Another year in the books for the Technology Liberation Front. Many developments unfolded in 2015 in the technology world and we covered much of it (on TLF and in other outlets). The most popular posts this year revolved around the Internet of Things, privacy, unlicensed spectrum, and municipal and public broadband networks. Thanks for reading, and enjoy the year in review.

10. What Cory Booker Gets About Innovation Policy, by Adam Thierer

In February, Adam appeared before the Senate Commerce Committee to testify about the Internet of Things and technology policy. During the hearing, Adam discovered a like-minded innovation advocate in Sen. Cory Booker (D-NJ). In his post, Adam recounts Sen. Booker’s statements during the hearing on the importance of promoting US leadership in technology, and rejecting policymaking based on techno-panics.

[P]erhaps most importantly, Sen. Booker stressed how essential it was that we reject a fear-based approach to public policymaking. As he noted at the hearing about these new information technologies, “there’s a lot of legitimate fears, but in the same way of every technological era, there must have been incredible fears.”

9. Bipartisan Internet of Things Resolution Introduced in the Senate, by Adam Thierer

Adam commends a bipartisan Senate resolution in March that announced a strategy to incentivize the development of the Internet of Things in the US. Adam likens it to the light-touch Internet policy vision from the 1990s that made the US a leader in Internet-based technologies and media.

We got policy right once before in the United States, and we can get it right again with a policy vision like that found in this new Senate resolution for the Internet of Things.

8. Unintended Consequences of the EU Safe Harbor Ruling, by Adam Thierer

In this post, Adam spells out some possible ill effects after the announcement that the European Court of Justice invalidated the 15-year old EU-US safe harbor agreement, which facilitated data transfers between the EU and US. Amongst the problems is that digital trade may suffer and the decision may accelerate the Balkanization of the Internet.

7. New ITIF Study on Privacy Panics, by Adam Thierer

In September, Adam appeared at an Information Technology and Innovation Foundation event to discuss privacy panics as new technologies are deployed. In his post, Adam reviews ITIF’s report about the latest privacy scares and posts video of the event.

I think one of the most important takeaways from the study is that, as Castro and McQuinn note, “history has shown, many of the overinflated claims about loss of privacy have never materialized.”

6. How the FCC Killed a Nationwide Wireless Broadband Network, by Brent Skorup

Clemson economist Thomas Hazlett and I published an article in the Duke Law & Technology Review about the bankruptcy of wireless carrier LightSquared and I summarized the piece in a blog post. We showed that FCC regulations regarding unlicensed spectrum often compel costly rent-seeking rather than parties’ reliance on market processes and Coasian bargaining.

The evaporation of billions of dollars of LightSquared funds was a non-market failure, not a market failure and not a technology failure. The economic loss to consumers was even greater than LightSquared’s. Different FCC rules could have permitted welfare-enhancing coordination between LightSquared and GPS. The FCC’s error was the nature of rights the agency assigned for GPS use. By authorizing the use of millions of unlicensed devices adjacent to LightSquared’s spectrum, the FCC virtually ensured that future attempts to reallocate spectrum in these bands would prove contentious.

5. 5 Great Books on Innovation and Technology Policy, by Adam Thierer

In September, after inquiries from tech scholars and students after an event, Adam provided his top-5 list of books to read about the conflict of visions over the direction of technology policy.

4. Don’t Hit the (Techno-) Panic Button on Connected Car Hacking and IoT Security, by Adam Thierer

Adam pushes back against the “panic-first” approach toward connected cars and the Internet of Things on display in a 60 Minutes segment and congressional hearings. Adam notes that most of the hype surrounding “car hacking” and malicious use of our connected devices are exaggerated. Further, market pressures and existing liability laws incentivize firms to act in ways that protect consumers and in these fast-moving industries, standards are rapidly improving as new IoT technologies enter the mainstream.

We are at the beginning of a long process. There is no final destination when it comes to security; it’s a never-ending process of devising and refining policies to address vulnerabilities on the fly. The complex problem of cybersecurity readiness requires dynamic solutions that properly align incentives, improve communication and collaboration, and encourage good personal and organizational stewardship of connected systems. Implementing the brittle bureaucratic standards that Markey and others propose could have the tragic unintended consequence of rendering our devices even lesssecure.

3. Will LTE-U Mark the End of the Unlicensed Spectrum Commons?, by Brent Skorup

Technologies using unlicensed spectrum have come and gone over the years but 2015 marked the year when one unlicensed technology–LTE-U–received substantial attention from technologists and tech reporters. The testing and possible deployment of technologies like LTE-U and Globalstar’s TLPS received significant opposition because of concerns about interference to and competition with existing unlicensed spectrum technologies like Wifi and Bluetooth. Despite the coverage in 2015, many predicted this “spectrum NIMBYism” in unlicensed spectrum years ago. The FCC created these circumstances because it provides no interference protection to existing users but its open access policy makes interference conflicts likely. Whether and how the FCC gets involved in approving new technologies using unlicensed spectrum is increasingly an issue to watch. Will the FCC continue to allow permissionless innovation in unlicensed spectrum or will it declare the spectrum commons a failed experiment, rescind its existing rules, and require more from new entrants?

By law unlicensed spectrum users have no rights to their spectrum; unlicensed spectrum is a managed commons. In practice, however, existing users frequently act as if they own their spectrum and they can exclude others. By entertaining these complaints, the FCC simply encourages NIMBYism in unlicensed spectrum.

2. Trouble Ahead for Municipal Broadband, by Brent Skorup

In early 2015, the Obama administration made publicly-funded broadband networks a major priority. I pushed back on the idea that public networks are good for consumers and taxpayers. I named several major operational and legal obstacles that municipal broadband operators can expect when they attempt to provide TV, Internet access, and telephone service.

If the federal government dropped over $100 million in a small city to build publicly-owned grocery stores with subsidized food, local grocery stores would, of course, strenuously object that this is patently unfair and harms private grocers. …The activists’ response to the carriers, who obviously complain about this “competition,” is essentially, “maybe now you’ll upgrade and compete harder.” It’s absurd on its face.

1. My Writing on Internet of Things (Thus Far), by Adam Thierer

In the run-up to Adam’s Internet of Things talk at CES 2015, he outlined his thoughts about IoT policy issues to watch. He attached his popular presentation about IoT and wearable technologies, helping to make this the top-visited TLF post of 2015.

[T]he Internet of Things finds itself at the center of what we might think of a perfect storm of public policy concerns: Privacy, safety, security, intellectual property, economic / labor disruptions, automation concerns, wireless spectrum issues, technical standards, and more. …[W]hen a new technology potentially touches all of these issues, then it means innovators in that space can expect an avalanche of attention and a potential world of regulatory trouble. Moreover, it sets the stage for a grand “clash of visions” about the future of IoT technologies that will continue to intensify in coming months and years.

Shane Greenstein, Kellogg Chair in Information Technology at Northwestern’s Kellogg School of Management, discusses his recent paper, Collective Intelligence and Neutral Point of View: The Case of Wikipedia , coauthored by Harvard assistant professor Feng Zhu. Greenstein and Zhu’s paper takes a look at whether Linus’ Law applies to Wikipedia articles. Do Wikipedia articles have a slant or bias? If so, how can we measure it? And, do articles become less biased over time, as more contributors become involved? Greenstein explains his findings.

