People are excited about online TV getting big in 2016. Alon Maor of Qwilt predicts in Multichannel News that this will be “the year of the skinny bundle.” Wired echoes that sentiment. The Wall Street Journal’s Geoffrey A. Fowler said, “it’s no longer the technology that holds back cable cutting–it’s the lawyers.”

Well, I’m here to say, lawyers can’t take all the blame. In my experience, it’s the technology, too. Some of the problem is that most discussion about the future of online TV and cable cutting fails to distinguish streaming video-on-demand (SVOD) and streaming linear TV (“linear” means continuous pre-programmed and live “channels”, often with commercials, much like traditional cable). Continue reading →

This article was originally posted on techfreedom.org

On January 11, TechFreedom joined nearly 200 organizations, companies, and experts from more than 40 countries in urging world leaders to support strong encryption and to reject any law, policy, or mandate that would undermine digital security. In France, India, the U.K, China, the U.S., and beyond, governments are considering legislation and other proposals that would undermine strong encryption. The letter is now open to public support and is hosted at https://www.SecureTheInternet.org.

The letter concludes:

Strong encryption and the secure tools and systems that rely on it are critical to improving cybersecurity, fostering the digital economy, and protecting users. Our continued ability to leverage the internet for global growth and prosperity and as a tool for organizers and activists requires the ability and the right to communicate privately and securely through trustworthy networks.

There’s no middle ground on encryption,” said Tom Struble, Policy Counsel at TechFreedom. “You either have encryption or you don’t. Any vulnerability imposed for government use can be exploited by those who seek to do harm. Privacy in communications means governments must not ban or restrict access to encryption, or mandate or otherwise pressure companies to implement backdoors or other security vulnerabilities into their products.”

For tech policy progressives, 2015 was a great year. After a decade of campaigning, network neutrality advocates finally got the Federal Communications Commission to codify regulations that require Internet service providers to treat all traffic the same as it crosses the network and is delivered to customers.

Yet the rapid way broadband business models, always tenuous to begin with, are being overhauled, may throw some damp linens on their party. More powerful smart phones, the huge uptick in Internet streaming and improved WiFi technology are just three factors driving this shift.

As regulatory mechanisms lag market trends in general, they can’t help but be upended along with the industry they aim to govern. Looking ahead to the coming year, the consequences of 2015’s regulatory activism will create some difficult situations for the FCC.

Continue reading →

This article originally appeared at techfreedom.org

Yesterday, the FTC reiterated its age-old formula: there are benefits, there are risks, and here are some recommendations on what we regard as best practices. The report summarizes the workshop the agency held in October 2014, “Big Data: A Tool for Inclusion or Exclusion?”

Commissioner Ohlhausen issued a separate statement, saying the report gave “undue credence to hypothetical harms” and failed to “consider the powerful forces of economics and free-market competition,” which might avoid some of the hypothetical harms in the report.

The FTC is essentially saying, ‘there are clear benefits to Big Data and there may also be risks, but we have no idea how large they are,’” said Berin Szoka. “That’s not surprising, given that not a single economist participated in the FTC’s Big Data workshop. The report repeats a litany of ‘mights,’ ‘concerns’ and ‘worries’ but few concrete examples of harm from Big Data analysis — and no actual analysis. Thus, it does little to advance understanding of how to address real Big Data harms without inadvertently chilling forms of ‘discrimination’ that actually help underserved and minority populations.”

“Most notably,” continued Szoka, “the report makes much of a single news piece suggesting that Staples charged higher prices online to customers who lived farther away from a Staples store — which was cherry-picked precisely because it’s so hard to find examples where price discrimination results in higher prices for poor consumers. The report does not mention the obvious response: if consumers are shopping online anyway, comparison shopping is easy. So why would we think this would be an effective strategy for profit-maximizing firms?”

The FTC can do a lot better than this,” concluded Szoka. “The agency has an entire Bureau of Economics, which the Bureau of Consumer Protection stubbornly refuses to involve in its work — presumably out of the misguided notion that economic analysis is somehow anti-consumer. That’s dead wrong. As with previous FTC reports since 2009, this one’s ‘recommendations’ will have essentially regulatory effect. Moreover, the report announces that the FTC will bring Section 5 enforcement actions against Big Data companies that have ‘reason to know’ that their customers will use their analysis tools ‘for discriminatory purposes.’ That sounds uncontroversial, but all Big Data involves ‘discrimination’; the real issue is harmful discrimination, and that’s not going to be easy for Big Data platforms to assess. This kind of vague intermediary liability will likely deter Big Data innovations that could actually help consumers — like more flexible credit scoring.”

