Miscellaneous

Technopanics, Progress Studies, AI, spectrum, and privacy were hot topics at the Technology Liberation Front in the past year. Below are the most popular posts from 2019.

Glancing at our site metrics over the past 10 years, the biggest topics in the 2010s were technopanics, Bitcoin, net neutrality, the sharing economy, and broadband policy. Looking forward at the 2020s, I’ll hazard some predictions about what will be significant debates at the TLF: technopanics and antitrust, AVs, drones, and the future of work. I suspect that technology and federalism will be long-running issues in the next decade, particularly for drones, privacy, AVs, antitrust, and healthcare tech.

Enjoy 2019’s top 10, and Happy New Year.

10. 50 Years of Video Games & Moral Panics by Adam Thierer

I have a confession: I’m 50 years old and still completely in love with video games.

As a child of the 1970s, I straddled the divide between the old and new worlds of gaming. I was (and remain) obsessed with board and card games, which my family played avidly. But then Atari’s home version of “Pong” landed in 1976. The console had rudimentary graphics and controls, and just one game to play, but it was a revelation. After my uncle bought Pong for my cousins, our families and neighbors would gather round his tiny 20-inch television to watch two electronic paddles and a little dot move around the screen.

9. The Limits of AI in Predicting Human Action by Anne Hobson and Walter Stover

Let’s assume for a second that AIs could possess not only all relevant information about an individual, but also that individual’s knowledge. Even if companies somehow could gather this knowledge, it would only be a snapshot at a moment in time. Infinite converging factors can affect one’s next decision to not purchase a soda, even if your past purchase history suggests you will. Maybe you went to the store that day with a stomach ache. Maybe your doctor just warned you about the perils of high fructose corn syrup so you forgo your purchase. Maybe an AI-driven price raise causes you to react by finding an alternative seller.

In other words, when you interact with the market—for instance, going to the store to buy groceries—you are participating in a discovery process about your own preferences or willingness to pay.

8. Free-market spectrum policy and the C Band by Brent Skorup

A few years ago I would have definitely favored speed and the secondary market plan. I still lean towards that approach but I’m a little more on the fence after reading Richard Epstein’s work and others’ about the “public trust doctrine.” This is a traditional governance principle that requires public actors to receive fair value when disposing of public property. It prevents public institutions from giving discounted public property to friends and cronies. Clearly, cronyism isn’t the case here and FCC can’t undo what FCCs did generations ago in giving away spectrum. I think the need for speedy deployment trumps the windfall issue here, but it’s a closer call for me than in the past.

One proposal that hasn’t been contemplated with the C Band but might have merit is an overlay auction with a deadline. With such an auction, the FCC gives incumbent users a deadline to vacate a band (say, 5 years). The FCC then auctions flexible-use licenses in the band. The FCC receives the auction revenues and the winning bidders are allowed to deploy services immediately in the “white spaces” unoccupied by the incumbents. The winning bidders are allowed to pay the incumbents to move out before the deadline.

7. STELAR Expiration Warranted by Hance Haney

The retransmission fees were purposely set low to help the emerging satellite carriers get established in the marketplace when innovation in satellite technology still had a long way to go. Today the carriers are thriving business enterprises, and there is no need for them to continue receiving subsidies. Broadcasters, on the other hand, face unprecedented competition for advertising revenue that historically covered the entire cost of content production.

Today a broadcaster receives 28 cents per subscriber per month when a satellite carrier retransmits their local television signal. But the fair market value of that signal is actually $2.50, according to one estimate.

6. What is Progress Studies? by Adam Thierer

How do we shift cultural and political attitudes about innovation and progress in a more positive direction? Collison and Cowen explicitly state that the goal of Progress Studies transcends “mere comprehension” in that it should also look to “identify effective progress-increasing interventions and the extent to which they are adopted by universities, funding agencies, philanthropists, entrepreneurs, policy makers, and other institutions.”

But fostering social and political attitudes conducive to innovation is really more art than science. Specifically, it is the art of persuasion. Science can help us amass the facts proving the importance of innovation and progress to human improvement. Communicating those facts and ensuring that they infuse culture, institutions, and public policy is more challenging.

5. How Do You Value Data? A Reply To Jaron Lanier’s Op-Ed In The NYT by Will Rinehart

All of this is to say that there is no one single way to estimate the value of data.

As for the Lanier piece, here are some other things to consider:

A market for data already exists. It just doesn’t include a set of participants that Jaron wants to include, which are platform users.    

Will users want to be data entrepreneurs, looking for the best value for their data? Probably not. At best, they will hire an intermediary to do this, which is basically the job of the platforms already.

