For decades Congress has gradually deregulated communications and media. This poses a significant threat to the FCC’s jurisdiction because it is the primary regulator of communications and media. The current FCC, exhibiting alarming mission creep, has started importing its legacy regulations to the online world, like Title II common carrier regulations for Internet providers. The FCC’s recent proposal to “open up” TV set top boxes is consistent with the FCC’s reinvention as the US Internet regulator, and now the White House has supported that push.

There are a lot of issues with the set top box proposal but I’ll highlight a few. I really don’t even like referring to it as “the set top box proposal” because the proposal is really aimed at the future of TV–video viewing via apps and connected devices. STBs are a sideshow and mostly just provide the FCC a statutory hook to regulate TV apps. Even that “hook” is dubious–the FCC arbitrarily classifies apps and software as “navigation devices” but concludes that actual TV devices like Chromecast, Roku, smartphones, and tablets aren’t navigation devices. And, despite what activists say, this isn’t about “cable” either but all TV distributors (“MVPDs”) like satellite and telephone companies and Google Fiber, most of whom are small TV players.

First, the entire push for the proposal is based on the baseless notion that “charging monthly STB fees reveals that cable companies are abusing their market power.” I say baseless because cable companies have lost 14 million TV subscribers since 2002 to phone and satellite companies’ TV offerings (Verizon FiOS TV, Dish, Google Fiber, etc.), which suggests cable doesn’t have market power to charge anticompetitive prices. This is bolstered by the fact that the rates cable companies charge are consistent with what their smaller phone and satellite competitors charge for STBs. In fact, the STB monthly rates cable companies charge are pretty much identical to what municipal-owned and -operated TV stations charge. Even competing STB companies like TiVo charge monthly fees.

Second, as I’ve written, the FCC’s plans simply won’t work. The FCC tried “opening up” cable boxes for years with CableCard. That debacle resulted in ten years of regulations and FCC-directed standards and had only a marginal effect on the STB market. At conclusion, under 5% of the STB market went to “competitive” STB makers like TiVo. This latest plan has an even smaller chance of success because the FCC is not simply regulating cable boxes, but also boxes from satellite TV and IPTV distributors and their apps. The FCC is telling these hundreds of companies using dozens of technologies, codecs, and standards to develop interoperable standards so that other companies can retransmit the TV programming the MVPDs have bundled. It’s impractical and likely to fail, as Larry Downes noted in Recode, which is why the FCC provides few details about how this will work.

Third, what little progress the FCC does make in forcing MVPDs to make their TV programming accessible to competitors’ video apps and devices will tend to make broadband and TV less competitive. What the FCC is trying to do is force, say, Comcast’s TV programming to be available to certain application makers who want to retransmit that programming. So whatever streams to the Comcast Xfinity app will need to also work on competing apps if a competitor wants to re-bundle that programming.

The problem is that TV packages are how these companies compete and FCC rules will hinder that competitive process. TV distributors, including Netflix, purchase rights for sports and other programming to steal subscribers away from competitors. For instance, DirecTV attracts many customers solely because they have NFL Sunday Ticket and Amazon and Netflix original programming is a huge draw to their video services. TV programming and bundling that programming drives the competitive process. The Google Fiber folks likewise found out the importance of TV programming to compete. They planned originally to offer only broadband but came to find out there was little market for a broadband-only provider. Most people want TV packaged with broadband and Google was compelled by market forces to go out and purchase TV programming to attract customers. (On the other hand, some cable companies like Cable One are getting out of the TV game because programmers have significant leverage.)

Even non-MVPDs like mobile carriers and tech companies, including Twitter, Yahoo, and Facebook, are using TV programming to compete and they are investing big into video programming. Verizon Wireless has exclusive NFL programming, T-Mobile recently gave its subscribers a year of streaming access to most baseball games via a MLB.TV deal, and AT&T is giving mobile subscribers access to DirecTV programming. The point is, companies compete by experimenting with different service and program bundles. By forcing programming onto competing applications, devices, and platforms, the FCC short-circuits these competitive dynamics.

Fourth, speaking of purchasing rights, there is misinformation spreading about what TV access consumers are entitled to. For instance, there’s a recent Public Knowledge post that simply distorts the economics and law of TV licensing. Notably, the post says the FCC’s proposal “makes it easier for subscribers to control their own experience when accessing the programming that they…have paid for and to which they have lawful access.” This is simply false. Just because Walking Dead has been licensed for viewing on your television does not mean it’s lawful (or beneficial) for a TV competitor to take that same programming and send it to you via their own app.

Copyright holders re-sell the same programming to different distributors, sometimes several times over. Programmers have exclusive licensing deals with various distributors and device makers, so just because your cable contract allows you to watch it on your TV does not mean you have lawful access anywhere. For instance, the NFL has licensed Thursday Night NFL games to CBS and NBC for broadcast TV viewing, to the NFL Network for cable TV viewing, to Verizon Wireless for smartphone viewing, and to Twitter for computer viewing. Same programming, four different distribution technologies and five different companies. When programming can be easily repurposed, as the FCC would like, that upends entire business models of hundreds of media companies and distributors.

Further, it injects the FCC into copyright licensing issues. Put aside for the moment the debates, that the Public Knowledge post touches on, whether copyright holders are too restrictive. Whatever your views, reforming program licensing should come from Congress and the courts–not the FCC through this convoluted proposal. In fact, change via the courts is what Public Knowledge implicitly endorses. It was the courts–not the FCC–that made VCRs, DVRs, and DVR cloud storage legal in the face of copyright holder opposition. When the FCC last got involved in intervening in TV rights assignments in the 1960s and 1970s, the agency created broadcast retransmission rights, which have plagued communications and copyright law with complexity and lawsuits to this day.

Quite simply, the FCC is coercing companies to make their contracted-for TV content available to others who didn’t contract for it. This proposal will create a mess in television when implemented. It’s an unnecessary intervention into a marketplace–video programming–that is working. We are in what many media critics regard as the Golden Age of Television. That’s because there are so many TV distributors competing for programming. It’s a sellers’ market. The supposed problems here–high STB prices and copyright restrictiveness–are problems for competition agencies and the courts, respectively, not the FCC. The FCC wants to fix what’s not broken and start regulating apps and online video. It does nothing to improve the television market and simply makes more tech and media companies dependent on the FCC’s good graces for competitive survival.

At the same time FilmOn, an Aereo look-alike, is seeking a compulsory license to broadcast TV content, free market advocates in Congress and officials at the Copyright Office are trying to remove this compulsory license. A compulsory license to copyrighted content gives parties like FilmOn the use of copyrighted material at a regulated rate without the consent of the copyright holder. There may be sensible objections to repealing the TV compulsory license, but transaction costs–the ostensible inability to acquire the numerous permissions to retransmit TV content–should not be one of them.

Economists can devise situations where transaction costs are immense and compulsory licenses are needed for a well-functioning market. Today, as when the compulsory license was created, the conventional wisdom is that TV compulsory licenses are still needed to prevent market failure.

In the 1970s, cable companies were capturing broadcast channels and retransmitting it to their subscribers for free because, per the Supreme Court, cable was a passive transmitter and didn’t need copyright permission. In 1976, to correct this perceived unfairness, Congress amended the Copyright Act and said this cable retransmission did necessitate copyright authorization. To make it easier on cable systems (most of which were small, local operations), the law created a compulsory license to broadcast TV content like NBC, ABC, and CBS programming.

The compulsory license primarily does two things: it provides cable operators local TV content royalty-free and provides non-local (“distant”) content (imagine a DC cable company importing a WGN broadcast from Chicago) at regulated rates.

As the House report says:

The Committee recognizes…that it would be impractical and unduly burdensome to require every cable system to negotiate with every copyright owner whose work was retransmitted by a cable system.

The Copyright Office, early on, opposed the compulsory license and has called for the repeal of the compulsory license to broadcast TV content since 1981. As the Register of Copyrights said at a 2000 congressional hearing,

A compulsory license is not only a derogation of a copyright owner’s exclusive rights, but it also prevents the marketplace from deciding the fair value of copyrighted works through government-set price controls.

But when the issue of repeal comes up, many parties cite “significant transaction costs” as a problem with conventional, direct licensing. GAO echoed these objections in an April 2015 report,

we have previously found that obtaining the copyright holders’ permission for all this content would be challenging. Each television program may have multiple copyright holders, and rebroadcasting an entire day of content may require obtaining permission from hundreds of copyright holders. The transaction costs of doing so make this impractical for cable operators.

That sounds sensible but we have powerful contradictory evidence: for decades, hundreds of TV channels requiring the bundling of thousands of copyright licenses are distributed seamlessly and completely outside of the compulsory license regime.

So it’s a mystery to me why analysts still talk about the difficulty in acquiring copyright permission from hundreds or thousands of rights holders. TV distributors outside of the compulsory license scheme do these complex content acquisition deals routinely. Hundreds of non-broadcast channels–like ESPN, CNN, Bravo, HGTV, MTV, and Fox News–are distributed to tens of millions of households via private contractual agreements and without regulated compulsory licenses. TBS, uniquely, in the late 1990s went from a broadcast channel, subject to a compulsory license, to a cable channel distributed via direct licensing with no apparent ill effects. Analysts raising the transactions costs for keeping compulsory licenses, to my knowledge, never explain why the market failure they predict is absent for these hundreds of cable and satellite channels.

Further, while cable and satellite companies don’t need to negotiate broadcast TV copyrights because of the compulsory license, the FCC’s retransmission consent process, part of the 1992 Cable Act, requires these companies to negotiate payment to retransmit broadcast signals–signals that contain the underlying copyrighted content. This process, though bizarre and artificial, is essentially the same negotiation cable and satellite companies would need to enter into in a world without compulsory license.

Finally, online programming from distributors like Hulu, Netflix, and (potentially) Apple TV operate entirely outside of the retrans-compulsory copyright system and undermine the transaction costs objection. Netflix, for instance, doesn’t negotiate with every individual right holder like GAO and Congress imply is necessary in a non-compulsory license regime. Content aggregators and intermediaries, not regulation, streamline the rights acquisition process without the need for a compulsory license. The ostensibly burdensome transaction costs don’t stop Netflix from licensing over 10,000 titles worth around $9 billion.

Certainly, converting from compulsory licensing to direct licensing has issues. Changing legal regimes can be costly and there is a need to prevent anticompetitive withholding of content. Understandably, many cable and satellite distributors oppose repeal of compulsory licenses if the complex FCC system of retransmission consent and must carry are maintained. I tend to agree. Nevertheless, it’s time to strike the transaction cost argument from the policy discussion. The predicted market failure is overcome by market forces.

For more background on TV regulation, see Adam Thierer and Brent Skorup, Video Marketplace Regulation: A Primer on the History of Television Regulation and Current Legislative Proposals (Mercatus working paper).

Last week, the Mercatus Center and the R Street Institute co-hosted a video discussion about copyright law. I participated in the Google Hangout, along with co-liberator Tom Bell of Chapman Law School (and author of the new book Intellectual Privilege), Mitch Stoltz of the Electronic Frontier Foundation, Derek Khanna, and Zach Graves of the R Street Institute. We discussed the Aereo litigation, compulsory licensing, statutory damages, the constitutional origins of copyright, and many more hot copyright topics.

You can watch the discussion here:

Adam and I recently published a Mercatus research paper titled Video Marketplace Regulation: A Primer on the History of Television Regulation And Current Legislative Proposals, now available on SSRN. I presented the paper at a Silicon Flatirons academic conference last week.

We wrote the paper for a policy audience and students who want succinct information and history about the complex world of television regulation. Television programming is delivered to consumers in several ways, including via cable, satellite, broadcast, IPTV (like Verizon FiOS), and, increasingly, over-the-top broadband services (like Netflix and Amazon Instant Video). Despite their obvious similarities–transmitting movies and shows to a screen–each distribution platform is regulated differently.

The television industry is in the news frequently because of problems exacerbated by the disparate regulatory treatment. The Time Warner Cable-CBS dispute last fall (and TWC’s ensuing loss of customers), the Aereo lawsuit, and the Comcast-TWC proposed merger were each caused at least indirectly by some of the ill-conceived and antiquated TV regulations we describe. Further, TV regulation is a “thicket of regulations,” as the Copyright Office has said, which benefits industry insiders at the expense of most everyone else.