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. Continue reading →

This article originally appeared at techfreedom.org

On December 15, the European Commission announced that it had reached agreement with the European Parliament and the Council on a new EU Data Protection regulation. The new regulation, which is not yet public, has been under negotiation since January 2012, and would replace Europe’s 1995 Data Protection directive, which left implementation up to nation states.

Europe has a collective insecurity complex about the Internet,” said Berin Szoka, President of TechFreedom. “The problem isn’t that Europeans aren’t innovative, but that Europe’s most innovativeusually leave the gray continent to start web businesses in the U.S., where innovation doesn’t require permission. Now, it seems, European governments have thrown in the towel: instead of trying to stop the digital brain drain by making Europe more open to innovation, they’re cracking down on the data flows that drive web companies. Their hodgepodge of new measures will prove either crippling, counter-productive or utterly unworkable.”

The worst idea is banning young teens from using social media without parental consent,” continued Szoka. “We already know that kids 13 and under simply lie about their age to get access to the sites they want to use. Teens will do the same, making the promise of parental control utterly illusory. That, in turn will undermine social media platforms’ efforts to offer age-appropriate experiences for their users. The only way to avoid this will be to age-verify all users, which means tyingeveryone’s Internet use to a verified identity — in short, ending online anonymity. Similarly, the ‘right to be forgotten’ sounds great, but in practice, means giving users a right to censor speech about them they don’t like.”

The new regulations will harm startups most,” concluded Szoka. “Allowing fines of up to 4% of a company’s global revenue will make all companies reluctant to experiment with new offerings that unsettle established norms. From Google’s Street View to Facebook’s NewsFeed, yesterday’s ‘creepy’ has proved to be today’s ‘awesome.’ Now, that line will be drawn by bureaucrats rather than consumers. Ironically, it’s established, American companies that will be most able to deal with the burden of compliance — which is why, of course, these heavy-handed regulations will no doubt be enforced arbitrarily. Regulatory discretion will be used as a tool of digital protectionism — yet another way for regulators to vent their frustration as Europe falls further and further behind Silicon Valley. Ordinary Europeans will be told that only tougher measures will bridge the gap, and Europe’s sad spiral of digital self-destruction will go on, and on, and on…”

Throughout the year, I collect some of the more notable tech policy-related essays that I’ve read and then publish an end-of-year list here. (Here, for example, are my end-of-year lists from 2014 and 2013.) So, here are some of my favorite essays and editorials from 2015. (Note: They are just in chronological order. No ranking here.)

