grants enable that. If you want to purchase rice and tomatoes, not bread and apples, SNAP enables that. The alternative, and far more costly, ways to improve consumer access to various services is to subsidize providers, which is basically how Medicare the rural telephone programs operate, or command-and-control industrial policy, like we have for television and much of agriculture.

Because the FCC is maintaining the consumer subsidy and expanding the menu of Lifeline options to include wired broadband, mobile broadband, and wifi devices, there’s much to commend in the proposed reforms. Continue reading →

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.”

Dan BrennerI was shocked and saddened to hear tonight that L.A. Superior Court Judge Dan Brenner was struck and killed in Los Angeles yesterday. I am just sick about it. He was a great man and good friend.

Dan was an outstanding legal mind who, before moving back out to California to become a judge in 2012, made a big impact here in DC while serving as a legal advisor to FCC chairman Mark Fowler in the 1980s. He went on to have a distinguished career as head of legal affairs at the National Cable & Telecommunications Association. He also served as an adjunct law professor in major law schools and wrote important essays and textbooks on media and broadband law.

More than all that, Dan Brenner was a dear friend to a great many people, and he was always the guy with the biggest smile on his face in any room he walked into. Dan had an absolutely infectious spirit; his amazing wit and wisdom inspired everyone around him. I never heard a single person say a bad word about Dan Brenner. Even people on the opposite side of any negotiating table from him respected and admired him. That’s pretty damn rare in a town like Washington, DC.

And Dan was a great friend to me. Continue reading →