Download

Related Links

• Is Wikipedia Biased?, Greenstein, Zhu
• Harvard Business School Biography, Greenstein
• Harvard Business School Biography, Zhu
• The Irony of Public Funding, The Virulent World of Mouse

Alice Marwick, assistant professor of communication and media studies at Fordham University, discusses her newly-released book, Status Update: Celebrity, Publicity, and Branding in the Social Media Age. Marwick reflects on her interviews with Silicon Valley entrepreneurs, technology journalists, and venture capitalists to show how social media affects social dynamics and digital culture. Marwick answers questions such as: Does “status conscious” take on a new meaning in the age of social media? Is the public using social media the way the platforms’ creators intended? How do you quantify the value of online social interactions? Are social media users becoming more self-censoring or more transparent about what they share? What’s the difference between self-branding and becoming a micro-celebrity? She also shares her advice for how to make Twitter, Tumblr, Instagram and other platforms more beneficial for you.

Download

Related Links

• Status Update: Celebrity, Publicity, and Branding in the Social Media Age, Marwick
• Engineered Performances Alice E. Marwick’s ‘Status Update’, The New York Times
• Biography, Marwick

Sherwin Siy, Vice President of Legal Affairs at Public Knowledge, discusses emerging issues in digital copyright policy. He addresses the Department of Commerce’s recent green paper on digital copyright, including the need to reform copyright laws in light of new technologies. This podcast also covers the DMCA, online streaming, piracy, cell phone unlocking, fair use recognition, digital ownership, and what we’ve learned about copyright policy from the SOPA debate.

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Related Links

• Sherwin Siy, Public Knowledge
• What the DMCA cell phone unlock ban means to you, Reardon
• Why The Library Of Congress Has A Lock On Your Phone, Henn

Jerry Ellig, senior research fellow at the Mercatus Center at George Mason University, discusses the the FCC’s lifeline assistance benefit funded through the Universal Service Fund (USF). The program, created in 1997, subsidizes phone services for low-income households. The USF is not funded through the federal budget, rather via a fee from monthly phone bills — reaching an all-time high of 17% of telecomm companies’ revenues last year. Ellig discusses the similarities between the USF fee and a tax, how the fee fluctuates, how subsidies to the telecomm industry have boomed in recent years, and how to curb the waste, fraud and abuse that comes as a result of the lifeline assistance benefit.

Download

Related Links

• Jerry Ellig’s Biography Mercatus Center
• Benefits, Costs and other Important Stuff-Demystifying Regulatory Analysis Ellig, Mercatus Center
• The Future of Regulation Ellig, Pepperdine University School of Public Policy

Adam Thierer, Senior Research Fellow at the Mercatus Center discusses his recent working paper with coauthor Brent Skorup, A History of Cronyism and Capture in the Information Technology Sector. Thierer takes a look at how cronyism has manifested itself in technology and media markets — whether it be in the form of regulatory favoritism or tax privileges. Which tech companies are the worst offenders? What are the consequences for consumers? And, how does cronyism affect entrepreneurship over the long term?

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Related Links

• A History of Cronyism and Capture in the Information Technology Sector, Thierer
• Video: A History of Cronysim and Capture in the Information Technology Sector, Thierer
• Adam Thierer Biography, Mercatus Center
• Adam Thierer on Anti-Tech Grump Evgeny Morozov, Thierer

Richard Brandt, technology journalist and author, discusses his new book, One Click: Jeff Bezos and the Rise of Amazon.Com. Brandt discusses Bezos’ entrepreneurial drive, his business philosophy, and how he’s grown Amazon to become the biggest retailer in the world. This episode also covers the biggest mistake Bezos ever made, how Amazon uses patent laws to its advantage, whether Amazon will soon become a publishing house, Bezos’ idea for privately-funded space exploration and his plan to revolutionize technology with quantum computing.

Download

Related Links

• One Click: Jeff Bezos and the Rise of Amazon.com, Brandt
• History of Google/About Google, Brandt
• Five minutes with Richard Brandt, Author of One Click, Ennyman

Just finished watching President Barack Obama’s State of the Union speech and Virginia Governor Bob McDonnell’s response.

For some reason, this reminds me of the annual honors ceremony at my daughter’s school.  Why?  Because at my daughter’s school, when they award a plethora of awards to students in each grade, they ask the audience to hold our applause to the end.  Why? Because  applause prolongs the ceremony interminably.

Sound familiar? Members of Congress imitate Jack-in-the-Boxes springing up and down at appropriate applause lines. Democrats sprang up at appropriate applause lines relevant to the president’s agenda. Republicans sprang up too, when the president praised small business or said said he wanted more nuclear power plants.  President Obama expected applause from Republicans when he listed his tax cuts, but he was disappointed and then joked about it. If you watched the speech on TV, some members of Congress seemed to be applauding with a look on their faces that said they didn’t quite know why they were applauding. The Joint Chiefs of Staff finally stood up and applauded when Obama praised veterans. Vice President Joe Biden has perfected the “sage” look, though sometimes he looked grumpy enough to be mistaken for a Republican!  

Republicans have finally cottoned to this phenomenon. Instead of presenting a solo speaker in a sterile environment, they presented Virginia Governor Bob McDonnell with an audience in the Virginia State Capitol. Like the president, the governor was interrupted by applause from legislators and others in the audence. Rhetorically, I thought it added an extra “oopmh” to the governor’s speech — both because it showed he has folks who agree with him and because he highlighted the state perspective. Given the rules of the political game, it was a smart choice. 

But that doesn’t mean a change in the rules wouldn’t make everyone better off. It’s friggin’ 11:50 at night, and I’m wiped out from a day of simultaneously working at home to get something written and running multiple scans on the home computer to get rid of the friggin’ Security 2010 virus, or Trojan, or whatever that thing  is.  I would have appreciated shorter speeches that simply told me what each party wanted to accomplish.

So here’s my suggestion. For the State of the Union Speech and the opposition party’s response, they should make the same request made at my daughter’s school awards ceremony: “Please hold your applause until the end.”

Now … anybody got any interesting technological solutions that would accomplish this goal?

Greg Elin (@gregelin) of the Sunlight Foundation schools you on government trasparency in under 5 minutes:

At George Mason University a while back, I was treated to a preview of some economic research; this time, a paper studying whether or not consumers read the fine print. “Does Anyone Read the Fine Print? A Test of the Informed Minority Hypothesis Using Clickstream Data.”  Authored by Yannis Bakos, Florencia Marotta-Wurgler, and David Trossen. The conclusion: in online software sales, no one does. Barely anyone. Less than one percent.

Well, of course not. Do you? (I skim them, personally, but most of that is me wearing my legal scholar curiousity hat, not me as a consumer. I read contracts with moving companies rather more carefully, as a consumer. Otherwise, not really.)