  1. Larry Downes –Take note Republicans and Democrats, this is what a pro-innovation platform looks like,” Washington Post, January 7. (Downes explains how governments need to adapt to accommodate and embrace new forms of technological innovation. He notes: “Here at home, the opportunity to wrap themselves in the flag of innovation is knocking for both parties, but so far there are few takers. Republicans and Democrats regularly invoke the rhetoric of innovation, entrepreneurship, and the transformative power of technology. But in reality neither party pursues policies that favor the disruptors. Instead, where lawmakers once took a largely hands-off approach to Silicon Valley, as the Internet revolution enters a new stage of industry transformation, the temptation to intervene, to usurp, to micromanage, to circumscribe the future — becomes irresistible.”) Equally excellent was Larry’s essay later in the year, “Fewer, Faster, Smarter.” (“As the technology revolution proceeds, the concept of government may return to its pre-industrial roots, setting the most basic rules of the economy and standing by as regulator of last resort when markets fail for some or all consumers over an extended period of time. Even then, the solution may simply be to tweak the incentives to encourage better behavior, rather than more full-fledged—and usually ill-fated—micromanagement of fast-changing industries.”)
  2. Bryant Walker Smith –Slow Down That Runaway Ethical Trolley,” CIS Blog, January 12. (Smith, a leading expert on autonomous vehicle systems, notes that, while serious ethical dilemmas will always be present with such technologies, we should not allow the perfect to be the enemy of the good. “The fundamental ethical question, in my opinion, is this: In the United States alone, tens of thousands of people die in motor vehicle crashes every year, and many more are injured. Automated vehicles have great potential to one day reduce this toll, but the path to this point will involve mistakes and crashes and fatalities. Given this stark choice, what is the proper balance between caution and urgency in bringing these systems to the market? How safe is safe enough?”)
  3. Tim Worstall –Google gets my data, I get search and email and that. Help help, I’m being OPPRESSED!” The Register, February 4. (A wicked tongue-lashing of the critics of the data-driven economy.)
  4. Aki Ito –Six Things Technology Has Made Insanely Cheap: Behold the power of American progress,” Bloomberg Business, February 5. (The title says it all.)
  5. Andrew McAfee –Who are the humanists, and why do they dislike technology so much?” Financial Times, July 7, 2015. (A brief but brilliant exploration of the philosophical fight over differing conceptions of “humanism.” McAfee, appropriately in my opinion, calls into question technological critics who self-label themselves “humanists” and then suggest that those who believe in the benefits of technological innovation and progress are somehow opposed to humanity. In reality, of course, nothing could be further from the truth!)
  6. Jocelyn Brewer – “Techno-Fear is Hurting Kids, Not Their Use of Digital Devices,” July 7, 2015. (A beautiful piece that makes it clear why “the Internet… is not addictive. Technology is not a drug.” Brewer continues on to make the case for avoiding fear-based messaging about Internet problems and instead adopting a more sensible approach: “Rather than trotting out interminable lists of the negative consequences of our adoption of technology lets raise awareness of how to avoid the pitfalls of not approaching this new era with solutions and proactive thinking.” Amen, sister!)
  7. Evan Ackerman – “We Should Not Ban ‘Killer Robots,’ and Here’s Why,” IEEE Spectrum, July 29, 2015, (A thought-provoking piece about a controversial subject in which Ackerman argues that “banning the technology is not going to solve the problem if the problem is the willingness of humans to use technology for evil”)
  8. Tim O’Reilly –Networks and the Nature of the Firm,” Medium, August 14, 2015.  (Explores the economics of the sharing economy and “the huge economic shift led by software and connectedness.”)
  9. Joe Queenan –America’s Need for Pointless Updates and Cat Videos,” Wall Street Journal, December 3, 2015. (“The back-to-nature, turn-off-your-cellphone movement is based on a false assumption.  . . .  Time not spent doing dumb stuff would otherwise be wasted doing other dumb stuff. It’s called ‘play,’ without which Jack is a dull boy. It is a variation on the old saying that nature abhors a vacuum. So nature created the Internet.”)
  10. Dominic Basulto –Can we just stop with all these tech dystopia stories?” Washington Post, Dec 8, 2015. (“Yes, a dystopian future is possible, but so is a utopian future. Most likely, the answer is somewhere in the middle, the way it’s been for millennia.”)

This article originally appeared at techfreedom.org

WASHINGTON D.C. — Yesterday, the Federal Trade Commission announced that it had reached a settlement with Wyndham Hotels over charges that the company had “unreasonable” data security. In 2009, Russian hackers stole customer information, including credit card numbers, from Wyndham hotel systems. The company initially refused to settle an FTC enforcement action, becoming the first to challenge the FTC’s approach to data security in federal court. The FTC has used a decade of settlements with dozens of companies to establish fuzzy de facto standards for data security. In August, the Third Circuit denied Wyndham’s appeal of the district court’s decision to let the case proceed.

The FTC has, once again, avoided having a federal court definitively answer fundamental questions about the constitutionality of the FTC’s approach to data security,” said Berin Szoka, President of TechFreedom, which joined an amicus brief in the case. “The FTC will no doubt claim the Third Circuit vindicated its approach, but all the court really said was that Wyndham’s specific practices may have been unfair. Indeed, the appeals court agreed with Wyndham that the FTC’s so-called ‘common law of consent decrees’ cannot provide the ‘fair notice’ required by the Constitution’s Due Process clause. This implied that the FTC needs to do much more to guide companies on what ‘reasonable’ data security would be. By settling the case, the FTC avoided having the district court resolve those questions.”

It’ll take years for another case to work its way through the courts,” explained Szoka. “LabMD’srecent victory before the FTC’s chief administrative law judge is encouraging, and may allow a federal court to weigh in on the requirements of Section 5’s amorphous unfairness standard, if the full Commission overrules the ALJ. But that case focuses more on how the FTC weighs costs and benefits in each enforcement action than on the issue of how much guidance it provides guidance to industry.”