We contend that overregulation of television resulted primarily because past FCCs, and Congress to a lesser extent, wanted to promote several social objectives through a nationwide system of local broadcasters:

1) Localism 2) Universal Service 3) Free (that is, ad-based) television; and 4) Competition

These objectives can’t be accomplished simultaneously without substantial regulatory mandates. Further, these social goals may even contradict each other in some respects.

For decades, public policies constrained TV competitors to accomplish those goals. We recommend instead a reliance on markets and consumer choice through comprehensive reform of television laws, including repeal of compulsory copyright laws, must-carry, retransmission consent, and media concentration rules.

At the very least, our historical review of TV regulations provides an illustrative case study of how regulations accumulate haphazardly over time, demand additional “correction,” and damage dynamic industries. Congress and the FCC focused on attaining particular competitive outcomes through industrial policy, unfortunately. Our paper provides support for market-based competition and regulations that put consumer choice at the forefront.

It appears that Federal Communications Commission (FCC) Chairman Tom Wheeler is returning to a competition-based approach to communications regulation. Chairman Wheeler’s emphasis on “competition, competition, competition” indicates his intent to intervene in communications markets only when it is necessary to correct a market failure.

I expect most on both sides of the political spectrum would welcome a return to rigorous market analysis at the FCC, but you can’t please all of the people all of the time. The American Television Alliance (ATVA), whose FCC petition wouldn’t withstand even a cursory market power analysis, is sure to be among the displeased.

The ATVA petition asks the FCC to regulate prices for retransmission consent (the prices video service providers (VSPs) pay for the rights to provide broadcast television programming to pay-TV subscribers) because retransmission fees and competition among VSPs are increasing. Though true, this data doesn’t indicate that TV stations or broadcast television networks have market power — it indicates that legislative and policy efforts to increase competition among VSPs are working.

The increase in retransmission consent fees is the natural consequence of the increase in competition among VSPs. When incumbent cable companies were the dominant VSPs, they could use the threat of a blackout to force broadcasters to grant retransmission consent at extremely low prices (or even for free). If a TV station balked, it risked losing substantial advertising revenue because there was no other VSP to retransmit the station’s signal.

As a result of increasing competition among VSPs, broadcasters are finally in a position to negotiate fairer prices for their content. When a VSP threatens a blackout today, a broadcaster has the option of calling the VSP’s bluff, as Wall Street observed when Time Warner yanked CBS off the air during a dispute about wireless distribution rights last fall. Now that there are competitive VSPs in most markets, cable operators have something to lose from a blackout too — their subscribers.

VSPs have responded to increasing market competition by asking the government for special treatment. ATVA has cloaked their rent-seeking request in the language of market power, but haven’t provided any analysis supporting their contention that retransmission consent fees are “too high.” They appear to be hoping that, if they cry wolf loud enough, they can avoid paying a fairer price for television programming.

If retransmission fees were really “too high,” one would expect that they would be significantly higher than the fees VSPs charge for their own content. According to the data, however, VSPs charge significantly more for their affiliated content than broadcasters charge for retransmission consent. In 2012, VSPs paid an average of $1.50 for the top ten channels affiliated with cable networks. In comparison, VSPs paid an average of $0.58 in 2012 for the right to retransmit the channels of the top ten TV station companies (e.g., Sinclair) — sixty one percent (61%) less than VSPs were willing to pay for their affiliated content. (Sources: Kagan and SNL)

Are the significantly higher prices cable networks charged for their programming in 2012 driven by consumer ratings? No. Kagan data indicates that, in 2012, VSPs paid approximately the same amount — $0.57 per subscriber — for CNN (CNN en Español sold for $0.58) as the average for the top ten TV stations. Despite its similar price, however, CNN averaged only about 600,000 daily viewers during primetime whereas each of the national broadcast network news programs averaged over 8 million evening viewers daily. This viewership data, albeit limited, indicates that broadcasters are charging ten times less for their programming than VSPs charge for similar programming.

The premium VSPs pay for their own content reflects the economics of the video programming market. Though competition among VSPs has increased, there is still significantly greater concentration and market power in the video distribution market than in the video programming market. According to the FCC’s most recent video competition report, only about one-third (35%) of homes had access to at least four VSPs in 2011. (See Fifteenth Report at Table 2) The FCC found that, even in areas with four VSPs, the Herfindahl-Hirschman Index (HHI), a common measure of horizontal market concentration, was over 2,500 (a highly concentrated marketplace). (See id. at ¶ 37) In comparison, there were more than twenty national video programming networks. (See id. at App. B)

Even a cursory review of the data indicates that recent increases in retransmission consent fees are a sign of market success, not a failure. It should be no surprise that, as competition among VSPs has increased, the price of retransmission consent has increased with it. It is the predictable result of cable’s decreasing monopsony power.

Anupam Chander, Director of the California International Law Center and Martin Luther King, Jr. Hall Research Scholar at the UC Davis School of Law, discusses his recent paper with co-author Uyen P. Lee titled The Free Speech Foundations of Cyberlaw. Chander addresses how the first amendment promotes innovation on the Internet; how limitations to free speech vary between the US and Europe; the role of online intermediaries in promoting and protecting the first amendment; the Communications Decency Act; technology, piracy, and copyright protection; and the tension between privacy and free speech.

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Related Links

• The Free Speech Foundations of CyberLaw, Chander, Lee
• The Electronic Silk Road: How the Web Binds the World Together in Commerce, Amazon
• Rules of the Digital Age: PW Talks with Anupam Chander, Publishers Weekly
• Securing Privacy in the Internet Age, Amazon

It’s been over five years since Congress passed major legislation addressing copyright protection, but this hasn’t stopped copyright owners from achieving real progress in securing their expressive works. In cooperation with private-sector stakeholders, rights holders have made several deals aimed at combating copyright infringement and channeling consumer demand for original content toward legitimate outlets. These voluntary agreements will be the subject of a hearing this afternoon (9/18) before the House Judiciary Committee’s Subcommittee on Courts, Intellectual Property and the Internet. This panel marks the latest in a series of hearings the committee launched earlier this year to review the Copyright Act, much of which dates back to 1976 or earlier.

Copyright consensus may sound like an oxymoron, especially in the wake of last year’s bruising legislative battle over SOPA and PIPA. But in reality, there’s no shortage of common ground when it comes to copyright protection. Despite all the controversy that surrounds the issue, copyright isn’t so much a “conflict of visions”, to borrow from Thomas Sowell, but a conflict of tactics, as I argued earlier this year on Cato Unbound.

Indeed, with some notable exceptions, most scholars, business leaders, and policymakers accept that government has a legitimate and important role in securing to inventors and creators the fruits of their labors“. Unsurprisingly, the devil is in the details, where genuinely tough questions arise regarding the government’s proper role in policing the Internet for copyright violations. Should the law hold online intermediaries accountable for their users’ infringing acts? What remedies should the law afford rights holders whose works are unlawfully distributed all over the Internet, often by profit-generating foreign actors?

Although Congress has struggled mightily with these questions, business leaders from a variety of sectors have worked together to devise several approaches to the problem of copyright infringement that go above and beyond the Copyright Act. Perhaps most notably, in February 2013, a coalition of five major ISPs and several trade associations representing filmmakers and artists announced the launch of the Copyright Alert System (“CAS”). Administered by the Center for Copyright Information, the CAS aims to educate users about copyright law—and deter them from violating it—by delivering Copyright Alert notices to ISP subscribers found to be sharing infringing files on peer-to-peer networks.

It’s too early to render a verdict on the CAS’s effectiveness, but as data accumulates in coming months and years, researchers will surely examine how the system has impacted user behavior. Similar approaches to infringement by ISP subscribers have been tried in other countries such as France—albeit on a mandatory, not voluntary, basis—and several studies have found that these so-called “graduated response” systems have indeed reduced infringement in nations where they’ve been implemented. But other studies have reached the opposite conclusion, so more research is needed in this area. Whether or not CAS succeeds, however, experimentation involving novel approaches to copyright protection is crucial for the future of creative expression, as is experimentation among business models to monetize content.

Speaking of voluntary approaches to copyright protection, Google last week unveiled a report describing its anti-piracy efforts. As Google’s Fred von Lohmann explained:

[W]e are releasing a report, “How Google Fights Piracy,” bringing together in one place an overview of the programs, policies, and technologies we have put in place to combat piracy online.

The report discusses how Google penalizes websites that receive a high percentage of DMCA takedown notices in Google’s search results, hopefully thereby directing users toward legitimate sources of content. It explains the “Content ID” system pioneered by YouTube, which enables rights holders to identify potentially infringing videos posted to the site, and gives copyright owners the choice to monetize such videos in lieu of removing them altogether. And the report points out that in 2012, Google voluntarily disabled ad service to 46,000 websites dedicated to infringement. Check out the full report for much more information on these efforts and many others that Google has taken to better secure copyrights—and for another perspective, check out a MPAA-commissioned study released today critiquing the role that Internet search engines play in helping users find infringing websites.

After today’s hearing, I’ll have more thoughts on the state of voluntary cooperation to protect copyrights, and on the debate about whether file lockers and search engines ought to do more to combat infringement.

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

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

Ian Brown and Christopher T. Marsden’s new book, Regulating Code: Good Governance and Better Regulation in the Information Age, will go down as one of the most important Internet policy books of 2013 for two reasons. First, their book offers an excellent overview of how Internet regulation has unfolded on five different fronts: privacy and data protection; copyright; content censorship; social networks and user-generated content issues; and net neutrality regulation. They craft detailed case studies that incorporate important insights about how countries across the globe are dealing with these issues. Second, the authors endorse a specific normative approach to Net governance that they argue is taking hold across these policy arenas. They call their preferred policy paradigm “prosumer law” and it envisions an active role for governments, which they think should pursue “smarter regulation” of code.

In terms of organization, Brown and Marsden’s book follows the same format found in Milton Mueller’s important 2010 book Networks and States: The Global Politics of Internet Governance; both books feature meaty case studies in the middle bookended by chapters that endorse a specific approach to Internet policymaking. (Incidentally, both books were published by MIT Press.) And, also like Mueller’s book, Brown and Marsden’s Regulating Code does a somewhat better job using case studies to explore the forces shaping Internet policy across the globe than it does making the normative case for their preferred approach to these issues.

Thus, for most readers, the primary benefit of reading either book will be to see how the respective authors develop rich portraits of the institutional political economy surrounding various Internet policy issues over the past 10 to 15 years. In fact, of all the books I have read and reviewed in recent years, I cannot think of two titles that have done a better job developing detailed case studies for such a diverse set of issues. For that reason alone, both texts are important resources for those studying ongoing Internet policy developments.

That’s not to say that both books don’t also make a solid case for their preferred policy paradigms, it’s just that the normative elements of the texts are over-shadowed by the excellent case studies. As a result, readers are left wanting more detail about what their respective policy paradigms would (or should) mean in practice. Regardless, in the remainder of this review, I’ll discuss Brown and Marsden’s normative approach to digital policy and contrast it with Mueller’s since they stand in stark contrast and help frame the policy battles to come on this front.

Governing Cyberspace: Mueller vs. Brown & Marsden

Mueller’s normative goal in Networks and States was to breathe new life into the old cyber-libertarian philosophy that was more prevalent during the Net’s founding era but which has lost favor in recent years. He made the case for a “cyberliberty” movement rooted in what he described as a “denationalized liberalism” vision of Net governance. He argued that “we need to find ways to translate classical liberal rights and freedoms into a governance framework suitable for the global Internet. There can be no cyberliberty without a political movement to define, defend, and institutionalize individual rights and freedoms on a transnational scale.”

I wholeheartedly endorsed that vision in my review of Mueller’s book, even if he was a bit short on the details of how to bring it about. But it is useful to keep Mueller’s paradigm in mind because it provides a nice contrast with the approach Brown and Marsden advocate, which is quite different.

Generally speaking, Brown and Marsden reject most forms of “Internet exceptionalism” and certainly reject the sort of “cyberliberty” ethos that Mueller and I embrace. They instead endorse a fairly broad role for governments in ordering the affairs of cyberspace. In their self-described “prosumer” paradigm, the State is generally viewed as benevolent actor, well-positioned to guide the course of code development toward supposedly more enlightened ends.