An underlying assumption is that the value of data is greater than the value advertisers are willing to pay for a slice of your attention. I’m not sure I agree with that.

Finally, how exactly do you write these kinds of laws?

4. Explaining the California Privacy Rights and Enforcement Act of 2020 by Ian Adams

As released, the initiative is equal parts privacy extremism and cynical-politics. Substantively, some will find elements to applaud in the CPREA, between prohibitions on the use of behavioral advertising and reputational risk assessment (all of which are deserving of their own critiques), but the operational structure of the CPREA is nothing short of disastrous. Here are some of the worst bits:

3. Best Practices for Public Policy Analysts by Adam Thierer

So, for whatever it’s worth, here are a few ideas about how to improve your content and your own brand as a public policy analyst. The first list is just some general tips I’ve learned from others after 25 years in the world of public policy. Following that, I have also included a separate set of notes I use for presentations focused specifically on how to prepare effective editorials and legislative testimony. There are many common recommendations on both lists, but I thought I would just post them both here together.

2. An Epic Moral Panic Over Social Media by Adam Thierer

Strangely, many elites, politicians, and parents forget that they, too, were once kids and that their generation was probably also considered hopelessly lost in the “vast wasteland” of whatever the popular technology or content of the day was. The Pessimists Archive podcast has documented dozens of examples of this reoccurring phenomenon. Each generation makes it through the panic du jour, only to turn around and start lambasting newer media or technologies that they worry might be rotting their kids to the core. While these panics come and go, the real danger is that they sometimes result in concrete policy actions that censor content or eliminate choices that the public enjoys. Such regulatory actions can also discourage the emergence of new choices.

1. How Conservatives Came to Favor the Fairness Doctrine & Net Neutrality by Adam Thierer

If I divided my time in Tech Policy Land into two big chunks of time, I’d say the biggest tech-related policy issue for conservatives during the first 15 years I was in the business (roughly 1990 – 2005) was preventing the resurrection of the so-called Fairness Doctrine. And the biggest issue during the second 15-year period (roughly 2005 – present) was stopping the imposition of “Net neutrality” mandates on the Internet. In both cases, conservatives vociferously blasted the notion that unelected government bureaucrats should sit in judgment of what constituted “fairness” in media or “neutrality” online.

Many conservatives are suddenly changing their tune, however.

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After coming across some reviews of Thomas Philippon’s book, The Great Reversal: How America Gave Up on Free Markets, I decided to get my hands on a copy. Most of the reviews and coverage mention the increasing monopoly power of US telecom companies and rising prices relative to European companies. In fact, Philippon tells readers in the intro of the book that the question that spurred him to write Great Reversal is “Why on earth are US cell phone plans so expensive?”

As someone who follows the US mobile market closely, I was a little disappointed that the analysis of the telecom sectors is rather slim. There’s only a handful of pages (out of 340) of Europe-US telecom comparison, featuring one story about French intervention and one chart. This isn’t a criticism of the book–Philippon doesn’t pitch it as a telecom policy book. However, the telecom section in the book isn’t the clear policy success story it’s described as.

The general narrative in the book is that US lawmakers are entranced by the laissez-faire Chicago school of antitrust and placated by dark money campaigns. The result, as Philippon puts it, is that “Creeping monopoly power has slowly but surely suffocated the [US] middle class” and today Europe has freer markets than the US. That may be, but the telecom sectors don’t provide much support for that idea.

Low Prices in European Telecom . . .

Philippon says that “The telecommunications industry provides another example of successful competition policy in Europe.”

He continues:

The case of France provides a striking example of competition. Free Mobile . . . obtained its 4G license [with regulator assistance] in 2011 and became a significant competitor for the three large incumbents. The impact was immediate. . . . In about six months after the entry of Free Mobile, the price paid by French consumers had dropped by about 40 percent. Wireless services in France had been more expensive in the US, but now they are much cheaper.

It’s true, mobile prices are generally lower in Europe. Monthly average revenue per user (ARPU) in the US, for instance, is about double the ARPU in the UK (~$42 v. ~$20 in 2016). And, as Philippon points out, cellular prices are lower in France as well.

One issue with this competition “success story”: the US also has four mobile carriers, and had four mobile carriers even prior to 2011. Since the number of competitors is the same in France and the US, competition doesn’t really explain why there’s a price difference between France and the US. (India, for instance, has fewer providers than the US and France–and much lower cellular prices, so number of competitors isn’t a great predictor of pricing.)