It’s high time Congress reasserted itself here,” concluded Szoka. “The FTC has demonstrated little willingness to change from within, and we can’t wait for the courts to address these questions. Congress needs to put the FTC on sounder footing across the board — from data security to privacy and other consumer protection issues. Far from hamstringing the agency, requiring better explanation of what the law requires and weighing of costs and benefits would actually help consumers — both by promoting better business practices and by avoiding FTC actions that end up harming consumers. Such common sense reforms should be bipartisan, just as they were back in 1980, the last time Congress really checked the FTC’s vast discretion.”

Szoka is co-author, along with Geoffrey Manne and Gus Hurwitz, of the FTC: Technology & Reform Project’s initial report, “Consumer Protection & Competition Regulation in a High-Tech World: Discussing the Future of the Federal Trade Commission,” which critiques the FTC’s processes and suggests areas where the FTC, the courts and Congress could improve how the FTC applies its sweeping unfairness and deception powers in data security, privacy and other cases, especially related to technology.

The FCC’s Open Internet Order is long and complex and the challenge to it is likewise difficult to untangle. The agency regularly engages in ad hoc rulemaking that results, per Judge Posner, in “unprincipled compromises of Rube Goldberg complexity among contending interest groups viewed merely as clamoring suppliants who have somehow to be conciliated.” The Open Internet Order is no exception and therefore faces several legal vulnerabilities.

In my view, the soft underbelly of the Order is the agency’s position that ISPs are not First Amendment speakers. While courts are generally very deferential to agencies, they are not deferential on constitutional questions. Further, the court panel (two Democrat appointees, one Republican appointee), unfortunately, was not in the carriers’ favor. The major carriers, however, have focused their arguments on whether the agency should receive deference in classifying Internet access as a telecommunications service.

That said, it’s possible the major carriers could get at least a partial win with their arguments. That likelihood is increased because Alamo Broadband and Dan Berninger raised the First Amendment problems with the Order. Given the strength of the First Amendment arguments, the Court might shy away from reaching the issue of whether ISPs are speakers. Below, some thoughts on the moments during oral arguments that surprised me and what went according to predictions.

The Unexpected

A receptive ear in Judge Williams re: the First Amendment arguments. (Good for: ISPs) The First Amendment arguments went better than I’d expected. Alamo and Berninger’s counsel, Brett Shumate, argued the First Amendment issues well and had good responses for skeptical questions. Shumate found a receptive ear in Judge Williams, who seemed to understand the serious First Amendment risks posed by the Order. Williams repeatedly brought up the fact that MetroPCS a few years ago tried to curate the Internet and provide its customers free YouTube, only to face resistance from the FCC and net neutrality activists.

The other two judges were more skeptical but Shumate corrected some misconceptions. The biggest substantive objection from Srinivasan, who sounded the most skeptical of the First Amendment arguments, was that if the Court reaches the First Amendment issues, it has determined that the FCC has reasonably classified Internet access as a common carrier service. He suggested that this means the First Amendment issues mostly disappear. No, Shumate explained. Congress and the FCC can call services whatever they want. They could declare Google Search or Twitter feeds a common carrier service tomorrow and that would have zero effect on whether filtering by Google and Twitter is protected by the First Amendment. Tatel asked whether Section 230’s liability protections suggest ISPs are common carriers and Shumate corrected that misconception, a subject I have written on before.

A major FCC concession that ISPs have to option to change their offerings and escape common carrier regulation. (Good for: ISPs) Title II advocates are spinning the terse First Amendment exchanges as a victory. I’m not convinced. The reason the arguments didn’t generate more heat was because the FCC lawyer made a huge concession at the outset: ISPs that choose to filter the Internet are not covered by the Open Internet Order.

FCC lawyer: “If [ISPs] want to curate the Internet…that would drop them out of the definition of Broadband Internet Access Service.”

Judge Williams: “They have that option under the Order?”

FCC lawyer: “Absolutely, your Honor. …If they filter the Internet and don’t provide access to all or substantially all endpoints, then they drop out of the definition of [BIAS] and the rules don’t apply to them.”