Consistent with the strong focus on European policymaking found throughout the book, the authors are quite enamored with the “co-regulatory” models that have become increasing prevalent across the continent. Like many other scholars and policy advocates today, they occasionally call for “multi-stakeholderism” as a solution but they do not necessarily mean the sort of truly voluntary, bottom-up multi-stakeholderism of the Net’s early days. Rather, they are usually thinking of multi-stakeholderism as what is essentially pluralistic politics; it’s the government setting the table, inviting the stakeholders to it, and then guiding (or at least “nudging”) policy along the way. “We are convinced that fudging with nudges needs to be reinforced with the reality of regulation and coregulation, in order to enable prosumers to maximize their potential on the broadband Internet,” they say. (p. 187)

Meet the New Boss, Same as the Old Boss?

Thus, despite the new gloss, their “prosumer law” paradigm ends up sounding quite a bit like a rehash of traditional “public interest” law and common carrier regulation, albeit with a new appreciation of just how dynamics markets built on code can be. Indeed, Brown and Marsden repeatedly acknowledge how often law and regulation fails to keep pace with the rapid evolution of digital technology. “Code changes quickly, user adoption more slowly, legal contracting and judicial adaptation to new technologies slower yet, and regulation through legislation slowest of all,” they correctly note (p. xv). This reflects what Larry Downes refers to as the most fundamental “law of disruption” of the digital age: “technology changes exponentially, but social, economic, and legal systems change incrementally.”

At the end of the day, however, that insight doesn’t seem to inform Brown and Marsden’s policy prescriptions all that much. Theirs is a world in which policy tinkering errors will apparently be corrected promptly and efficiently by still more policy tinkering, or “smarter regulation.” Moreover, like many other Internet policy scholars today, they don’t mind regulatory interventions that come early and often since they believe that will help regulators get out ahead of the technological curve and steer markets in preferred directions. “If regulators fail to address regulatory objects at first, then the regulatory object can grow until its technique overwhelms the regulator,” they say (p. 31).

This is the same mentality that is often on display in Tim Wu’s work, which I have been quite critical of here and elsewhere. For example, Wu has advocated informal “agency threats” and the use of “threat regimes” to accomplish policy goals that prove difficult to steer though the formal democratic rulemaking process. As part of his “defense of regulatory threats in particular contexts,” Wu stresses the importance of regulators taking control of fast-moving tech markets early in their life cycles. “Threat regimes,” Wu argues, “are best justified when the industry is undergoing rapid change — under conditions of ‘high uncertainty.’ Highly informal regimes are most useful, that is, when the agency faces a problem in an environment in which facts are highly unclear and evolving. Examples include periods surrounding a newly invented technology or business model, or a practice about which little is known,” Wu concludes.

This is essentially where most of the “co-regulation” schemes that Brown and Marsden favor would take us: Code regulators would take an active role in shaping the evolution of digital technologies and markets early in its life cycle. What are the preferred regulatory mechanisms? Like Wu and many other cyberlaw professors today, Brown and Marsden favor robust interconnection and interoperability mandates bolstered by antitrust actions as well. And, again, they aren’t willing to wait around and let the courts adjudicate these issues in an ex post fashion. “Essential facilities law is a very poor substitute for the active role of prosumer law that we advocate, especially in its Chicago school minimalist phase” (p. 185). In other words, we shouldn’t wait for someone to bring a case and litigate it through the courts when preemptive, proactive regulatory interventions can sagaciously steer us to a superior end.

More specifically, they propose that “competition authorities should impose ex ante interoperability requirements upon dominant social utilities… to minimize network barriers” (p. 190) and they model this on traditional regulatory schemes such as must-carry obligations, API interface disclosure requirements, and other interconnection mandates (such as those imposed on AOL/Time Warner a decade ago to alleviate fears about instant messaging dominance). They also note that “Effective, scalable state regulation often depends on the recruitment of intermediaries as enforcers” to help achieve various policy objectives (p. 170).

The Problem with Interoperability Über Alles

So, in essence, the Brown-Marsden Internet policy paradigm might be thought of as interoperability über alles. Interoperability and interconnection in pursuit of more “open” and “neutral” systems is generally considered an unalloyed good and most everything else is subservient to this objective.

This is a serious policy error and one that I address in great detail in my absurdly long review of John Palfrey and Urs Gasser’s Interop: The Promise and Perils of Highly Interconnected Systems. I’m not going to repeat all 6,500 words of that critique here when you can just click back and read it, but here’s the high level summary: There is no such thing as “optimal interoperability” that can be determined in an a priori fashion. Ongoing marketplace experimentation with technical standards, modes of information production and dissemination, and interoperable information systems, is almost always preferable to the artificial foreclosure of this dynamic process through state action. The former allows for better learning and coping mechanisms to develop while also incentivizing the spontaneous, natural evolution of the market and market responses. The latter (regulatory foreclosure of experimentation) limits that potential.

More importantly, when interoperability is treated as sacrosanct and forcibly imposed through top-down regulatory schemes, it will often have many unintended consequences and costs. It can even lock in existing market power and market structures by encouraging users and companies to flock to a single platform instead of trying to innovate around it. (Go back and take a look at how the “Kingsbury Commitment” — the interconnection deal from the early days of the U.S. telecom system — actually allowed AT&T to gain greater control over the industry instead of assisting independent operators.)

Citing Palfrey and Gasser, Brown and Marsden do note that “mandated interoperability is neither necessary in all cases nor necessarily desirable” (p. 32), but they don’t spend as much time as Palfrey and Gasser itemizing these trade-offs and the potential downsides of some interoperability mandates. But what frustrates me about both books is the almost quasi-religious reverence accorded to interoperability and open standards when such faith is simply not warranted after historical experience is taken into consideration.

Plenty of the best forms of digital innovation today are due to a lack of interoperability and openness. Proprietary systems have produced some of the most exciting devices (iPhone) and content (video games) of modern times. Then again, voluntary interoperable and “open” services and devices thrive, too. The key point here — and one that I develop in far greater detail in my book chapter, “The Case for Internet Optimism, Part 2 – Saving the Net From Its Supporters” — is that the market for digital services is working marvelously and providing us with choices of many different flavors. Innovation continues to unfold rapidly in both directions along the “open” vs. “closed” continuum. (Here are 30 more essays I have written on this topic if you need more proof.)

Generally speaking, we should avoid mandatory interop and openness solutions. We should instead push those approaches and solutions in a truly voluntary, bottom-up fashion. And, more importantly, we should be pushing for outside-the-box solutions of the Schumpeterian (creative destruction / disruptive innovation) variety instead of surrendering so quickly on competition through forced sharing mandates.

The Case for Patience & Policy Restraint

But Brown and Marsden clearly do not subscribe to that sort of Schumpeterian thinking. They think most code markets tip and lock into monopoly in fairly short order and that only wise interventions can rectify that. For example, they claim that Facebook’s “monopoly is now durable,” which will certainly come as a big surprise to the millions of us who do not use it all. And the story of MySpace’s rapid rise and equally precipitous fall has little bearing on this story, they argue.

But, no matter how you define the “social networking market,” here are two facts about it: First, it is still very, very young. It’s only about a decade old. Second, in that short period of time, we have already witnessed the entire first generation of players fall by the wayside. While the second generation is currently dominated by Facebook, it is by no means alone. Again, millions like me don’t use it at all and get along just fine with other “social networking” technologies, including Twitter, LinkedIn, Google+, and even older tech like email, SMS, and yes, phone calls! Accusations of “monopoly” in this space strain credulity in the extreme. I invite you to read my Mercatus working paper, “The Perils of Classifying Social Media Platforms as Public Utilities,” for a more thorough debunking of this logic. (Note: The final version of that paper will be published in the CommLaw Conspectus shortly.)

Such facts should have a bearing on the debate about regulatory interventions. We continue to witness the power of Schumpeterian rivalry as new and existing players battle in a race for the prize of market power. Brown and Marsden fear that the race is already over in many sectors and that it is time to throw in the towel and get busy regulating. But when I look around at the information technology marketplace today, I am astonished just how radically different it looks from even just a few years ago, and not just in the social media market. I have written extensively about the smartphone marketplace, where innovation continues at a frantic pace. As I noted in my essay here on “Smartphones & Schumpeter,” it’s hard to remember now, but just 6 short years ago:

• The iPhone and Android had not yet landed.
• Most of the best-selling phones of 2007 were made by Nokia and Motorola.
• Feature phones still dominated the market; smartphones were still a luxury (and a clunky luxury at that).
• There were no app stores and what “apps” did exist were mostly proprietary and device or carrier-specific; and,
• There was no 4G service.

It’s also easy to forget just how many market analysts and policy wonks were making absurd predictions at the time about how the telecom operators at the time had so much market power that they would crush new innovation without regulation. Instead, in very short order, the market was completely upended in a way that mobile providers never saw coming. There was a huge shift in relative market power flowing from the core of these markets to the fringes, especially to Apple, which wasn’t even a player in that space before the launch of the iPhone.

As I noted in concluding that piece last year, these facts should lead us to believe that this is a healthy, dynamic marketplace in action. Not even Schumpeter could have imagined creative destruction on this scale. (Just look as BlackBerry). But much the same could be said of many other sectors of the information economy.  While it is certainly true that many large players exist, we continue to see a healthy amount of churn in these markets and an astonishing amount of technological innovation.

Public Choice Insights: What History Tells Us

One would hope these realities would have a greater bearing on the policy prescriptions suggested by analysts like Brown and Marsden, but they don’t seem to. Instead, the attitude on display here is that governments can, generally speaking, act wisely and nudge efficiently to correct short-term market hiccups and set us on a better course. But there are strong reasons to question that presumption.

Specifically, what I found most regrettable about Brown and Marsden’s book was the way — like all too many books in this field these days — the authors briefly introduce “public choice” insights and concerns only to summarily dismiss them as unfounded or overblown. (See my review of Brett Frischmann’s book, Infrastructure: The Social Value of Shared Resources for a more extended discussion of this problem as it pertains to discussions about not just infrastructure regulation by the regulation of all complex industries and technologies.)

Brown and Marsden make it clear that their intentions are pure and that their methods would incorporate the lessons of the past, but they aren’t very interested in dwelling on the long, lamentable history of regulatory failures and capture in the communications and media policy sectors. They do note the dangers of a growing “security-industrial complex” and argue that “commercial actors dominate technical actors in policy debates.” They also say that the “potential for capture by regulated interests, especially large corporate lobbies, is an essential insight” that informs their approach. The problem is that it really doesn’t. They largely ignore those insights and instead imply that, to the extent this is a problem at all, we can build a better breed of bureaucrats going forward who will craft “smarter regulation” that is immune from such pressures. Or, they claim that “multi-stakeholderism” — again, the new, more activist and government-influenced conception of it — can overcome these public choice problems.

A better understanding of power politics that is informed by the wisdom of the ages would instead counsel that minimizing the scope of politicization of technology markets is the better remedy. Capture and cronyism in communications and media markets has always grown in direct proportion to the overall scope of law governing those sectors. (I invite you to read all the troubling examples of this that Brent Skorup and I have documented in our new 72-page working paper, “A History of Cronyism and Capture in the Information Technology Sector.” Warning: It makes for miserable reading but proves beyond any doubt that there is something to public choice concerns.)

To be clear, it’s not that I believe that “market failures” or “code failures” never occur, rather, as I noted in this debate with Larry Lessig, it’s that such problems are typically “better addressed by voluntary, spontaneous, bottom-up, marketplace responses than by coerced, top-down, governmental solutions. Moreover, the decisive advantage of the market-driven approach to correcting code failure comes down to the rapidity and nimbleness of those response(s).” It’s not just that traditional regulatory remedies cannot keep pace with code markets, it’s that those attempting to craft the remedies do not possess the requisite knowledge needed to know how to steer us down a superior path. (See my essay, “Antitrust & Innovation in the New Economy: The Problem with the Static Equilibrium Mindset,” for more on that point.)

Regardless, at a minimum, I expect scholars to take seriously the very real public choice problems at work in this arena. You cannot talk about the history of these sectors without acknowledging the horrifically anti-consumer policies that were often put in place at the request of one industry or another to shield themselves from disruptive innovation. No amount of wishful thinking about “prosumer” policies will change these grim political realities. Only by minimizing chances to politicize technology markets and decisions can we overcome these problems.