. . . and Low Investment

If “lower telecom prices than the US” is the standard, then yes, European competition policy has succeeded. But if consumers and regulators prioritize other things, like industry investment, network quality (fast speeds), and rural coverage, the story is much more mixed. (Bret Swanson at AEI points to other issues with Philippon’s analysis.) Philippon’s singular focus on telecom prices and number of competitors distracts from these other important competition and policy dimensions.

According to OECD data, for instance, in 2015 the US exceeded the OECD average for spending on IT and communications equipment as a percent of GDP. France might have lower cell phone bills, but US telecom companies spend 275% more than French telecom companies on this measure (1.1% of GDP v. 0.4% of GDP) .

Further, telecom investment per capita in the US was much higher than its European counterparts. US telecom companies spent about 55 percent more per capita than French telecoms spent ($272 v. $175), according to the same OECD reports. And France is one of the better European performers. Many European carriers spend, on a per capita basis, less than half what US carriers spend. US carriers spend 130% more than UK telecoms spend and 145% more than German telecoms.

This investment deficit in Europe has real-world effects on consumers. OpenSignal uses crowdsourced data and software to determine how frequently users phones have a 4G LTE network available (a proxy for coverage and network quality) around the world. The US ranked fourth the world (86%) in 2017, beating out every European country, save Norway. In contrast, France and Germany ranked 60th and 61st, respectively, for this network quality measure, beat out by less wealthy nations like Kazakhstan, Cambodia, and Romania. 

The European telecom regulations and anti-merger policies created a fragmented market and financially strapped companies. As a result, investors are fleeing European telecom firms. According to the Financial Times and Bloomberg data, between 2012 and 2018, the value of Europe’s telecom companies fell almost 50%. The value of the US sector rose by 70% and the Asian sector rose by 13% in that time period.  

Price Wars or 5G Investment?

Philippon is right that Europe has chosen a different path than the US when it comes to telecom services. Whether they’ve chosen a pro-consumer path depends on where you sit (and live). Understandably, academics and advocates living in places like Boston, New York and DC look fondly at Berlin and Paris broadband prices. Network quality outside of the cities and suburbs rarely enters the picture in these policy discussions, and Philippon’s book is no exception. US lawmakers and telecom companies have prioritized non-price dimensions: network quality, investment in 5G, and rural coverage.

If anything, European regulators seem to be retreating somewhat from the current path of creating competitors and regulating prices. As the Financial Times wrote last year, the trend in Europe telecom is consolidation. The French regulator ARCEP reversed course last year signaled a new openness to telecom consolidation.

Still, there are significant obstacles to consolidation in European markets, and it seems likely they’ll fall further behind the US and China in rural network coverage and 5G investment. European telecom companies are in a bit of panic about this, which they expressed in a letter to the European Commission this month, urging reform.

In short, European telecom competition policy is not the unqualified success depicted in Great Reversal. To his credit, Philippon in the book intro emphasizes humility about prognostications and the limits of experts’ knowledge:

I readily admit I don’t have all the answers. …I would suggest . . . that [economists’] prescriptions be taken with a (large) grain of salt. When you read an author or commentator who tells you something obvious, take your time and do the math. Almost every time, you’ll discover that it wasn’t really obvious at all. I have found that people who tell you that the answers to the big questions in economics are obvious are telling you only half of the story.

Couldn’t have put it better myself.

Credit to Connor Haaland for research assistance.

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A few weeks ago I was invited to provide testimony about rural broadband policy to the Communications and Technology Committee in the Pennsylvania Senate (video recording of the hearing). My co-panelists were Kathyrn de Wit from Pew and Prof. Sasha Meinrath from Penn State University.

In preparing for the testimony I was surprised to learn how much money leaves Pennsylvania annually to fund the federal Universal Service Fund programs. In recent years, a net $200 million leaves the state annually and is disbursed at USAC and in other states. That’s a lot of money considering Pennsylvania, like many geographically large states, has its own broadband deployment problems.

From the Intro:

The federal government has spent more than $100 billion on rural telecommunications in the past 20 years. Most of that total comes from the federal Universal Service Fund (USF), which disburses about $4.5 billion annually to rural providers across the country. In addition, the Pennsylvania Universal Service Fund redistributes about $32 million annually from Pennsylvania phone customers to Pennsylvania phone companies serving rural areas.

Are rural residents seeing commensurate benefits trickle down to them? That seems doubtful. These programs are complex and disburse subsidies in puzzling and uneven ways. Reform of rural telecommunications programs is urgently needed. FCC data suggest that the current USF structure disproportionately penalizes Pennsylvanians—a net $800 million left the state from 2013 to 2017.

I made a few recommendations, which mostly apply for state legislators in other states looking at rural broadband issues.