But what does it all mean? According to the authors “the result casts doubt on the validity of the informed minority argument in a market where it has been invoked by both theorists and court; it also raises questions about the likely effectiveness of policies mandating increased contract disclosure to alleviate market failures.”

Actually, the study doesn’t quite do either of these things convincingly. For starters, the data set is too limited. It’s software sales only. And of those, only a small subset of software sales, since purchases through sites where you MUST scan down and click on the EULA were excluded–that is, most mass-market software. However. let us set aside this as a quibble, for now. I know I don’t read online or offline contracts or policies very often … or in very great detail. Most people seem to share this trait. So there is something here, although the data might not capture it very well. Let us go back to basics.

At the level of theory, consumers do not read contracts because it makes little sense for them to do so. Harm rarely results from not reading. It is “Rational ignorance.” But why does harm result so rarely? To explain this, along comes the “informed minority” theory. A few consumers do read, it was argued. For the theory to work, though, the minority of consumers needs to be enough to discipline sellers. Since the number might turn out to be very, very small in practice… do we toss the theory? And… more importantly, do we need more a more careful, watchful regulatory eye on consumers online and offline as a consequence, as some might suggest? From this data to theory and thence to policy is a much, much more giant step than first appears.

Because the bottom line remains. Every day there are billions and billions of transactions offline and online. Hardly anyone is reading the fine print. As Tom Hazlett astutely pointed out at the event, offline, there is often nothing to read. Do you write a contract when you sit down to eat in a restaurant? No. Many exchanges involve such implied contracts. Many others implicate statute law, which no one reads in their capacity as consumers. And yet more involve actual contracts which no one reads, or the meaning of which is not clearly comprehensible even to those who do read closely. And yet, overall, remarkable benefits come from this array of exchanges. And … the probability of actual harm linked to not reading the fine print? Tiny. From one standpoint, the “problem” is a non-problem.

But it is a fascinating puzzle nonetheless. If our ignorance of the content of these contracts is rational, why is it so? The habit of non-reading clearly present an opportunity for contract drafters to put all sorts of surprising nonsense in the contracts… Why is it not there?

Some think it is there. The fine print might include an arbitration clause, for example. Is this a mean trick to play on consumers, something that if one knew it was there one would go to another seller? Probably not. Studies suggest that arbitration awards tends to favor consumers slightly. Sellers put them in to avoid litigation costs (a benefit to consumers as well), not to harm consumers. What other devious stuff is in the fine print? Limitations on consequential damages? These are the damages of the sort that follow from “for want of a nail, a horseshoe was lost, for want of a shoe a horse was lost, for want of a horse… ” and so on. Well, if there were no limits on consequential damages, many products quite likely would not be offered, or not for long, or they would cost far more. This isn’t a good example of fine print harming consumers, either. Privacy policies? Again, real harm is rare and there are benefits to consumers from information sharing, as well (unless you are a theorist who values privacy in itself… but this seems to beg the question).

Some mechanism does discipline sellers. There is a potent force shaping these transactions. After all, sellers don’t stick the price of the product or other key information in the fine print (If prices were in the fine print, I bet people would read it then, so long as they knew it was there; if not, customers would vanish, perplexed, since no one would expect something really important like price to be in the fine print, and would be unlikely to look for it there unprompted). In the vast majority of cases, only stuff that really, really almost always does not matter gets in there, and it is pretty benign. There is a very, very low probability of mischief from this stuff. But Why? Why? Why? We hate mysteries.

Perhaps a partial answer is rooted in legal, rather than pure economic, thinking. Think of the contract or license not as one aspect of the whole product, like the color, but as something that has been bundled with the actual good (software, a restaurant meal, a lawnmower). Why is it there? People are looking to reduce risk. What if this happens? What if that happens? What if there is a dispute… What if? Both buyers and sellers want low risk and predictability. Consider again markets with no written contracts at all. Why are restaurant processes and customs for service and pricing and menus and service so much alike? The comfort of certainty for both sides. When there is a written contract, that force remains powerful. Contracts are shaped by hundreds of years of legal precedent. Writing one of these is a very conservative undertaking. If there is something weird in there, it presents an unknown element. What will a court do? We don’t know. And this would be bad. The instrument would no longer serve its basic function as guide to what is going to happen. Demand for certainty is so strong, and the market for contracts so responsive to this demand, that we can get away, most of the time, without reading. (Again, though, the mystery… why, why, why… how does signaling work here?).

One of the strangest ideas to have taken hold of the legal mind in the last century is the idea that contracts of adhesion are bad, because consumers do not get to negotiate the individual terms. Who the heck wants to do that? It would make every purchase an endless research process. Do consumers do better when they negotiate with, say, used car salesmen? No? Then why would we want to negotiate with software salesmen? Shoe salesmen? And so on.

Disclaimer. The fine print: This is yet another half-baked theory. Enjoy.

My original blog is here

Come join us for one of our semi-regular happy hours as we celebrate the Digital Revolution (while also denouncing the scourge of centralizing, totalitarian Digital Jacobinism).

All those interested in technology, the freedom of technology and technologies of freedom are welcome.  We’ll be at the Science Club at 1136 19th St NW, Washington DC from 5:30-8 pm.

RSVP on Facebook today!

Yesterday was a big day for any business, nonprofit organization, or fundraiser that relies on affiliate advertising that depend upon Internet advertising for important revenue and fundraising efforts: Governor Schwarzenegger vetoed the nexus tax and calls up Overstock.com to invite to reinstate their affiliates in California.

As we’ve written previously, all sorts of organizations depend on Internet advertising. Online companies are experimenting with new ways to deliver products, services, and content, and business of all kinds are going online to reach consumers and advertise to receptive audiences. The Gov’s veto sends a strong message that this growing business model is welcome in California.

It is important to note that the proposed budget legislation was indeed a tax increase. Contrary to the statements of nexus tax proponents, in no event would new money flow into California. Any incremental sales tax collected from online sellers just moves from the California purchaser to the state treasury, at a time when households are being squeezed by a struggling economy. The result: fewer advertising dollars would flow to California publishers and websites who employ and serve California’s residents today.

And this is one tax increase that would have serious unintended consequences. An affiliate advertising tax would harm California businesses, nonprofit organizations, and even public schools that depend upon Internet advertising for important revenue and fundraising efforts.

My friend Megan McArdle has a sharp post on the causes of the newspaper’s imminent demise:

Journalism is not being brought low by excess supply of content; it’s being steadily eroded by insufficient demand for advertising pages. For most of history, most publications lost money, or at best broke even, on their subscription base, which just about paid for the cost of printing and distributing the papers. Advertising was what paid the bills. To be sure, some of that advertising is migrating to blogs and similar new media. But most of it is simply being siphoned out of journalism altogether. Craigslist ate the classified ads. eHarmony stole the personals. Google took those tiny ads for weird products. And Macy’s can email its own damn customers to announce a sale… We’re not witnessing the breakup of a monopoly, in which more players make more modest incomes providing more stuff, and everyone flourishes (except the monopolist). We’re witnessing the death of a business model. And no one has figured out how to pay for hard news. Hard news stories take a great deal of time to write–more time than most amateurs can afford, which is why blogs tend to do opinion rather than journalism. Moreover, they are at least greatly improved when their authors are not worried about losing their jobs if what they write pisses off a local power broker.