Conclusion

For those of us who prefer to focus on freeing code, Brown and Marsden’s Regulating Code is another reminder that liberty is increasingly a loser in Internet policy circles these days. Milton Mueller’s dream of decentralized, denationalized liberalism seems more and more unlikely as armies of policymakers, regulators, special interests, regulatory advocates, academics, and others all line up and plead for their pet interest or cause to be satisfied through pure power politics. No matter what you call it — fudging, nudging, coregulation, smart regulation, multistakeholderism, prosumer law, or whatever else, — there is no escaping the fact that we are witnessing the complete politicization of almost every facet of code creation and digital decisionmaking today.

Despite my deep reservations about a more politicized cyberspace, Brown and Marsden’s book is an important text because it is one of the most sophisticated articulations and defenses of it to date. Their book also helps us better understand the rapidly developing institutional political economy of Internet regulation in both broad and narrow policy contexts. Thus, it is worth your time and attention even if, like me, you are disheartened to be reading yet another Net policy book that ultimately endorses mandates over of markets as the primary modus operandi of the information age.

Additional Resources about the book:

• the official MIT Press website for Regulating Code
• shorter Brown & Marsden paper on “Prosumer Law” (via SSRN)
• Little Atoms podcast featuring Brown & Marsden discussing Regulating Code
• Ian Brown edited this beefy Research Handbook On Governance Of The Internet, which makes a nice complement to Regulating Code. It offers even more detailed case studies on the major issues featured in the book. A terrific resource (if you can afford it!)
• a video of Brown & Marsden discussing the book at the Oxford Internet Institute (also embedded below):

Other books you should read alongside “Regulating Code” (links are for my reviews of each):

• Milton Mueller’s Networks and States: The Global Politics of Internet Governance
• John Palfrey & Urs Gasser’s Interop: The Promise and Perils of Highly Interconnected Systems
• Rebecca MacKinnon’s Consent of the Networked: The Worldwide Struggle for Internet Freedom
• David G. Post’s In Search of Jefferson’s Moose: Notes on the State of Cyberspace
• Christopher Yoo’s The Dynamic Internet: How Technology, Users, and Businesses are Transforming the Network
• Larry Lessig’s Code (my 2-part exchange with Lessig upon Code’s 10^th anniversary: Part 1, Part 2)

Alex Tabarrok, author of the ebook Launching The Innovation Renaissance: A New Path to Bring Smart Ideas to Market Fast discusses America’s declining growth rate in total factor productivity, what this means for the future of innovation, and what can be done to improve the situation.

Accroding to Tabarrok, patents, which were designed to promote the progress of science and the useful arts, have instead become weapons in a war for competitive advantage with innovation as collateral damage. College, once a foundation for innovation, has been oversold. And regulations, passed with the best of intentions, have spread like kudzu and now impede progress to everyone’s detriment. Tabarrok outs forth simple reforms in each of these areas and also explains the role immigration plays in innovation and national productivity.

Download

Related Links

• Launching The Innovation Renaissance: A New Path to Bring Smart Ideas to Market Fast, Tabarrok
• VIDEO: Innovations in Most Fields Are Not Patented, Tabarrok
• VIDEO: End Software Patents, Tabarrok
• Patent Policy on the Back of a Napkin, Tabarrok

Paul J. Heald, professor of law at the University of Illinois Urbana-Champaign, discusses his new paper “Do Bad Things Happen When Works Enter the Public Domain? Empirical Tests of Copyright Term Extension.”

The international debate over copyright term extension for existing works turns on the validity of three empirical assertions about what happens to works when they fall into the public domain. Heald discusses a study he carried out with Christopher Buccafusco that found that all three assertions are suspect. In the study, they show that audio books made from public domain bestsellers are significantly more available than those made from copyrighted bestsellers. They also demonstrate that recordings of public domain and copyrighted books are of equal quality.

Since copyrighted works will once again begin to fall into the public domain starting in 2018, Heald says, it’s likely that content owners will ask Congress for yet another term extension. He argues that his empirical findings suggest it should not be granted.

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Related Links

• Do Bad Things Happen When Works Enter the Public Domain?: Empirical Tests of Copyright Term Extension, Heald and Buccafusco
• More Music in Movies: What Box Office Data Reveals About the Availability of Public Domain Songs in Movies from 1968-2008, Heald, Shi, Stoiber, and Zheng
• Property Rights and the Efficient Exploitation of Copyrighted Works: An Empirical Analysis of Public Domain and Copyrighted Fiction Best Sellers, Heald

Joshua Gans, professor of Strategic Management at the University of Toronto’s Rotman School of Management and author of the new book Information Wants to be Shared, discusses modern media economics, including how books, movies, music, and news will be supported in the future.

Gans argues that sharing enhances most information’s value. He also explains that the business models of traditional media companies, gatekeepers who have relied on scarcity and control, have collapsed in the face of new technologies. Equally important, he argues that sharing can revive moribund, threatened industries even as he examines platforms that have, almost accidentally, thrived in this new environment.

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Related Links

• Information Wants to be Shared, Gans
• Is There a Market for Ideas?, Gans and Scott Stern
• The Product Market and the Market for ‘Ideas’: Commercialization Strategies for Technology Entrepreneurs, Gans and Stern
• The Impact of Uncertain Intellectual Property Rights on the Market for Ideas: Evidence from Patent Grant Delays, Gans, Stern, and David H. Hsu

In anticipation of a hearing in the House Judiciary Committee Wednesday afternoon, Sandra Aistars, executive director of the Copyright Alliance, writes in The Hill about the principles that should guide copyright reform, calling for debate “based in reality rather than rhetoric.”

Chief among these principles is that protecting authors is in the public interest. Ensuring that all creators retain the freedom of choice in determining how their creative work is used, disseminated and monetized is vital to protecting freedom of expression.

Arguing for authors in terms of freedom of choice and expression is good rhetoric, but it’s quite unlike what I expect you’ll hear during Cato’s noon Wednesday forum on copyright and the book Laws of Creation: Property Rights in the World of Ideas.

Authors Ron Cass and Keith Hylton methodically go through each intellectual property doctrine and explore its economic function, giving few words to authors’ “choice” or their “freedom of expression.” They certainly don’t denigrate authors or their role, but Cass and Hylton don’t vaunt them the way Aistars does either.

Recent events in the copyright area are providing much grist for the discussion. You can still register for the book forum, treating it as a warm-up for Wednesday afternoon’s hearing, if your freedom of choice and expression so dictate.

Register here now for next Wednesday’s Cato book forum on Laws of Creation: Property Rights in the World of Ideas.

In the book, Ronald A. Cass and Keith Hylton reject the idea that changing technology undermines the case for intellectual property rights. They argue that making the work of inventors and creators free would be a costly mistake.

That cuts against the bulk of academic opinion today, which is critical of the broad scope and length of intellectual property protections today. The book has qualities that many libertarians will enjoy because it starts with first principles: the theoretical underpinnings and practical benefits of property rights.

By no means does the book answer all the questions, and we’ll have TLF’s own Jerry Brito, the editor of Copyright Unbalanced, on hand to provide commentary.

That’s Wednesday (3/20) at noon in the Cato Institute’s F.A. Hayek auditorium. There’s no such thing as a free lunch, but the sandwiches provided afterwards come at the low cost of learning more dimensions of the intellectual property debate. Register now!

Ronald A. Cass, Dean Emeritus of Boston University School of Law, discusses his new book, Laws of Creation: Property Rights in the World of Ideas, which he co-authored with Boston University colleague Keith Hylton. Written as a primer for understanding intellectual property law and a defense of intellectual property, Laws of Creation explains the basis of IP and its justification. 

According to Cass, not all would-be reformers share a similar guiding philosophy, distinguishing between those who support property rights but nevertheless have specific critiques of the intellectual property system as it currently stands, and reformers who do not see a place for property.

Cass explains that the current intellectual property system is neither wholly good nor wholly bad, but is a matter of weighing tradeoffs. On the whole, he argues, intellectual property benefits society. Cass also argues that intellectual property law in the U.S. is still more functional than that in other countries, such as Italy, and that, while it would benefit from some reform, it is fundamentally a workable system.

Download

Related Links

• Laws of Creation: Property Rights in the World of Ideas, Cass and Hylton
• Property Rights Systems and the Rule of Law, Cass
• Tom W. Bell on Laws of Creation, Antitrust & Competition Policy Blog
• Book Talk: Law of Creation: Property Rights in the World of Ideas, The Cato Institute

Gabriella Coleman, the Wolfe Chair in Scientific and Technological Literacy in the Art History and Communication Studies Department at McGill University, discusses her new book, “Coding Freedom: The Ethics and Aesthetics of Hacking,” which has been released under a Creative Commons license.

Coleman, whose background is in anthropology, shares the results of her cultural survey of free and open source software (F/OSS) developers, the majority of whom, she found, shared similar backgrounds and world views. Among these similarities were an early introduction to technology and a passion for civil liberties, specifically free speech.

Coleman explains the ethics behind hackers’ devotion to F/OSS, the social codes that guide its production, and the political struggles through which hackers question the scope and direction of copyright and patent law. She also discusses the tension between the overtly political free software movement and the “politically agnostic” open source movement, as well as what the future of the hacker movement may look like.

Download

Related Links

• Coding Freedom: The Ethics and Aesthetics of Hacking, by Coleman
• Hacker Politics and Publics. Public Culture, by Coleman
• Hackers. The Johns Hopkins Encyclopedia of Digital Textuality. Forthcoming, 2012, by Coleman

The number of major cyberlaw and information tech policy books being published annually continues to grow at an astonishing pace, so much so that I have lost the ability to read and review all of them. In past years, I put together end-of-year lists of important info-tech policy books (here are the lists for 2008, 2009, 2010, and 2011) and I was fairly confident I had read just about everything of importance that was out there (at least that was available in the U.S.). But last year that became a real struggle for me and this year it became an impossibility. A decade ago, there was merely a trickle of Internet policy books coming out each year. Then the trickle turned into a steady stream. Now it has turned into a flood. Thus, I’ve had to become far more selective about what is on my reading list. (This is also because the volume of journal articles about info-tech policy matters has increased exponentially at the same time.)

So, here’s what I’m going to do. I’m going to discuss what I regard to be the five most important titles of 2012, briefly summarize a half dozen others that I’ve read, and then I’m just going to list the rest of the books out there. I’ve read most of them but I have placed an asterisk next to the ones I haven’t.  Please let me know what titles I have missed so that I can add them to the list. (Incidentally, here’s my compendium of all the major tech policy books from the 2000s and here’s the running list of all my book reviews.)

As I do each year, I need to repeat a few disclaimers.  First, what qualifies as an “important” info-tech policy book is highly subjective, but I would define it as a title that many people — especially scholars in the field — are currently discussing and that we will likely be referencing for many years to come.  But I “weight” books in the sense that narrowly-focused titles lose a few points. For example, books that deal mostly with privacy issues, copyright law, or antitrust policy are docked a few points relative to “big picture” info-tech policy books that offer a broader exploration of policy issues and which offer more wide-ranging recommendations.

Second, almost all of the books included have something profound to say about Internet policy (either directly or indirectly) and the more profound and clear the policy recommendations or implications, the higher the titles rank in terms of importance on my list.

Third, and most importantly: Just because a book appears on this list that does not necessarily mean I agree with everything in it.  In fact, as was the case in previous years, I found much with which to disagree in most of the books listed here. Simply put, the cyber-liberty I cherish is a real loser in both academic and public policy circles these days. It has very few defenders today. So, if this was simply a list of my personal favorite books, there would only be 2 or 3 titles on it. Instead, this is my effort to list important books in the field, regardless of whether I agree with the content and conclusions found in those titles.

OK, on to the list.

(1) Rebecca MacKinnon – Consent of the Network: The Worldwide Struggle for Internet Freedom

Rebecca MacKinnon’s book was the most important information technology policy book released in 2012 because it: (1) presented a splendid history of the ideas and forces shaping Internet policy debates globally; (2) offered policy insights that were extremely relevant to breaking developments in this field; and (3) set forth a call-to-arms to global Internet activists and gave them a new way of framing their issue advocacy.