This admission seriously undermines the purposes of the Order. The FCC is stating outright that ISPs have the option to filter and to avoid the rules. That seems to mean that Comcast’s Stream Internet protocol television service, where it is curating streaming TV programs, is not covered by the rules. If Facebook’s Free Basics or a similar service launched in the US giving free, limited access to the Web, that is not covered by the Order. Finally, this means that the many broadband packages that offer family-friendly filtering are outside of the FCC’s rules. It’s not clear how much remains to be regulated since all ISPs reserve the right to filter content and each filters at least some content.

Judge Tatel directing most questioning. (Good for: wash) Many view Judge Tatel as the “swing vote” but I was surprised at the relative quiet from Williams and Srinivasan. Tatel was the most inquisitive, by my listening. He was much more skeptical of some of the FCC’s arguments regarding interconnection than I expected but also more skeptical of the First Amendment arguments than I expected.

Little discussion of Chevron Step 0. (Good for: FCC) Many on the free-market side wanted to make this case about Chevron Step 0 and the notion that Title II is too economically and socially significant to warrant deference. Unfortunately, at oral argument there was very little discussion of Chevron Step 0.

The Expected

Focus on agency discretion. (Good for: FCC) The judges generally seem to see this as a straightforward Chevron case and the questions focused on Chevron Step 1, whether there is ambiguity in the statute about “offering telecommunications” for the FCC to interpret. As expected, the FCC did fairly well in their arguments because these technical issues are very hard to untangle.

On Chevron Step 2, whether the reinterpretation of “telecommunications service” to include Internet access was reasonable, the US Telecom attorney was strong. He leaned heavily on the fact that in Section 230, which amends the Communications Act, Congress announces a national policy that the Internet and specifically Internet access services, should remain “unfettered by Federal regulation.” That would seem to preclude the FCC from using, at the very least, its most powerful regulatory weapon–common carriage–against Internet access providers. Even if “telecommunications service” is ambiguous, he stated, it was unreasonable to include Internet access in that definition.

Focus on whether mobile broadband can be properly classified under Title II. (Benefit: ISPs) As many commentators have noted, the idea that the traditional phone network and the mobile broadband network can be classified as the same interconnected network is far-fetched. Each judge seemed very skeptical of the FCC’s argument and Tatel suggested there was a lack of adequate notice.

Srinivasan pointed out that striking down the wireless rules and maintaining the wireline rules would mean that using the same tablet in different areas of your house would lead to different regulatory treatment, depending on whether you’re on the cellular broadband network or Wifi. Title II supporters think this is pretty clever gotcha but communications law already abounds with seemingly absurd FCC- and court-created legal distinctions. (The FCC invents its own absurd distinction and offers vastly different regulatory treatment for DNS operated by an ISP v. DNS operated by literally anyone else.)

Conclusion

Predictions about major regulatory cases are notoriously difficult. I’ve read (and made) enough predictions about big court cases to know that prognosticators almost always get it wrong. If that’s the case, at least consider one thought-provoking outcome: the rules are largely struck down because the FCC provided inadequate notice on most of the major issues of classification.

If the rules, in contrast, were sustained under Chevron and judged to have had adequate notice, the Court would likely need to confront the First Amendment issues. I don’t think Tatel and Srinivasan, especially, want to rule on these hard constitutional questions. The judges must know the Supreme Court has, as Prof. Susan Crawford says, an “absolutist approach” to the First Amendment that protects speakers of all kinds. Sustaining the rules means the FCC risks a loss on First Amendment grounds on appeal that would nearly eliminate the ability of the FCC to regulate the Internet. For that reason, and because of the notice problems, the Court may strike down the rules on notice and comment grounds, thereby preserving the ability of the FCC to take a fourth bite at the apple.

I wanted to draw your attention to this important address on online platform regulation by Alex Chisholm, the head of UK’s Competition and Markets Authority. That’s the non-ministerial department in the UK responsible for competition policy issues. Chisholm delivered the address on October 27th at the Bundesnetzagentur conference in Bonn. It’s a terrific speech that other policymakers would be wise to read and mimic to ensure that antitrust and competition policy decisions don’t derail the many benefits of the Information Revolution.

“Today, as regulators, we have the responsibility but also the great historical privilege of playing an influential role in the deployment throughout the economy of the latest of these defining technological eras,” Chisholm began. “As regulators, we must try to minimise the inevitable mismatch between how we’ve done things before and the opportunities and risks of the new,” he argued.

He continued on to specify three recommendations for those crafting policy on this front: Continue reading →