I think there’s a lot to this: a key part of the newspaper’s business model was that economies of scale made them one of the very few efficient ways of distributing small pieces of printed information to a lot of people. So lots of different kinds of content—classified ads, personal ads, display ads, and various kinds of news reporting—got bundled together and sold as one package. The Internet makes it cheap to distribute information of all kinds, and so the newspaper is getting disaggregated. And so some of the cross-subsidies that supported the traditional newspaper are going away.

So the death of the classified is one important cause of newspapers’ worsening business model. But it’s also true that newspapers are “being brought low by excess supply of content.” The websites of mainstream media outlets run display ads, and these ads generate revenues. They don’t generate enough revenue to cover the costs of producing content, but that’s simply a function of supply and demand: if there were fewer online news sources, the ones that were left would be able to command higher rates. This is easy to see with the following thought experiment: imagine if the government granted the New York Times a monopoly in the news reporting business, so that no other media outlet were permitted to provide news online. Under those circumstances, the Times would be insanely profitable. They’d have tens of millions of daily readers and be able to charge outrageous amounts of money for their display ads.

Each traditional outlet that goes out of business makes the others a little more profitable. Eventually, the market will reach an equilibrium–if necessary, with dramatically fewer news outlets and higher revenues for each one. But there’s no “death of a business model” here. The newspapers have always given away content in order to sell ads. The news websites of the future will do the same thing. There just may be fewer of them than there were in the past.

The part I think Megan is ignoring is that the while it’s often true that hard news stories take a “great deal of time to write,” the Internet has made the process much easier for many types of news. Most obviously, the laborious process of editing and typesetting stories on strict deadlines is being replaced by much more flexible editing using web-based content management systems. Many primary sources (court decisions, regulatory filings, government data) that once required a physical trip to obtain can now be downloaded off the web. Reporters also have access to a vast new universe of primary sources from user-generated media that simply didn’t exist in the past.

It’s possible that the absolute number of reporters doing “hard news” in the future will be lower than it was in the past. And certainly the next decade will be a tough one for print journalists. But there’s nothing fundamentally broken about the “give away content, sell ads” business model. And we’re not heading toward a dystopian future in which no one produces hard news.

Image Courtesy of Flickr User Pieter Baert

I’ve been reading many critiques of Wired editor Chris Anderson’s new book, Free, after first reading Malcolm Gladwell’s review in The New Yorker.  Gladwell’s piece is fantastic as it illuminates just how wrong Anderson’s central claim really is.  Anderson writes that:

In the digital realm you can try to keep Free at bay with laws and locks, but eventually the force of economic gravity will win.

Gladwell quickly dismisses this by pointing out that YouTube, one of Anderson’s case studies, is set to lose $500 million next year.  As Gladwell puts it ” If [YouTube] were a bank, it would be eligible for TARP funds.”

But Anderson’s wrong-headedness goes beyond this one case.  Gladwell likens Anderson’s naivete about online distribution to that of Lewis Strauss, the former head of the Atomic Energy Commission, who Anderson himself quotes in Free.  Straus famously—and as Gladwell points out, quite inaccurately—predicted that “our children will enjoy in their homes electrical energy too cheap to meter.”  Gladwell points out that just as Strauss failed to realize that fuel was just one of many inputs to the distribution of power, Anderson fails to realize that while the price of transistors may be plummeting at logarithmic rates, other costs associated with digital distribution remain fixed or are increasing.

Anderson’s responds to this critique in a post on Wired.com that fails to answer nearly any of Gladwell’s points, but instead asked why Gladwell felt “threatened” by Anderson.  I doubt he does.

To those who have been regular readers of Wired, all of this should come as no surprise.  The unambiguous mismanagement of Wired.com is the greatest illustration that Anderson doesn’t really understand the web.

Joel Johnson, a former Wired.com employee, has a great post on Boing Boing about this very issue—a post which I discovered by reading a Gawker post entitled “The Case Against Chris Anderson.”  The irony of Johnson’s account of working at Wired.com—and those of several commentors to the post, also former Wired.com employees—is that Anderson, the author of a book on how giving things away for free makes sense, has mismanaged an outlet that should be doing just that.  Comment #7,# 10, #14, #16—a dialogue between Anderson and former Wired.com employees— are particularly worth reading.

But we needn’t rely on the words of disgruntled former employees to show that Anderson doesn’t get the web, take it from Anderson himself.  When speaking about Wired and Wired.com in 2006 Anderson said:

A monthly magazine like ours — which combines long-form journalism, lavish design and high-end photography — really shows paper at its finest. Online, the design is lost, the photos become thumbnails, and you have to click through as many as 16 screens [to read the longer articles].

This betrays just how ignorant Anderson is about the web—he’s squandered the opportunity to make Wired.com one of the most innovative sites on the web today. Gawker’s Nick Douglas responded to this by quipping “In other words, Wired can’t find a decent web designer.”

As if all of this wasn’t enough, Anderson’s attempt to explain away the unattributed Wikipedia quotations in his book not only call into question his ethics, but also his understanding of how to properly work with information found on the web, which in turn calls into question any claim of authority on the subject matter of the book.

Several folks in the blogosphere have pointed out that another quotation which Anderson uses in the book is taken out of context. “Information wants to be free,” as famously spoken by Stewart Brand at the 1984 Hacker Conference, is incomplete.  Stewart’s full statement was:

On the one hand information wants to be expensive, because it’s so valuable. The right information in the right place just changes your life. On the other hand, information wants to be free, because the cost of getting it out is getting lower and lower all the time. So you have these two fighting against each other.

It’s that fight between expensive information and nearly free distribution that needs to be explored.  Anderson could have drawn on his own struggles with Wired.com as a way to address this theme.  Instead, we’re left with a book that seems flawed from the outset.

All of this adds up to Free not being worth its very non-free cover price.  However, the blogosphere’s cataloging of the missteps of the author, and the ironic way which they actually illustrate the changing nature of information-based products, makes for very interesting reading indeed.

Check out today’s Wall Street Journal editorial on the affiliate nexus tax that North Carolina is considering — aptly titled Tarheels vs. the Internet. This comes on the heels (pun intended) of news that Amazon will terminate its affiliates in North Carolina.  It also talks about the tickets tax, which is blatantly in violation of the Internet Tax Freedom Act because it only applies to the Internet resale of tickets.

I received a mailing (see poorly taken iPhone photo) from Comcast a few days ago and I thought it was worth talking about from a libertarian perspective.

I’m all for companies taking advantage of the digital changeover to make a little extra scratch, so long as they’re honest in doing so.  This mailer never explicitly lies, but it’s not exactly forthcoming about what the digital conversion really means and it certainly didn’t mention the possibility of buying a converter box to continue getting broadcast TV for free.

Instead, the octagenarians who occupy most of the other units in my building were met with this sort of language:

If you use an analog TV with an antenna and did not get the right equipment to receive a digital signal, you lost those broadcast channels after that date.