MacKinnon is a former journalist and her outstanding reporting skills are on display throughout the text. Her coverage of China’s efforts to regulate the Net is outstanding. She also surveys some of the recent policy fights here and abroad over issues such as online privacy, Net neutrality regulation, free speech matters, and the copyright wars. The book demands attention for this historical work and analysis alone.

Even more importantly, however, MacKinnon makes a forceful argument for how to think about Internet freedom and democracy in new digital worlds. Her book is an attempt to take the Net freedom movement to the next level; to formalize it and to put in place a set of governance principles that will help us hold the “sovereigns of cyberspace” more accountable. Many of her proposals are quite sensible. But, as I noted in my much longer review of the book, I had a real problem with MacKinnon’s use of the term “digital sovereigns” or “sovereigns of cyberspace” and the loose definition of “sovereignty” that pervades her narrative. She too often blurs and equates private power and political power, and she sometimes leads us to believe that the problem of the dealing with the mythical nation-states of “Facebookistan” and “Googledom” is somehow on par with the problem of dealing with actual sovereign power — government power — over digital networks, online speech, and the world’s Netizenry.

Despite these nitpicks, MacKinnon has many other ideas about Net governance in the book that are less controversial and entirely sensible in my opinion. She wants to “expand the technical commons” by building and distributing more tools to help activists and make organizations more transparent and accountable. These would include circumvention and anonymization tools, software and programs that allow both greater data security and portability, and devices and network systems to expand the range of communication and participation, especially in more repressed countries. She would also like to see neitzens “devise more systematic and effective strategies for organizing, lobbying, and collective bargaining with the companies whose service we depend upon — to minimize the chances that terms of service, design choices, technical decisions, or market entry strategies could put people at risk or result in infringement of their rights.” This also makes sense as part of a broader push for improved corporate social responsibility.

Regarding the role of law, MacKinnon has a mixed view. She says: “There is a need for regulation and legislation based on solid data and research (as opposed to whatever gets handed to legislative staffers by lobbyists) as well as consultation with a genuinely broad cross-section of people and groups affected by the problem the legislation seeks to solve, along with those likely to be affected by the proposed solutions.” Of course, that’s a fairly ambiguous standard that could open the door to excessive political meddling with the Net if we’re not careful. Overall, though, she acknowledges how regulation so often lags far behind innovation. “A broader and more intractable problem with regulating technology companies is that legislation appears much too late in corporate innovation and business cycles,” she rightly notes.

MacKinnon’s book will be of great interest to Internet policy scholars and students, but it is also accessible to a broader audience interested in learning more about the debates and policies that will shape the future of the Internet and digital networks for many years to come. One other note: MacKinnon’s clearly-worded prose and cool-headed tone deserve praise and emulation. It serves as a model for how to write a thoughtful Internet policy book, even if you don’t agree with all her conclusions or recommendations.

My complete review of Consent of the Networked can be found here.

(2) Susan Crawford – Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age

Susan Crawford’s book was probably my least favorite title of 2012, but that doesn’t mean I can discount its significance within this field. Crawford has made herself a widely-recognized and highly-charged figure in the world of Internet policy through her work as an activist, an academic, and even a government official. In Captive Audience, she doesn’t even try to hide her self-described “radicalized” views on communications policy anymore and in the process she solidifies her role as the ringleader of the growing movement to impose centralized, top-down government control on America’s broadband infrastructure.

What is most astonishing about Captive Audience is the way Crawford so audaciously waxes nostalgic for the days of regulated monopoly. Simply put, Crawford doesn’t believe that capitalism or competition have any role to play in the provision of broadband networks and services. “No competitive pressure will force these companies to act [in the public interest],” she argues on the last page of the manifesto. “Americans,” she claims, “have allowed a naive belief in the power and beneficence of the free market to cloud their vision.” She suggests we should just give up our false hope that markets can deliver such an important service and get on with the task of converting broadband into a full-blown regulated public utility.

Her proposed solutions read like the typical Big Government grab-bag of policy proposals: more government spending, more government ownership, and more government regulation (forced access regulation and rate controls) for any private carriers that are allowed to remain in operation as de facto handmaidens of the state. Crawford’s perfect world scenario would seem to be some sort of amalgam of the U.S. Postal Service and the federal highway program. While both programs have sought to provide an important service to the masses, it goes without saying that both are also an absolute basket case in terms of service management and economic viability. But, for the sake of argument, let’s say that Crawford is right and that public ownership and comprehensive government management is the way to go. Where will all this money come from for all the new government activity Crawford desires? Apparently it grows on trees because she isn’t ever willing to admit that we find ourselves in the midst of major fiscal crisis that likely constrains the ability of governments to make these investments themselves. Luckily, private wireline and wireless broadband providers have been investing tens of billions in infrastructural upgrades in recent years (don’t take my word for it, read what the Progressive Policy Institute has to say), a fact that Crawford conveniently ignores.

More importantly, Crawford never fully confronts the fact that the era of regulated monopoly she cherishes was an unmitigated croynist disaster for consumers. That era had nothing to do with the “public interest” and everything to do with protecting the private interests of regulated entities — namely, Ma Bell on the communications side and broadcasters on the media side. She also doesn’t address the lackluster state of innovation during the 70 or so years during which time communications and media markets were under the tight grip of federal and state regulators, who controlled rates, restricted new entry, and discouraged innovation at virtually every juncture. If one is going to recommend a return to the regulatory past, they had better grapple with that uncomfortable, anti-consumer, anti-innovation history. Crawford utterly fails to in Captive Audience.

While the book is nominally about broadband regulation, the bulk of it is actually dedicated to taking on one company — Comcast — and specifically picking apart its recent merger with NBC Universal. For Crawford, the Comcast-NBC deal represented something akin to the Mayan apocalypse of media policy. She wants us to believe that the deal has forever solidified Comcast’s grasp on both programming and broadband markets. Comcast chief Brian Roberts is presented as the nefarious villain of the narrative; Crawford paints him as a cross between Gordon Gecko and Mr. Burns from “The Simpsons.” Usually such neurotic narratives are reserved for Rupert Murdoch and how he is supposedly plotting mass media domination to brainwash the minds of the masses. But Crawford suggests that Roberts is the new Bond villain du jour and chapter after chapter are devoted to demonizing him, his father, and other execs at Comcast. She argues that “Comcast now owns the Internet in America” and that the company is “squeezing independent online video” providers out of the market.

Despite all this hand-wringing, the situation in the video marketplace has never looked brighter. Crawford fails to put things in historical perspective and examine consumer choices in this market today relative to the past — a point I made in this debate with her last year. Of course, she probably didn’t want to seriously examine that evidence because by every metric available — and I published an entire report called Media Metrics a few years ago proving this — Americans have more and better viewing options at their disposal than ever before in history. We have more channels and more content available over more platforms (cable, satellite, telco, online, DVD, mail, etc) and more devices than ever before. Consumers have an unprecedented ability to access, record, time-shift, interact with, and even manipulate and redistribute video content. Of course, all this choice and quality comes at a cost, as Crawford continuously complains throughout the text. Apparently, in her view, all these great new programming options and technologies should just fall to us like manna from heaven with no price tag attached.

If you want to see what the opposite of Internet freedom and digital capitalism looks like, look no further than this book. It is the definitive articulation of the cyber-planner’s ethos. Of course, that’s also what makes Captive Audience one of the most important books of 2012. But if you really must read such one-sided propaganda — since this book will, no doubt, be assigned in many cyberlaw and media studies classes across America — then I encourage you to also read Christopher Yoo’s Dynamic Internet and Randy May’s edited collection of essays on Communications Law and Policy in the Digital Age, both of which are mentioned below. Both of those books offer a refreshingly level-headed examination of the true state of this marketplace. I’d also recommend you check out these recent essays by Bret Swanson and Richard Bennett for a hard look at the shoddy numbers and assumptions underlying many of the broadband policy critiques you hear out there today from Crawford and others.

(3) John Palfrey & Urs Gasser – Interop: The Promise and Perils of Highly Interconnected Systems

What makes Palfrey & Gasser’s book so important is that the authors aim to develop “a normative theory identifying what we want out of all this interconnectivity” that the information age has brought us. They correctly note “there is no single, agreed-upon definition of interoperability” and that “there are even many views about what interop is and how it should be achieved.” Generally speaking, they argue increased interoperability — especially among information networks and systems — is a good thing because it “provides consumers greater choice and autonomy,” “is generally good for competition and innovation,” and “can lead to systemic efficiencies.”

But they wisely acknowledge that there are trade-offs, too, noting that “this growing level of interconnectedness comes at an increasingly high price.” Whether we are talking about privacy, security, consumer choice, the state of competition, or anything else, Palfrey and Gasser argue that “the problems of too much interconnectivity present enormous challenges both for organizations and for society at large.” Their chapter and privacy and security offers many examples, but one need only look around at their own digital existence to realize the truth of this paradox. The more interconnected our information systems become, and the more intertwined our social and economic lives become with those systems, the greater the possibility of spam, viruses, data breaches, and various types of privacy or reputational problems. Interoperability giveth and it taketh away.

Ultimately, however, the authors fail to develop a clear standard for when interoperability is good and when governments should take steps to facilitate or mandate it. They argue that “there is no single form or optimal amount of interoperability that will suit every circumstance” and that “most of the specifics of how to bring interop about [must] be determined on a case-by-case basis. Yet, Palfrey and Gasser also make it clear they want government(s) to play an active role in ensuring optimal interoperability. They say they favor “blended approaches that draw upon the comparative advantages of the private and public sector,” but they argue that government should feel free to tip or nudge interoperability determinations in superior directions to satisfy “the public interest.” “If deployed with skill,” they argue, “the law can play a central role in ensuring that we get as close as possible to optimal levels of interoperability in complex systems.”

The fundamental problem this “public interest” approach to interoperability regulation is that it is no better than the “I-know-it-when-I-see-it” standard we sometimes at work in the realm of speech regulation. It’s an empty vessel, and if it is the lodestar by which policymakers make determinations about the optimal level of interoperability, then it leaves markets, innovators, and consumers subject to the arbitrary whims of what a handful of politicians or regulators think constitutes “optimal interoperability,” “appropriate standards,” and “best available technology.”

In my absurdly long review of their book, I offered an alternative framework that suggests patience, humility, and openness to ongoing marketplace experimentation as the primary public policy virtues that lawmakers should instead embrace. Ongoing marketplace experimentation with technical standards, modes of information production and dissemination, and interoperable information systems, is almost always preferable to the artificial foreclosure of this dynamic process through state action. The former allows for better learning and coping mechanisms to develop while also incentivizing the spontaneous, natural evolution of the market and market responses. The latter (regulatory foreclosure of experimentation) limits that potential.

Defining “optimal interoperability,” is not just difficult as Palfrey and Gasser suggest, but I would argue that it is a pipe dream. Sometimes consumers demanded a certain amount interoperability and they usually get it. But it seems equally obvious that consumers don’t always demand perfect interoperability. Just look at your iPhone or Xbox for proof. Quite often, a lack of interoperability helps firms finance important new products and services while simultaneously ensuring users a tailored and potentially more secure and satisfying experience. Importantly, however, non-interoperability also spurs new forms of innovation from rivals looking to leap-frog the old front-runners. Progress flows from this never-ending cycle of technological change and industrial churn.

In sum, we cannot define or determine “optimal interoperability” in an a priori fashion; only ongoing experimentation can help us determine what truly lies in “the public interest.” Despite my different approach and conclusions, Palfrey and Gasser’s book perfectly frames what should be a very interesting ongoing debate over these issues and for that reason will be required reading on this subject for years to come.

Again, my longer review of Palfrey and Gasser’s book can be found here, and listen to John Palfrey’s podcast discussion with Jerry Brito here.]