• Urge the FCC to transform the USF into broadband vouchers for rural households.
• Prevent unreasonable restrictions on small, outdoor antennas on private property.
• Instruct the state broadband advisory committee to recommend best practices for rural towns and counties.
• Create a “vertical assets inventory” for wireless providers to use in rural areas.

I also came across an interesting program in Pennsylvania spearheaded in 2018 by Gov. Wolf. It’s a $35 million grant program to rural providers. From the Governor’s website:

The program was a partnership between the Office of Broadband Initiatives and PennDOT. The $35 million of incentive funding was provided through PennDOT to fulfill its strategic goal of supporting intelligent transportation systems, connected vehicle infrastructure, and improving access to PennDOT’s facilities. In exchange for incentive funding, program participants were required to supply PennDOT with the use of current and future network facilities or services.

It’s too early to judge the results of that program but I’ve long thought state DOTs should collaborate more with state telecom officials. There’s a lot of federal and state transportation money that can do double duty in supporting broadband deployment efforts, a subject Prof. Korok Ray and I take up in our recently-released Mercatus Paper, “Smart Cities, Dumb Infrastructure.”

For more, you can find my full testimony at the Mercatus website.

The Ray-Skorup paper, “Smart Cities, Dumb Infrastructure,” about transportation funds and their use in telecom networks is on SSRN.

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Last month I spoke at the Innovation Summit in Orlando, hosted by the James Madison Institute. My co-panelists on the transportation panel were Jamal Sowell, President and CEO of Enterprise Florida, state senator Jeff Brandes, who cosponsored Florida’s autonomous vehicle legislation this year, and Stephanie Smith from Uber. Romina Boccia from the Heritage Foundation was our moderator.

It was a great event and the panel discussion made clear that Florida is at the forefront of autonomous vehicle policy. The panel got me thinking about some nationwide trends that are pushing people towards ride-sharing and, eventually, mobility as a service and autonomous vehicles. Florida seems well positioned but many of these trends will affect the ridesharing and autonomous vehicle market in the next decade.

Rising Cost of Car Ownership

Cars are expensive to own and maintain. Using AAA estimates, the annual cost of a new car in 2019 is $9,300 (nearly $800 per month). These costs are mostly depreciation and insurance, but also include gas, registration, and maintenance.

Used cars are significantly cheaper to own since depreciation is steepest early in a car’s life. I haven’t seen much research on used car costs but out of curiosity I estimated the cost of ownership of our used car. We recently sold my wife’s 2010 Corolla, which she’d bought in 2012. The annual cost of ownership of the Corolla (insurance, maintenance, gas, depreciation) came to about $4,200 ($350 per month).

But costs are much higher for families. Parents adding a teenage boy to their car insurance policy, for instance, can expect their annual insurance costs to jump over $6,000.

Using the AAA numbers and these insurance numbers, we can estimate the costs for adding a new vehicle and a teenage driver for a family budget: from about $15,000 annually (getting a teen driver a new sedan) to about $10,000 annually (getting a teen driver a used compact).

Further, car repair is only going to increase with time. The introduction of sensors and other technology into new cars has caused a spike in repair and insurance costs. Automakers are also adding expensive-to-fix components to engines, like turbochargers and CVTs, in an attempt to comply with federal CAFE standards.

One signal of the increasing costs of repair is rising insurance rates. Over the last four years, the consumer price index for auto insurance increased about 27%, During the same period the CPI for all goods increased about 6%. That increase even exceeds the CPI for hospital services (18%).

This is likely one reason car leasing is becoming more popular, even with good-credit drivers–leasing allows you to shift the (increasing) costs of car depreciation and maintenance to leasing companies.

Mobility as a Service and AVs in Florida

Florida seems to have the perfect recipe for AV and mobility as a service success. First and foremost, they have a governor and state legislature that is welcoming AV companies.

The state also has:

• many students, retirees, tourists, and uninsured drivers who need rides but don’t use a car regularly
• very high insurance premiums
• no-fault auto insurance, which simplifies the claims process in personal injury cases
• flat terrain and no snow

Suppose a couple in Florida is considering getting a third car, a new car for their teenage son. If their son isn’t interested in getting a drivers license (which is increasingly common) and they live in an area with high penetration of ridesharing services, they might be willing to purchase an annual subscription to mobility as a service. For many families on the fence about getting a second or third car, even a $10,000 annual subscription might make financial sense.

AV tech is slowly but surely approaching mass-market deployment. This month, Waymo announced they were increasing the number of autonomous vehicles on Phoenix-area roads without safety drivers in the front seats. These trends in auto leasing and putting off getting a license is accelerating in urbanized areas in the South. It’s probably where mobility as a service companies and, eventually, AV companies will find their largest potential market.

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