Followed by:

Q: How do I get my signal back? A: There are several options, but the easy answer is to call Comcast…

First, I think that’s factually innacurate.  It’s easier to drive 30 miles to a neighboring city to buy a converter box than to setup and then play the waiting game for the Comcast guy, but I guess the people who didn’t catch on about the conversion have nothing but time.  My second beef is that the first sentence, the one about how you “lost those broadcast channels” seems to be awkwardly worded on purpose.  It seems to be written in a way that’s intentially confusing, as thought Comcast were trying to obfuscate the fact that those TV signals are still out there—they’re not really “lost”—and you just need to spend $40, once.

Of course Comcast is in the business of selling people cable, so flauting the advantages of an over-the-air converter box isn’t in their interest.  I don’t feel like anything in this mailing was fraudulent or illegal, but it could be seen as trying to lead people to believe that cable was maybe, just perhaps, the only way to get their broadcast TV back.

A new coalition, NoChokePoints, has been formed to lobby Congress and the Federal Communications Commission to further regulate the prices that incumbent telephone companies (Regional Bell Operating Companies or Incumbent Local Exchange Carriers) can charge for special access services purchased by businesses and institutions.  Special access circuits are dedicated, private lines.  For example, Sprint purchases special access circuits to connect its cell towers to its backbone.

According to a coalition spokeswoman,

Huge companies like Verizon and AT&T control the broadband lines of almost every business in the United States. The virtually unchallenged, exclusive control of these lines costs businesses and consumers more than $10 billion annually and generates a profit margin of more than 100 percent for the controlling phone companies, according to their own data provided to the FCC. This hidden broadband tax results in enormous losses for consumers and the economy, and this country cannot afford it; especially now.

An analysis prepared by Peter Bluhm with Dr. Robert Loube under contract with the National Association of Regulatory Commissioners (NARUC) disputes this conclusion. NARUC represents both state utility commissioners who are pro-business as well as state utility commissioners who are hostile toward regulated utilities.  NARUC is not supporting the incumbent network providers on the issue of special access regulation.  According to Bluhm and Loube,

Buyers have criticized the FCC’s current regulatory regime because it has apparently allowed excessive earnings. For their part, the RBOCs contend that the ARMIS figures are virtually meaningless. We agree with the RBOCs ….

Before 2000, special access investment was categorized by what is called “direct assignment.” The purpose was to assign 100% of investment for interstate special access to the interstate jurisdiction and 100% of investment for intrastate special access to the state jurisdiction. In practice, direct assignment required carriers to perform studies on how their networks were used ….

In 2001, the FCC “froze” separations categories and factors for large companies. At that point, large carriers stopped performing direct assignment studies ….

During [the ensuing] period, carriers greatly increased their sales of interstate special access, and all of that revenue was assigned to interstate. As a result, interstate special access revenues increase every year, but not interstate special access costs.  This imbalance has inflated ARMIS special access earnings reports and made them unreliable. (emphasis added.)

Likewise, a paper by Harold Ware, Christian Dippon and William Taylor at NERA Economic Consulting concludes,

accounting profits generated from [ARMIS] data bear no relationship with economic profits and cannot serve any useful purpose in determining whether pricing flexibility has generated excessive rates of return.

In an effort to get to the bottom of this, Bluhm and Loube estimated the current actual cost and found that the carriers are probably earning substantially less than ARMIS indicates.  Instead of earning a 138% return on special access investment, AT&T is more likely earning 30%.  Qwest is probably earning 38%, not 175%.  And Verizon, 15% instead of 62%.

The revised percentages are still more than a regulated utility would be allowed to earn.  However, there are at least two points to consider.

First, absent cost studies there is no way to know how much the network providers are earning.  According to Ware, Dippon and Taylor,

allocations and adjustments can produce wildly different results depending on what factors are used. This is why economists and regulators have long rejected use of cost allocations such as those in the ARMIS data. It is also why [Bluhm and Loube’s] conclusions regarding profits for special access should be summarily rejected.

Incidentally, Ware, Dippon and Taylor predict that the potential benefits of additional special access regulation are not worth the “potentially large costs.”

They point out that if different adjustments are chosen, the return on investment could be even lower.

For another, competitors are entering the market and they are capturing market share.  Bluhm and Loube concede that

Cable television and fixed wireless have low entry and exit costs where their networks are currently established, and each can provide substitutable dedicated services to many customers. Overall, these competitors are still acting on the fringes of special access markets, but they have larger roles in some locations and their market shares appear to be growing. Fixed wireless may hold a large market share in five years, particularly if WiMAX proves reliable and if these carriers can attract sufficient capital to expand. These newer technologies may be poised to become major competitors and are increasingly constraining ILEC behavior, but they have not yet grown beyond fringe competitors in most markets.

Maybe these competitors are still “acting on the fringes” because profit margins afforded by the market aren’t fat enough.

If AT&T, Qwest and Verizon are earning excess profits, cable and fixed wireless competitors will be able to undercut their prices and capture market share. The higher the profits, the faster the entry.

What would happen if Congress or the FCC decided to intervene?  If regulation pushed special access prices lower, that would reduce the revenue investors could expect to earn from new competitive facilities.  If investment won’t be profitable, it won’t be made.

NoChokePoints includes telecommunications providers Sprint, BT (British Telecom) and tw telecom among its members.

These competitors would not be pushing to cap the special access prices charged by incumbent network providers if they wanted to profitably invest in competing facilities.  They would want incumbent providers to charge high prices so they could charge lower prices and still make a profit.

The logical conclusion is that competitors don’t want to invest in new facilities.  They simply want to cut costs.  (Sprint, which has partnered with Clearwire and is exploring a combination with Level 3, is hedging its bets.)

A desire to cut costs rather than assume investment risks is not surprising.

But the coalition claims that additional special access regulation will create jobs.

Policymakers need to consider whether they want to help companies who don’t want to invest save jobs at the expense of their suppliers, or whether it would be better to maintain incentives for investment.  Investment will create sustainable jobs.

Cost cutting will simply lead to more layoffs, here or there.

The message for Congress is: (1) the “controlling phone companies” are not earning margins in excess of 100%, according to any credible observer; (2) determining what the exact margin really is would require cost studies which are expensive, time consuming and would probably lead to litigation and (3) if prices do exceed reasonable costs it will be profitable for competitors to invest in new facilities which will create needed jobs.

For more information, a recent column I wrote about proposals to expand special access regulation can be found here.

Small cellphone operators want Congress or the Federal Communications Commission to prohibit larger carriers from becoming exclusive providers of popular handsets, like the Apple iPhone (AT&T), Blackberry Storm (Verizon Wireless), Palm Pre (Sprint) and Samsung Behold (T-Mobile).

John E. Rooney, President and CEO of United States Cellular Corp., testified at a recent Senate Commerce Committee hearing:

These arrangements harm consumers in rural areas and decrease competition nationwide and do not enhance innovation.

Let’s examine these arguments.