(4) Christopher Yoo – The Dynamic Internet: How Technology, Users, and Businesses are Transforming the Network

Christopher Yoo’s book was my personal favorite of the year, but it won’t capture as much interest and recognition as some of the other titles on this list. The book offers a concise overview of how Internet architecture has evolved and a principled discussion of the public policies that should govern the Net going forward. Yoo makes two straight-forward arguments. First, the Internet is changing. In Part 1 of the book, Yoo offers a layman-friendly overview of the changing dynamics of Internet architecture and engineering. He documents the evolving nature of Internet standards, traffic management and congestion policies, spam and security control efforts, and peering and pricing policies. He also discusses the rise of peer-to-peer applications, the growth of mobile broadband, the emergence of the app store economy, and what the explosion of online video consumption means for ongoing bandwidth management efforts. Those are the supply-side issues. Yoo also outlines the implications of changes in the demand-side of the equation, such as changing user demographics and rapidly evolving demands from consumers. He notes that these new demand-side realities of Internet usage are resulting in changes to network management and engineering, further reinforcing changes already underway on the supply-side.

Yoo’s second point in the book flows logically from the first: as the Internet continues to evolve in such a highly dynamic fashion, public policy must as well. Yoo is particularly worried about calls to lock in standards, protocols, and policies from what he regards as a bygone era of Internet engineering, architecture, and policy. “The dramatic shift in Internet usage suggests that its founding architectural principles form the mid-1990s may no longer be appropriate today,” he argues. “[T]he optimal network architecture is unlikely to be static. Instead, it is likely to be dynamic over time, changing with the shifts in end-user demands,” he says. Thus, “the static, one-size-fits-all approach that dominates the current debate misses the mark.”

Yoo makes a particular powerful case for flexible network pricing policies. His outstanding chapter on “The Growing Complexity of Internet Pricing” offers an excellent overview of the changing dynamics of pricing in this arena and explains why experimentation with different pricing methods and business models must be allowed to continue. Getting pricing right is essential, Yoo notes, if we hope to ensure ongoing investment in new networks and services. He also notes how foolish it is to expect the government to come in and save the day thought massive infrastructure investment to cover the hundreds of billions of dollars needed to continue to build-out high-speed services.

Throughout the second half of his book, Yoo explains why it would be a disaster for consumers and high-tech innovation if policymakers limited pricing flexibility and experimentation with new business models and technological standards. He argues that public policy should generally seek to avoid ex ante forms of preemptive, prophylactic Internet regulation and instead rely on an ex post approach when and if things go wrong. Essentially, he wants policymakers to embrace “techno-agnosticism” toward ongoing debates over standards, protocols, business models, pricing methods, and so on. Lawmakers should not be preemptively tilting the balance in one direction or the other or, worse yet, restricting experimentation that can help us find superior solutions.

And even under that model of retrospective review, Yoo makes it clear throughout the book that there should be a very high bar established before any regulation is pursued. This is particularly true because of the First Amendment values at stake when the government attempts to regulate speech platforms. In Chapter 9 of the book, Yoo walks the reader through all the relevant case law on this front and makes it clear how “the Supreme Court has repeatedly recognized that the editorial discretion exercised by intermediaries serves important free speech values.” Yoo also makes the case that a certain degree of intermediation helps serve consumer needs by helping them more easily find the content and services they desire. Law should not seek to constrain that and, under current Supreme Court First Amendment jurisprudence, it probably cannot.

To me, Yoo’s approach strikes the right balance for Net governance and public policy in the information age. It all comes down to flexibility and freedom. If the Internet and all modern digital technologies are to thrive, we must reject the central planner’s mindset that dominated the analog era and forever bury all the static thinking it entailed.

My complete review of Yoo’s Dynamic Internet is here.

(5) Brett Frischmann – Infrastructure: The Social Value of Shared Resources

Frischmann’s book offers a nice contrast with Yoo’s in that it suggests a far more ambitious role for the state in shaping the future of digital networks and online platforms. Although not strictly a book about information technology infrastructure, Frischmann spends a great deal of time making the case for a greater government action in the realm of communications policy and for open access and Net neutrality regulation in particular. (There’s also a chapter on intellectual property issues that tech policy wonks will find of interest). The book is a veritable paean to open access regulation; Frischmann aims to persuade the reader that “society is better off sharing infrastructure openly” and devotes considerable energy to hammering that point home in one context after another.

In my review of the book, which was part of 2-day symposium on the book over at the Concurring Opinions blog, I took Frischmann’s book to task for its almost complete absence of public choice insights and his general disregard for thorny “supply-side” questions.  Frischmann is so single-mindedly focused on making the “demand-side” case for better appreciating how open infrastructures “generate spillovers that benefit society as a whole” and facilitate various “downstream productive activities,” that he short-changes the supply-side considerations regarding how infrastructure gets funded and managed to begin with.

The book also ignored the omnipresent threat of regulatory capture and the fact that any major infrastructure regulatory system big enough and important to be captured by special interests and affected parties often will be. Frischmann acknowledges the problem of capture in just a single footnote in the book and admits that “there are many ways in which government failures can be substantial,” but he asks the reader to quickly dispense with any worries about government failure since he believes “the claims rest on ideological and perhaps cultural beliefs rather than proven theory or empirical fact.”  I found that assertion outrageous and argued that, to the contrary, decades of scholarship has empirically documented the reality of government failure and its costs to society, as well as the plain old-fashioned inefficiency often associated with large-scale government programs. For infrastructure projects in particular, the combination of these public choice factors usually adds up to massive inefficiencies and cost overruns.

For those reasons, I argued in my review that society would be better off adopting a “3-P” approach to infrastructure management: privatize, property-tize, and price. But Frischmann is dead set against such thinking and makes it clear that everything must be subservient to the goal of “openness” and commons-based management. Unsurprisingly, therefore, this leads him to suggest that we need “a dramatic shift — perhaps a paradigm shift — away from the conventional position favoring market provisioning and markets ‘free’ from government intervention.” But the problem with that reasoning, as I pointed out in my review, is that most of the infrastructure that Frischmann cites as failing us today is already managed in the fashion he favors! Nonetheless, he wants to pile on still more commons-based government control / ownership solutions even though they are the primary cause of our infrastructure problems today. In this sense, Frischmann’s approach parallels Susan Crawford’s in her book Captive Audience, discussed above. They both seek to gloss over the ugly realities of traditional public infrastructure (mis-)management and they imply that we just need to build a better breed of bureaucrats who will somehow be immune to all the problems of the past. Needless to say, I don’t place much faith in such efforts.

Despite these serious deficiencies, students and scholars studying infrastructure theory will benefit from Frischmann’s excellent treatment of public goods and social goods; spillovers and externalities; proprietary versus commons systems management; common carriage policies and open access regulation; congestion pricing strategies; and the debate over price discrimination for infrastructural resources. He at least does a nice job outlining these concepts and controversies, even if he ultimately fails to make the case for radically expanding government control of infrastructural resources.

Again, you can read my entire review of Frischmann’s book here.

— Other Major Releases in 2012 —

Julie E. Cohen – Configuring the Networked Self: Law, Code, and the Play of Everyday Practice

Cohen’s book represents an effort to move “beyond the bounds of traditional liberal political theory” by transcending what she labels the traditional “information-as-freedom” versus “information-as-control” paradigms. Her aim is to promote “cultural environmentalism” and “the structural conditions of human flourishing.” She argues that “a commitment to human flourishing demands a more critical stance toward the market-driven evolution of network architectures.” In other words, don’t trust markets.

I didn’t find her case very convincing and it didn’t help that the book is filled with impenetrable prose that sometimes leaves the reader’s head a bit numb. (Two representative samples: “With respect to space, surveillance employs a twofold dynamic of containerization and affective modulation in order to pursue large-scale behavioral modification.” … and… “Here the performative impulse introduces static into the circuits of the surveillant assemblage; it seeks to reclaim bodies and reappropriate spaces.” Say what? Write in plain English, professor!)

The closing chapter also includes a strange reinterpretation of Ludditism. Cohen argues: “the tale of the Luddites poses an important challenge for scholars and policy makers in the emerging networked information society. If technologies do not have natural trajectories, it is our obligation to seek pathways of development that promote the well-being of situated, embodied users and communities. When our preferred policy prescriptions persistently produce information architectures and institutions that undermine human flourishing in critical ways, it is time to question them and to experiment with ways of doing better.”  Hmmm… I’m not sure I want to know what that would mean in practice!

Regardless, Cohen’s book has a lot to say about modern privacy and copyright battles and will be of great interest to scholars in those specific fields of study.  You can find all the chapters online here.

Cole Stryker – Hacking the Future: Privacy, Identity, and Anonymity on the Web

Stryker’s Hacking the Future provides a concise overview of the battles over online anonymity that have raged since the Net’s early days and he outlines the many new threats to it. “What we are seeing is an all-out war on anonymity, and thus free speech, waged by a variety of armies with widely diverse motivations, often for compelling reasons,” he says. The book will be a great use to those covering ongoing policy debates over cybersecurity, the “nymwars” and online authentication / identification debates, post-Arab Spring political activism & “hactivism,” encryption issues, social networking privacy, troll culture and cyberbullying, and much more. Stryker makes a strong case for the continuing importance of online anonymity but isn’t scared to ask hard questions about the trade-offs society faces when some can mask their online identities. But he also explores the question of whether anonymity can survive given recent technological and policy-related developments, both of which aim to make individuals more identifiable online. I particularly enjoyed Chapter 10’s breakdown of the “Faces of Anonymity,” in which Stryker crafts a detailed taxonomy of anonymous character types online.

He also offers a run-down of the tools and steps that people can take advantage of if they want to ensure their anonymity / privacy online, including: cookie blocking, private browsing tools, disabling HTML in email and limiting or disabling broswer extensions, clearing browser histories, and using encryption tools, proxy servers, and VPN tunneling. “The question we have to ask ourselves,” Stryker notes, is “Does the accessibility of these anonymizing technologies make the world a safer, more equitable place, better place?” He answers: “It’s difficult to measure, but their abolition certainly wouldn’t.” He also draws this interesting parallel with efforts to regulate firearms: “The logic here is not unlike that used by those who oppose gun control: if guns are made illegal, then only criminals will have guns, leaving well-meaning folks defenseless. The reasoning is compelling within the identity space,” he argues, “regardless of what you might think about the merits of gun control.”

Two other notes: First, Wide Open Privacy: Strategies For The Digital Life by J.R. Smith & Siobhan MacDermott makes a nice compliment to Hacking the Future. It also offers a breakdown of privacy-enhancing technologies and outlines other strategies to safeguard your online anonymity. Second, if you are interested in digging even deeper in the Luzsec side of this story, you should check out Parmy Olson’s W e are Anonymous: Inside the Hacker Wor ld of Lulzsec, Anonymous and the Global Cyber Insurgency. It’s a splendid history but doesn’t have as much to say about the various policy issues that Stryker tackles in Hacking the Future. Or just listen to Olson’s podcast discussion with Jerry Brito. Speaking of that Brito character…

Jerry Brito (ed.) – Copyright Unbalanced: From Incentive to Excess

My Mercatus Center colleague Jerry Brito put together this important collection of essays by various conservatives and libertarian authors to highlight growing concerns about copyright policy. Contributors include Tom W. Bell, David G. Post, Reihan Salam, Patrick Ruffini, Tim Lee, Christina Mulligan, and Eli Dourado (also of Mercatus). Their essays suggest that the tide may be turning against copyright among free market analysts. Their chapters explore the increasingly complexity of copyright law and the rising costs associated with its enforcement and make a powerful case for reform of, or at least restraints on, the current copyright system. The consensus seemed to revolve around a few key reforms: significantly shortened copyright terms, the reintroduction of formalities (i.e., registration), and limits on criminal prosecution and civil asset forfeiture. The authors also make a strong case that public choice problems pervade today’s copyright system and that we should be concerned that cronyism is increasing creeping into the politics of copyright law and its seemingly endless expansion.

If you interested in a different take on IP issues to balance out Brito’s collection, I’d recommend picking up the forthcoming Laws of Creation: Property Rights in the World of Ideas by Ronald A. Cass and Keith N. Hylton. It’s a 2013 release but it is already in stock. I’m reading an advance copy from the publisher right now and will likely have more to say about it in a forthcoming post.

Randolph J. May (ed.) – Communications Law and Policy in the Digital Age: The Next Five Years

My former colleague Randy May put together this nice collection of essays by some of America’s leading communications and media policy scholars, including Bruce Owen, Christopher Yoo, James Speta, Daniel Lyons and others. The authors offer a generally skeptical take on the expansion of communications and broadband regulation and the growing power of the Federal Communications Commission over these markets. In particular, many of the contributors take the FCC to task for sketchy assertions of jurisdiction and the agency’s efforts to expand its imperial regulatory ambitions without always having the clear statutory authority to do so. The chapters by James Speta and Seth Cooper are particularly good in that regard. Admin law geeks will eat them up.

Those analysts following the ongoing Net neutrality wars will also find the book informative, even if they disagree with the generally skeptical take on the issue from contributors. Spectrum and universal service policy wonks will also appreciate the excellent chapters on those two issues from Michele P. Connolly and Daniel A. Lyons, respectively. And the closing chapter by Bruce Owen is, like everything Bruce does, a masterpiece. Owen is probably the most respected media economist on the planet and his decades of experience in this field shines through in his powerful essay on “Communications Policy Reform, Interest Groups, and Legislative Capture.” He crafts a political economy of the regulatory state and points out that the explosion of rent-seeking and legislative/regulatory capture in this sector is unlikely to dissipate. “Therefore,” Owen argues, “communications policy likely will continue to be subject to welfare-suppressing regulation because such regulation is consistent with the interests of legislators,” who are often beholden to special interests and their campaign dollars.

Joshua Gans – Information Wants to Be Shared

I really enjoyed this book. It’s an insightful exploration of modern media economics filled with interesting questions and scenarios about how information markets will evolve in the future. What will sustain movies, music, book, local reporting, and so on in the future? Gans does a terrific job making these issues easy to understand and doesn’t try to evangelize as much as the many others who have written on these issues. If you’ve read and enjoyed Carl Shapiro and Hal Varian’s classic text, Information Rules, then you will find Gans’ book to be the perfect compliment.

Gans doesn’t have a lot to say about public policy, however. This is really more of a business book suited for industry analysts and business school students. Nonetheless, some of its implications for policy are clear since many of these business model debates boil over into the policy arena.

P.S. I should mention that, even if you don’t pick up his new book, you should be following Gans’ “Digitopoly” blog. It is always worth reading.

Andrew Keen – Digital Vertigo: How Today’s Online Social Revolution Is Dividing, Diminishing, and Disorienting Us

If you’re into ‘the-whole-world-is-going-to-Hell-and-the-Internet-is-to-blame’ screeds, Andrew Keen will never disappoint. In Digital Vertigo as well as his earlier book, The Cult of the Amateur, Keen is grumpy about, well, just about everything under the sun. In the earlier book, it was the Web 2.0 world of blogging and “amateur” content creation — most notably Wikipedia and YouTube — that earned Keen’s wrath. In the new book, it is users themselves and the social sharing sites and technologies that they favor that Keen goes off on.

Specifically, Keen is worried that our increased reliance on new online and interactive technologies is spawning a “hypervisible age of great exhibitionism” that sacrifices privacy and individuality at the altar of sharing and social status-seeking. He also makes sweeping claims that we are now living in “a world in which many of us have forgotten what it means to be human,” or that “we are forgetting who we really are.” As I noted in my Forbes review of the book, it’s classic technopanic talk. Not only does Keen fail to substantiate such claims, but he also doesn’t bother to even offer the reader any sort of practical plan for how to achieve a more balanced digital life.

Bruce Schneier – Liars & Outliers: Enabling the Trust that Society Needs to Thrive

Security expert Bruce Schneier’s latest book was a terrific read and easily one of my favorites of the year. It wasn’t a book about technology policy per se, but it certainly has important ramifications for it. Schneier explains four “societal pressures” combine to help create and preserve trust within society. Those pressures include: (1) Moral pressures; (2) Reputational pressures; (3) Institutional pressures; and (4) Security systems. By “dialing in” these societal pressures in varying degrees, trust is generated over time within groups. Of course, these societal pressures also fail on occasion, Schneier notes. He explores a host of scenarios — in organizations, corporations, and governments — when trust breaks down because defectors seek to evade the norms and rules the society lives by. These defectors are the “liars and outliers” in Schneier’s narrative and his book is an attempt to explain the complex array of incentives and trade-offs that are at work and which lead some humans to “game” systems or evade the norms and rules others follow.

Indeed, Schneier’s book serves as an excellent primer on game theory as he walks readers through complex scenarios such as prisoner’s dilemma, the hawk-dove game, the free-rider problem, the bad apple effect, principle-agent problems, the game of chicken, race to the bottom, capture theory, and more. These problems are all quite familiar to economists, psychologists, and political scientists, who have spent their lives attempting to work through these scenarios. Schneier has provided a great service here by making game theory more accessible to the masses and given it practical application to a host of real-world issues.

The most essential lesson Schneier teaches us is that perfect security is an illusion, and this is where the implications for tech policy come in. We can rely on those four societal pressures in varying mixes to mitigate problems like theft, terrorism, fraud, online harassment, and so on, but it would be foolish and dangerous to believe we can eradicate such problems completely. “There can be too much security,” Schneier explains, because, at some point, constantly expanding security systems and policies will result in rapidly diminishing returns. Trying to eradicate every social pathology would bankrupt us and, worse yet, “too much security system pressure lands you in a police state,” he correctly notes.

Despite these challenges, Schneier reminds us that there is cause for optimism. Humans adapt better to social change than they sometimes realize, usually by tweaking the four societal pressures Schneier identifies until a new balance emerges. While liars and outliers will always exist, society will march on.

See my longer review of Schneier’s excellent book over at Forbes. I highly recommend you pick up Liars & Outliers no matter what your field of study. It is outstanding.

… and still more titles from 2012 (* asterisk means I didn’t find time to finish them)…

• E. Gabriella Coleman – Coding Freedom: The Ethics and Aesthetics of Hacking *
• Sean A. Pager & Adam Candeub (eds.) – Transnational Culture in the Internet Age *
• John Naughton – From Gutenberg to Zuckerberg: What You Really Need to Know about the Internet
• Erik Brynjolfsson & Andrew McAfee – Race Against the Machine: How the Digital Revolution is Accelerating Innovation, Driving Productivity, and Irreversibly Transforming Employment and the Economy [listen to McAfee’s podcast discussion with Jerry Brito]
• Chris Reed – Making Laws for Cyberspace *
• J.R. Smith & Siobhan MacDermott – Wide Open Privacy: Strategies For The Digital Life
• Virginia Eubanks – Digital Dead End: Fighting for Social Justice in the Information Age *
• Lori Andrews – I Know Who You Are and I Saw What You Did: Social Networks and the Death of Privacy
• Hassan Masum and Mark Tovey (eds.) – The Reputation Society: How Online Opinions Are Reshaping the Offline World *
• Reed Hundt & Blair Levin – The Politics of Abundance: How Technology Can Fix the Budget, Revive the American Dream, and Establish Obama’s Legacy *
• Kal Raustiala & Christopher Sprigman – The Knockoff Economy: How Imitation sparks Innovation* [listen to Sprigman’s podcast discussion with Jerry Brito]
• Jason Mazzone, Copyfraud and Other Abuses of Intellectual Property Law * [listen to Mazzone’s podcast discussion with Jerry Brito]
• Clay A. Johnson – The Information Diet: A Case for Conscious Consumption
• Julian Assange – Cypherpunks: Freedom and the Future of the Internet
• Andy Greenberg – This Machine Kills Secrets: How WikiLeakers, Cypherpunks, and Hacktivists Aim to Free the World’s Information

… and, again, here are the lists of important books from 2008, 2009, 2010, and 2011.

In last week’s episode of Surprisingly Free, Tom Bell introduced his chapter in Copyright Unbalanced, a new book on the conservative and libertarian case for copyright reform, edited by Jerry Brito. This week, Geoff Manne, lecturer in law at Lewis & Clark Law School and Executive Director of the International Center for Law & Economics, explains how, while also working from libertarian principles, he arrived at a very different view of copyright than either Brito or Bell.

Taking an economic approach to property rights, Manne argues that there is a necessary tradeoff between incentive to create and widespread access. While Manne does recognize the value of widespread use, he says that its benefits must be weighed against the potential breakdown in specialization of labor and the value added by commercialization.

According to Manne, just because someone has exclusive rights to something, doesn’t mean that it won’t be optimally distributed, and, in fact, the highest value ownership right tends to transfer from the creator to the users over time.

Manne concludes that if the government can have any important role, it’s the creation and enforcement of property rights, including copyright, and that that may necessitate new copyright laws.

Download

Related Links

• Copyright Unbalanced: From Incentive to Excess, by Brito, et al
• Intellectual Privilege: A Libertarian View of Copyright, by Bell
• On Copyright, Conservatives and Libertarians Should Focus on What Unites Us, Tech Liberation Front

Tom W. Bell, professor of law at Chapman University and author of the concluding essay in Copyright Unbalanced, a new book edited by Surprisingly Free’s own Jerry Brito, discusses the ways in which copyright has evolved over time and why reform is vital.

Bell differentiates copyright from other types of property, arguing that conflating the two terms causes great confusion amongst laypeople and, over time, corrodes the value placed in tangible property rights. According to Bell, copyright is a privilege created by statute that doesn’t exist in a state of nature and is not recognized by common law.

As a special type of economic good, copyright must be treated differently than tangible property rights, according to Bell, who outlines five proposals for copyright reform.

While Bell is not opposed to copyright, he argues that copyright enforcement has gone too far, and lawmakers should structure policies to lead us towards a world in which we conceivably do without it.

Download

Related Links

• Copyright Unbalanced: From Incentive to Excess, by Brito, et al
• Intellectual Privilege: A Libertarian View of Copyright, Bell
• Copyright Duration and the Mickey Mouse Curve, Tech Liberation Front

I find myself delighted, but also mildly disappointed, by a short speech making the rounds on the Internets, given by Amelia Anderstotter, Swedish Member of the European Parliament representing the Pirate Party. For its forcefulness, the speech misses a key distinction about which advocates of freedom, which I think members of the Pirate Party mean to be, should be very clear.

It’s a delightful speech because it’s a crisp rejection of the authoritarian forces that seek to control communications. In doing so, they hinder the development of culture. The woman delivering the speech is equal parts young, serious, and articulate. I reject authoritarianism, too, and I work to eliminate or hold at bay many of the same forces as Anderstotter, so that civil society can organize itself as it will.

I’m nonplussed, though, by the line that has gotten the speech so much attention.

“I would like to paraphrase George Michael from I think 1992,” she says. “‘Fuck you, this is my culture.’ And if copyright or telecommunications operators are standing in the way, I think they should go.'”

In one sense, the bracing language works. It is what generated a lot of interest in her words. But the context of the quote does not work as well. You see, when confronted with paparazzi photos showing him engaged in late-night cruising at a London park, Michael said, “Are you gay? No? Well then Fuck Off! Because this is my culture and you don’t understand it.” That is vituperation when confronted about arguably unhealthy behavior. It is not the conformity-rejecting line you might have expected in “Freedom! ’90,” presaging Michaels’ dispute with Sony over the release of Listen Without Prejudice Vol. 2.

One should certainly be free to act as Michael did among a community of consenting adults, and to reject criticism as he did. But when a speaker’s job is to persuade skeptics, one might choose an example of contempt for authority that the audience can easily embrace. With this quote, Anderstotter didn’t seat her rejection of authority firmly in logic and justice.

That’s a narrow point about influence, but the real weakness of the speech is in its internal logic. In the name of freedom, she calls for authoritarian regulatory interventions on private-sector network operators.

“[V]ery few top political figures in the world have acknowledged,” she says, that free speech and human rights protection “will require regulatory intervention on some private sectors.”

And later: “The control over communities and the ability to shape them must be with the communities themselves. Infrastructure must be regulated to enable that ability and such autonomy.”

Note how her use of passive voice hides the actor. Infrastructure “must be regulated” to achieve her agreeable goals. By whom? Perhaps one imagines beneficent gods fixing things up, but the regulations she seeks will almost certainly come from “the Governments and … public officials and lobbyists” that she says she wishes would fuck off.

A coherent system of rights does not have internal conflicts. If your freedoms come at the expense of someone else’s, you haven’t sorted out yet what “freedom” is.

Anderstotter is on the right track in many respects. Timid though the debate may be from her perspective, the scope and duration of copyright protection is again controversial among U.S. libertarians and conservatives. But her rejection of authoritarianism is an implicit embrace of authoritarianism at the same time.