Rural Consumers

Rooney bemoans the fact that

many rural residents of Alaska, Arizona, Colorado, Idaho, Kansas, Maine, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Dakota, South Dakota, Utah, West Virginia and Wyoming are not served by AT&T network facilities

while Victor H. “Hu” Meena, President and CEO if Cellular South, Inc.,  claims that

Vast portions of America – including all or part of Alaska, Arizona, California, Idaho, Kansas, Maine, Minnesota, Montana, Nebraska, Nevada, New Hampshire New Mexico, Oregon, Vermont, Washington, West Virginia and Wisconsin – are not served by any of the largest carriers, so Americans in these areas are prohibited from acquiring the newest and most innovative devices.

There are advantages and disadvantages no matter where one chooses to live.  The fact that someplace is without a particular amenity traditionally hasn’t justified limiting the ability of private entities to exercise their own judgment as to parties with whom they will deal.  While I am fortunate to have the opportunity to own an iPhone, I don’t get to live in a pristine rural setting with a wide open outdoors, low housing costs, etc.

It should be noted that however many rural Americans are unserved by any of the largest carriers, these customers are no threat to United States Cellular Corp. or Cellular South.  The threat comes from customers who have the option to switch carriers in pursuit of better devices, and I get the impression there are more of these customers than Rooney and Meena are letting on.  According to Rooney,

the Big Four’s control over the most advanced, attractive handsets has made it significantly harder for smaller carriers to attract and retain subscribers, and to effectively compete in rural areas, even with federal universal service support. (emphasis added.)

Meena says,

Cellular South and other regional and rural carriers have competed with the largest carriers for years based on network quality, network coverage and price. These are all factors that are within our control … However, our ability to compete is compromised because the largest carriers lock up devices in exclusivity agreements. Put simply, regional and rural carriers cannot gain access to the latest, cutting-edge devices which gives large carriers a key competitive advantage. Focus groups of customers who have left Cellular South for the largest carriers repeatedly say that they are buying the device, not the network, and certainly not the company. (emphasis added.)

A competitor who can offer something you or I can’t is a frequent hazard of doing business.

Competition and Innovation

The cellphone market is wildly competitive.  More than 95 percent of the U.S. population lives in census blocks with at least three competing carriers, according to the FCC.  And no carrier has a market share exceeding 27 percent.

The cellphone industry was deregulated by a Democratic Congress – with Al Gore’s tie-breaking Senate vote – and signed into law by President Clinton in 1993.

It was an unregulated market in which handset exclusivity was permitted that Apple sought to transform; undoubtedly at least part of the appeal was the fact Apple would be permitted to earn a commensurate profit if consumers liked its product.  “There can be no growth without the investment that is inspired and financed by profit,” as John F. Kennedy said.

Rooney offers no evidence in support of his contention that exclusivity decreases competition nationwide.   Instead, he entreats policymakers to shift the burden of proof with the statement “There is no evidence showing that these practices create significant pro-competitive benefits.”

Similarly, he claims exclusivity arrangements “do not enhance innovation”; again, he offers no support for this view — which is untrue.

The iPhone set a transformative new standard for wireless handsets and attracted millions of new subscribers for AT&T.  All other handset manufacturers and network operators have been racing to catch up.  Before the iPhone, we had awkward devices of limited utility.  Now the industry is competing to offer Smart Phones, or “teleputers” as envisioned by George Gilder.  It is obvious these developments are a tremendous benefit for consumers.  Most consumers will benefit immediately; all consumers will benefit in time.

Rooney and Meena are asking policymakers to reset the basis of competition away from something many consumers apparently value highly (cool devices) back to something that once defined competition in the wireless segment but which these consumers now take for granted (network quality, network coverage and price).

In other words, these executives are asking for protection.

If policymakers proceed down this path, they will be protecting competitors, not competition.  There’s a danger where that will lead, as Peter J. Wallison noted in a recent column,

Protecting competitors means blunting the skills of superior players, allowing inferior managers and business models to remain in business and thus preventing better managements and business models from emerging. Again, stability wins out over change and progress.

Voters Get This (or Soon Will)

On a related note, a Wall Street Journal/NBC poll notes that nearly seven in 10 survey respondents said they had concerns about federal interventions into the economy, including Mr. Obama’s decision to take an ownership stake in General Motors Corp., limits on executive compensation and the prospect of more government involvement in health care.  The poll also found that Mr. Obama’s overall job approval and personal ratings have dropped among independent voters from nearly two-to-one approval to closely divided.

A Pew Poll earlier this month confirmed that independent voters tend to have conservative views about government and regulation, and more liberal views regarding the hot-button social issues, national security and religion.

Democrats deserve much credit for the success of the wireless industry.  It’s ironic some of them want to reverse course.

I previously lauded the Sunlight Foundation for its intention to bid on the contract for updating Recovery.gov. There’s been extensive excessive discussion of it on the Open House Project Google group.

The general theme among the one or two critics has been “leave the incompetence to the experts.” They’ve been a bit curmedgeonly, frankly.

But an informative and balanced comment highlights the practice of “wiring” government contracts. The contracting authority gets together with the preferred contractor and they collaborate to make it very difficult for anyone else to win the bid.

Well, that’s why Sunlight’s bid is so interesting and different. As I said, “[T]he contract award will now be subject to public scrutiny. Value-for-dollar to the taxpayer will be easily discernible, and that will raise the political risk if the contract is awarded based on cronyism or go-with-whatchya-knowism.”

Government contracting officials aren’t used to encountering public scrutiny and political risk for their award decisions. They’re going to experience it here, and they should get used to it for the long haul. I am eager – nay, giddy! – to report on what happens.

Kudos, and carry on, Sunlight.

It’s fascinating to continue watching developments in Iran via Twitter and other social media.

The fact that Twitter delayed a scheduled outage to late-night Tehran time was laudable, but contrary to a growing belief it wasn’t done at the behest of the State Department. It was done at the behest of Twitter users.

Twitter makes that fairly (though imperfectly) clear on its blog, saying, “the State Department does not have access to our decision making process.”

As my Cato Institute colleague Justin Logan notes, events in Iran are not about the United States or U.S. policy. They should not be, or appear to be, directed or aided from Washington, D.C. Any shifts in power in Iran should be produced in Iran for Iranians, with support from the people of the world – not from any outside government.

People are free to speculate that the State Department asked Twitter to deny its involvement precisely to create the necessary appearances, but without good evidence of it, assuming that just reflects a pre-commitment that governments – not people and the businesses that serve them – are the primary forces for good in the world.

Hilarious video on the DTV transition.

Here’s a very cool little app from Identity Analytics: My ID Score. You enter a bit of identifying information. It checks to see if you know stuff that only you are likely to know. (This is what I called “epistemetric” identification in my book.)And then it spits out an estimate of your risk of being a victim of identity fraud.

I got a 240 when I didn’t give them my SSN, and my score dropped to 40 when I submitted my SSN.

Everybody talks about identity fraud, but nobody does anything about it. This does something about it – specifically, it will help stop the worrying on the part of people who don’t need to. And it will give people who should worry a few things to do to get their situation under control. The more that can be done to demystify identity fraud, the better – and the less likely there will be unwise legislation and regulation that ultimately harm the interests of consumers.

So have a little fun and check out My ID Score. (If you’re worried about submitting personal data over a Web site – you can see for yourself that the transmission is encrypted, and ID Analytics is a company I’ve known for many years. This is not a phishing scam – unless it’s a very, very good one.)

As many outlets reported last week, Disney’s ABC Enterprises has bought into Hulu, which had been a joint-venture of NBC Universal, News Corp., and investor Providence Equity Partners.  Like other large media platforms before it, Hulu should brace for the possible antitrust implications of its increasing number of content deals—many of them exclusive, at least as it applies to online streaming video—especially considering the Obama’s administration’s stance on antitrust policy.

Many media commentators are already using the kind of language we associate with past media antitrust cases.  Nate Anderson of ArsTechnica predicted Hulu’s forthcoming “lock” on the market saying:

The Disney deal makes it far more plausible that Hulu—mocked when it launched only last year for its name and its business plan—will dominate online streaming of premium content.

Caroline McCarthy of CNET pointed out that the Disney deal has Hulu fraternizing with prior antitrust targets:

Apple CEO Steve Jobs is Disney’s single biggest shareholder, having sold animation studio Pixar to the company in 2006.

McCarthy makes an apt point as Hulu is looking more and more like the iTunes of television, an honor which Mr. Jobs likely hoped would have gone to iTunes itself.

This all makes for fertile ground for a Justice Department and FTC that are breaking with the prior administration’s antitrust policies.  As then candidate Obama declared last May in a Reuters story:

We’re going to have an antitrust division in the Justice Department that actually believes in antitrust law. We haven’t had that for the last seven, eight years.

The outlook looks especially bad for Hulu considering the Obama administration’s stance on competition policy for the media sector in particular.  In June of last year, then candidate Obama spoke with John Eggerton of Broadcasting & Cable about the direction he would take American antitrust policy:

Under current rules, the media market is dominated by a handful of firms. The ill effects of consolidation today and continued consolidation are well-documented—less diversity of opinion, less local news coverage, replication of the same stories across multiple outlets, and others. We can do better.

However, in the same interview, Mr. Obama gives us reason to believe that a FTC or DoJ under his guidance might not pursue such action against Hulu.  As part of his answer to a question on net neutrality, Mr. Obama said:

The Internet is a powerful, democratizing tool. There are very low entry barriers for the delivery of services over the Internet, and public debate is unfettered by either the network owner or any single dominant voice.

Even so, Hulu’s runaway success over the last year and its growing number of exclusivity agreeements mean that it could see some of the added scrutiny that Mr. Obama believes is necessary in the world of media.  Of course, there are thousands of arguments as to why an actual antitrust case would lack any real merit—the availability of media in other formats such as broadcast or DVD, the number of non-exclusive deals Hulu has signed, the low barriers to entry and low costs for others to offer similar streaming video services—yet these arguments have failed to impress judges and administrations in the past.

President Obama intends to nominate Mignon L. Clyburn to the Federal Communications Commission. Clyburn is a good pick. She has been a member of the Public Service Commission of South Carolina since 1998. She chaired the South Carolina commission from 2002 to 2004, is a past chair of the Southeastern Association of Regulatory Utility Commissioners and is a respected leader in the National Association of Regulatory Utility Commissioners (NARUC). She is trained in economics and has a reputation for thoughtfulness.

The remaining question is who ought to be the Republican nominee to fill the seat vacated by former chairman Kevin J. Martin (a soon-to-be-vacant seat held by Republican Robert M. McDowell will also need to be filled). By law, two of the commssion’s five members may not be from the President’s political party.

Let’s pretend you’re president. You have to appoint two opponents to the FCC. You don’t need their votes to pass your agenda, because you get to appoint three members from your political party who agree with your views. Do you fill the other two slots with people who hold few clear convictions, who are inclined to compromise and who crave positive feedback? Or do you look for people who are intellectually-engaged and are inclined to debate? If you believe your agenda is radical and you worry it will lead to negative consequences for which you will be blamed, you would want to appoint opponents who can be induced to vote with you. That way, you can claim your agenda had bipartisan support. This is the “cover you ass” approach.

On the other hand, if you believe your agenda is correct and will ultimately be viewed as wise and far-sighted, you don’t care whether your opponents supported it. In fact, if your opponents opposed it, you can use that to bury your opponents. I believe the President would be better served by appointing real Republicans to the FCC rather than token Republicans. Real Republicans will scrutinize and dissect issues before the commission and suggest better approaches. Token Republicans will basically just vote with the majority. Token Republicans will tee up fewer issues for judges to review on appeal, but appellants will fill that void. Real Republicans will encourage the formulation of sounder policies which have a better chance of surviving judicial scrutiny.

During the Clinton administration, pliable Republicans were chosen. Commission decisions were unanimous. Those decisions were appealed and were ultimately overturned after years of litigation. Short term success was purchased at the expense of any permanent legacy.

So which Republicans should the President appoint?

The most qualified candidate obviously is Ajit Pai, currently serving as Deputy General Counsel of the FCC. Pai was Chief Counsel of the U.S. Senate Judiciary Committee’s Subcommittee on the Constitution, Senior Counsel at the Office of Legal Policy at the U.S. Department of Justice and Deputy Chief Counsel of the U.S. Senate Judiciary Committee’s Subcommittee on Administrative Oversight and the Courts. He graduated with honors from Harvard College and from the University of Chicago Law School, where he was an editor of the University of Chicago Law Review.

Pai would probably be the most outstanding FCC commissioner ever confirmed, based upon prior experience.

Another excellent candidate is Lee Carosi Dunn, currently a counsel to Senator John McCain. Dunn has 15 years experience working on communications issues. McCain is one of the leading advocates of deregulation for the communications industry. He wisely voted against the 1996 Telecommunications Act because it didn’t go far enough in deregulating the industry and spurring competition. He has consistently supported legislation to loosen media ownership rules, provide equality in regulation for cable and satellite companies to allow for greater competition in subscription televisions services, reduce government ownership in satellite companies, and allow for the FCC to forgo merger reviews that are duplicative to the Department of Justice review.

Pai and Dunn blend tremendous experience and free market views.

They are conservatives, to be sure.

But conservatives aren’t a threat to good policy.

Three of the five commissioners will be Democrats. The two Republicans aren’t going to change the outcome on most issues. Their job will be to offer principled arguments and counterproposals, and to write well-reasoned dissents. If they don’t do it, someone else will.

Policies can either be debated and refined in the commission, or in the courts. It can take the courts years to consider the legality and constitutionality of commission decisions. Years of uncertainty can be devastating to private investment.

The objective needs to be for the courts to review good policies, which stand a better chance of being upheld. If the courts review policies which were not well-considered, there is a higher chance those policies will be reversed.

That necessitates a high caliber of FCC commissioners.

If the President wants a new era of bipartisanship and competent government, he has nothing to fear from the appointment of real Republicans to the FCC. He ought to fear rubber-stamp Republicans who may be inclined to approve well-intentioned but imperfect policies which could use a bit of tinkering to make them survive judicial scrutiny.

Unlike with wiretaps, law enforcement agents are not required by federal statutes to obtain search warrants before employing pen registers or trap and trace devices. These devices record non-content information regarding telephone calls and Internet communications. (Of course, “non-content information” has quite a bit of content – who is talking to whom, how often, and for how long.)

The Electronic Privacy Information Center points out in a letter to Senate Judiciary Committee Chairman Patrick Leahy (D-VT) that the Department of Justice has consistently failed to report on the use of pen registers and trap and trace devices as required by law:

The Electronic Communications Privacy Act requires the Attorney General to “annually report to Congress on the number of pen register orders and orders for trap and trace devices applied for by law enforcement agencies of the Department of Justice.” However, between 1999 and 2003, the Department of Justice failed to comply with this requirement. Instead, 1999-2003 data was provided to Congress in a single “document dump,” which submitted five years of reports in November 2004. In addition, when the 1999-2003 reports were finally provided to Congress, the documents failed to include all of the information that the Pen Register Act requires to be shared with lawmakers. The documents do not detail the offenses for which the pen register and trap and trace orders were obtained, as required by 18 U.S.C. § 3126(2). Furthermore, the documents do not identify the district or branch office of the agencies that submitted the pen register requests, information required by 18 U.S.C. § 3126(8).

EPIC has found no evidence that the Department of Justice provided annual pen register reports to Congress for 2004, 2005, 2006, 2007, or 2008. “This failure would demonstrate ongoing, repeated breaches of the DOJ’s statutory obligations to inform the public and the Congress about the use of electronic surveillance authority,” they say.

It’s a good bet, when government powers are used without oversight, that they will be abused. Kudos to EPIC for pressing this issue. Senator Leahy’s Judiciary Committee should ensure that DoJ completes reporting on past years and that it reports regularly, in full, from here forward.

Just came across this informative blog article by David Ardia, a lawyer at the Harvard Berkman Center. He describes a recent ruling on Section 230 of the Communications Decency Act in a case that the New England Patriots filed against StubHub. The Pats bar fans from reselling their season tickets and want to hold online sites liable for the actions of ticket holders. The judge said that Section 230 did not give StubHub immunity. According to David:

In summary, StubHub profited as ticket prices increased; it didn’t require users to disclose what they paid for their tickets, thus making it harder to police its site; and it encouraged its best clients to buy low and sell high.  Isn’t this the way most online auction sites work?  Surely “knowing participation” isn’t coterminous with “materially contributing” to unlawful activity.

Using the factors described above is a troubling interpretation for Section 230, and has broad implications for online platforms and social networking sites – not just ticket exchanges. The court is sending a message that online sites should be the enforcer of private contracts to which they are not a party. This is an added obligation and potential liability that threatens the stated intent of Section 230, “to promote the continued development of the Internet and other interactive computer services and other interactive media.”

(Update: Bruce Schneier linked to this post (and Adam’s) from his blog post on the topic, and the Wall Street Journal issued a “correction and amplification” at the top of the story on its site.)

I share many of Adam’s concerns with Bruce Schneier’s WSJ piece. But there’s something else wrong with it. He’s got the facts wrong, right in the first paragraph:

Almost none of more than 27 million people who took the RealAge quiz realized that their personal health data was sold to drug companies, who in turned used that information for targeted e-mail marketing campaigns.

RealAge does not sell data to drug companies. RealAge collects health information about users and markets to its users at the request of its “partners.” But, again, it does not disclose health data to those partners, including drug companies.

RealAge.com has a sensible business model: cultivate an audience of users that are interested in health, and make money on the sellers trying to reach them, like drug companies. And y’know what would kill that business model? Giving data about users to the drug companies.

And in terms of privacy, that’s a difference in kind, not degree. The data is held close by RealAge.com. Given that, Schneier’s argument that there is deception deserving government intervention falls apart. RealAge.com says what it does and does what it says.

The line from RealAge’s privacy policy that Bruce quotes is deprived of context by what he doesn’t quote. Here’s what he quotes: “[W]e will share your personal data with third parties to fulfill the services that you have asked us to provide to you.” Scary . . . ish.

The rest of the story is the next line: “These third parties are required not to use your Personal Data other than to provide the services requested by RealAge.”

When I first read the privacy policy a few weeks ago – here’s what I wrote then – I assumed this language allowed them to use an email service provider to store and send emails. I was impressed that they say they specifically require service providers like this not to repurpose the data.

When I checked with the people at RealAge.com today, they confirmed that these lines in their privacy policy are for this kind of third-party service provider, not for drug companies.

So, with the sinister data-sharing-with-drug-companies meme kinda dropped out of the equation, what you have left is the question whether personal information should be used to direct health information toward interested people. Should people get information about remedies they might need from companies interested in selling them?

People are free to doubt drug advertisements because they’re advertisements, but given the prospective health benefits, more information is better than none, and I have a hard time saying health marketing is bad. It’s a lot easier to say it’s bad when you assume incorrectly what happens to personal data in the process.

Last week I attended the National Conference of State Legislators spring meeting here in Washington, DC.  One of the panels was called “Social Networking 101”, and it was an interesting inside discussion centered on how legislatures and legislators are using Facebook, MySpace, Twitter and other social networking tools. Presenters were Sharon Crouch Steidel (Dir of IT for Virginia House of Delegates), Rep. Steve Harrelson from Arkansas, and Pam Greenberg of NCSL.

Rep. Harrelson described three main reasons for legislators to blog: (1) Immediacy – can get in front of the media story; (2) No filters – can tell the story how you want to, and can tell the whole story; (3) Transparency – tell constituents reasons for votes. His blog is amazingly complete.

According to Harrelson, his blog readers care more about politics, not policy issues. Reader traffic spikes when Harrelson talks about who was at what dinner/social event, or who is running for what seat, or committee maneuvering.  One consideration is whether to allow readers to comment and if so, do you censor? Harrelson does not censor, and wonders whether it would be unconstitutional for him to do so using a state computer on state time.

Speakers complained about a flood of email. Policymakers hate canned email and they hate it when they can’t tell if email is actually from a constituent. Legislators and IT directors struggle with how to use social media for effective dialogues, not just emails that say “I support HB 555” 30,000 times. They also want technology that forces users to input their addresses, so they can have constituent mail readily identified.

Virginia is moving toward the use of Wikis for current bills. For example, if a bill is tabled, the wiki will explain what this really means, and what can still happen in the future. The wiki will not allow for user generated content. Virginia is also considering a redesign of members’ webpages to link to a members personal blog or social network page, and to even allow constituent interaction on the members site itself.

Apparently Utah is the most advanced state in terms of the number of members and the caucuses who use a variety of social networking sites. Ning is a site that can be useful because it allows users to create their own communities. Google Moderator is also beneficial as a forum for legislators to post questions or issues and allow users to vote on the most popular ones, that then rise to the top of ranking on the list/page.

If you’re from New Jersey and you like to drink wine — or just feel strongly that government shouldn’t be protecting alcohol distributors at the expense of competition and consumers — go to the UncorkNJ website and send a letter to your local representative in the General Assembly. New Jerseyans are barred from buying wine over the Web, and having it shipped to their home. The time to disintermediate is now!