With a little sorting out, she and the Pirate Party could get it right. Until then, the cultural reference she brings to mind for me is “meet the new boss, same as the old boss.”

Stan Liebowitz on copyright and incentivesStan Liebowitz, Ashbel Smith Professor of Economics at the University of Texas at Dallas, discusses his paper, “Is Efficient Copyright a Reasonable Goal?” According to Leibowitz, economists could hypothetically calculate the exact copyright terms necessary to incentivize creators to make new works without allowing them to capture “rents,” or profits above the bare minimum necessary. However, he argues, efficiency might not be the best goal for copyright.

Liebowitz argues from a fairness or justice perspective that society should not favor an economically efficient copyright law, but one that treats creators of copyrighted works the same as workers in other types of industries. In other industries, he argues, workers are allowed to capture and keep rents.

Download

Related Links

• Is Efficient Copyright a Reasonable Goal?, by Liebowitz
• TSeventeen Famous Economists Weigh in on Copyright: The Role of Theory, Empirics, and Network Effects, by by Liebowitz
• How copyright is like Solyndra, by Jerry Brito

A few weeks I wrote an intentionally provocative post comparing copyright to Solyndra. My argument was that just as Congress has a knowledge problem and a public choice problem picking the right technologies to subsidize, so does it have these problems when it comes to picking winners and losers when it comes to setting out the contours of copyright.

I’m grateful for all the wonderful feedback I got on that post, and I agree with those who pointed out that a problem with my analogy was that unlike subsidies to Solyndra, copyright doesn’t pick particular politically connected individuals or companies to privilege. I think it’s much more accurate to say that Congress can use copyright to privilege certain classes of well-organized industries or companies.

A case in point that shows how Congress picks winners and losers is being debated right now: the framework that governs digital music broadcasting royalties for satellite radio and internet radio stations like Pandora. Today you pay a different royalty rate for playing a sound recording (like the lasted LMFAO opus) depending on what kind of radio station you are. Satellite radio stations pay 6 to 8 percent of their gross revenues each year in royalties. Pandora, however, pays around 50 percent, and it will likely be more next year. Meanwhile, traditional AM and FM radio stations pay nothing, zip, zero, zilch.

I won’t get into the public choice problems that may have led to this situation, but the fact is that one legacy industry is not just being subsidized with free access to an essential input (sound recordings), but it is also protected. That protection comes at the expense of a new and innovative industry–internet radio–that is being charged punishing rates for the same essential input.

My colleague Matt Mitchell recently published an excellent paper entitled The Pathology of Privilege: The Economic Consequences of Government Favoritism that catalogs the different ways government has favored particular industries. He also shows how this behavior “misdirects resources, impedes genuine economic progress, breeds corruption, and undermines the legitimacy of both the government and the private sector.” The uneven playing field in the digital music space fits right in with the type of privilege he discussed.

Conservatives and libertarians who are wary of such government extensions of privilege should keep their eye on copyright as the source of many such imbalances.

Ryan Radia recently posted an impassioned and eminently reasonable defense of copyright with which I generally agree, especially since he acknowledges that “our Copyright Act abounds with excesses and deficiencies[.]” However, Ryan does this in the context of defending broadcaster rights against internet retransmitters, such as ivi and Aereo, and I have a bone to pick with that. He writes,

[Copyright] is why broadcasters may give their content away for free to anybody near a metropolitan area who has an antenna and converter box, while simultaneously preventing third parties like ivi from distributing the same exact content (whether free of charge or for a fee). At first, this may seem absurd, but consider how many websites freely distribute their content on the terms they see fit. That’s why I can read all the Techdirt articles I desire, but only on Techdirt’s website. If copyright protection excluded content distributed freely to the general public, creators of popular ad-supported content would soon find others reproducing their content with fewer ads.

I think what Ryan is missing is that copyright is not why broadcasters give away their content for free over the air. The real reason is that they are required to do so as a condition of their broadcast license. In exchange for free access to one of the main inputs of their business–spectrum–broadcasters agree to make their signal available freely to the public. Also, the fact that TV stations broadcast to metro areas (and not regionally or nationally) is not the product of technical limitations or business calculus, but because the FCC decided to only offer metro-sized licenses in the name of “localism.” That’s not a system I like, but it’s the system we have.

So, if what the public gets for giving broadcasters free spectrum is the right to put up an antenna and grab the signals without charge, why does it matter how they do it? To me a service like Aereo is just an antenna with a very long cable to one’s home, just like the Supreme Court found about CATV systems in Fortnightly. What broadcasters are looking to do is double-dip. They want free spectrum, but then they also want to use copyright to limit how the public can access their over-the-air signals. To address Ryan’s analogy from above, Techdirt is not like a broadcaster because it isn’t getting anything from the government in exchange for a “public interest” obligation.

Ideally, of course, spectrum would be privatized. In that world I think we’d see little if any ad-supported broadcast TV because there are much better uses for the spectrum. If there was any broadcast TV, it would be national or regional as there is hardly any market for local content. And the signal would likely be encrypted and pay-per-view, not free over-the-air. In such a world the copyright system Ryan favors makes sense, but that’s not the world we live in. As long as the broadcasters are getting free goodies like spectrum and must-carry, their copyright claims ring hollow.

Imagine a service that livestreams major broadcast television channels over the Internet for $4.99 a month — no cable or satellite subscription required. For an extra 99 cents a month, the service offers DVR functionality, making it possible to record, rewind, and pause live broadcast television on any broadband-equipped PC.

If this service sounds too good to be true, that’s because it is. But for a time, it was the business model of ivi. Cheaper than a cable/satellite/fiber subscription and more reliable than an over-the-air antenna, ivi earned positive reviews when it launched in September 2010.

Soon thereafter, however, a group of broadcast networks, affiliates, and content owners sued ivi in federal court for copyright infringement. The court agreed with the broadcasters and ordered ivi to cease operations pending the resolution of the lawsuit.

ivi appealed this ruling to the 2nd Circuit, which affirmed the trial court’s preliminary injunction earlier this month in an opinion (PDF) by Judge Denny Chin. The appeals court held as follows:

• The rights holders would likely prevail on their claim that ivi infringed on their performance rights, as ivi publicly performed their copyrighted programs without permission;
• ivi is not a “cable system” eligible for the Copyright Act’s compulsory license for broadcast retransmissions, as ivi distributes video over the Internet, rather than its own facilities;
• Allowing ivi to continue operating would likely cause irreparable harm to the rights holders, as ivi’s unauthorized distribution of copyrighted programs diminishes the works’ market value, and ivi would likely be unable to pay damages if it loses the lawsuit;
• ivi cannot be “legally harmed by the fact that it cannot continue streaming plaintiffs’ programming,” thus tipping the balance of hardships in plaintiffs’ favor;
• While the broad distribution of creative works advances the public interest, the works streamed by ivi are already widely accessible to the public.

As much as I enjoy a good statutory construction dispute, to me, the most interesting question here is whether ivi caused “irreparable harm” to rights holders.

Writing on Techdirt, Mike Masnick is skeptical of the 2nd Circuit’s holding, criticizing its “purely faith-based claims … that a service like ivi creates irreparable harm to the TV networks.” He argues that even though ivi “disrupt[s] the ‘traditional’ way that [the broadcast television] industry’s business model works … that doesn’t necessarily mean that it’s automatically diminishing the value of the original.” Citing the VCR and DVR, two technologies that disrupted traditional methods of monetizing content, Mike concludes that “[t]here’s no reason to think” ivi wouldn’t “help [content owners’] business by increasing the value of shows by making them more easily watchable by people.”

Mike has a point. Perhaps many ivi subscribers previously didn’t watch much, if any, broadcast television. But thanks to ivi, some of these viewers may get hooked on hit network shows like American Idol, NCIS, or Person of Interest. Some ivi subscribers might even go on to buy seasons of their favorite shows on Blu-ray or DVD. If these assumptions hold true, ivi might actually increase the market value of the television programs it streams. So why aren’t rights holders applauding ivi — or emulating it — instead of trying to shut it down?

Perhaps it’s because the rights holders worry that ivi could attract a large audience of “cord cutters” who previously bought season passes to their favorite shows from Internet media stores such as iTunes or Amazon Instant Video. Rights holders might also worry that ivi could induce  cord cutting by inducing people to cancel their basic cable or satellite television service. Why pay a cable company $16.50 a month for local broadcast channels when you can get them from ivi for less than a third of the price of cable?

Broadcasters might worry about ivi undercutting their advertising revenues. Because television ad rates are largely based on viewership statistics — as determined by audience measurement companies like Nielsen — each person who unplugs his antenna or cancels his cable subscription for ivi is one fewer Nielsen viewer. (Although ivi is reportedly interested in cutting a deal with Nielsen to ensure its ratings reflect ivi’s audience, it appears no deal was in place when ivi launched.) From the broadcasters’ perspective, it doesn’t matter if lots of ivi subscribers actually watch television ads, as advertisers typically aren’t willing to pay for eyeballs they can’t measure.

Adding insult to injury, ivi streamed the local channels of two markets, Seattle and New York City, to subscribers worldwide. Because broadcast affiliates typically sell ad slots to local businesses, every person who uses ivi but doesn’t reside in Seattle or NYC amounts to one fewer set of eyeballs for a local affiliate.

So ivi could be helping rights holders, hurting them, or doing some of both. To determine ivi’s net impact on content owners’ bottom line, we need to know whether the first type of viewers discussed above (those who spend more on content because of ivi) makes more money for content owners than they lose on other viewers (those who substitute ivi viewing for media store purchases, over-the-air viewing, or pay-TV subscriptions). Unfortunately, we lack the data to answer these questions with confidence.

Nevertheless, there are good reasons to assume that ivi subscribers who generate less revenue for content owners after signing up for ivi vastly outnumber those who generate more revenue.

Consider ivi’s natural subscriber base: people who already pay for network television content — via pay-TV, Internet media stores, or streaming services like Hulu Plus — or watch for free via authorized, ad-supported sources. For many of these viewers, ivi presents a compelling alternative to other sources of network television content.

But what about ivi’s potential to deliver networks a new, untapped audience? Well, at $60 per year, ivi won’t likely play well with casual viewers who aren’t even sure if network television is worth watching. These viewers far more likely to test the network TV waters by streaming recently-aired shows for free on Hulu or network websites.

ivi is also unlikely to attract many network television lovers who’d otherwise miss out on it because they lack the cash. That’s because most low-income television junkies already tune in — perhaps via free, over-the-air network television (which nearly all TV owners can already access with nothing more than a $20 antenna and $30 converter box). From the content owners’ perspective, each user who switches from an over-the-air antenna to an ivi subscription is basically a wash.

At best, ivi may attract some viewers who can’t afford or aren’t willing to pay for basic cable, and live too far away from an urban area to receive an over-the-air signal. But do these viewers outnumber the many TV junkies who want cheaper, more convenient access to network television content? I highly doubt it. And, had ivi tried to persuade the 2nd Circuit that its service actually benefits rights holders, I suspect the Court wouldn’t have bought the argument unless ivi could marshall data that probably doesn’t exist.

Business Models, Innovation, and Incentives

If ivi is such an attractive alternative to “legacy” business models, why don’t the broadcast networks simply follow ivi’s lead by offering a comparable service? It seems like a no-brainer; after all, networks and affiliates already have established relationships with advertisers, and enjoy immediate access to perfect digital copies of their content. A joint venture of the major networks, perhaps in collaboration with their affiliates, would surely dominate ivi (assuming both services were comparably priced).

What explains the broadcasters and rights holders’ reticence toward this business model? Perhaps they’re too stupid or lazy to see the green in front of them. Maybe they’re too attached to obsolete business models to monetize their content in a rational, profit-maximizing manner.

But the rights holders could also be acting perfectly rationally. Maybe the $6 monthly fee ivi charges isn’t the profit-maximizing price at which to charge consumers for high definition, live, recordable, rewindable network television content. Perhaps the business strategy currently employed by broadcasters and creators — complex and confusing as it may be to most people — captures more income for the creation and distribution of television shows than alternative business models.

I don’t know whether content owners ought to shun or embrace ivi’s business model. Neither does Mike Masnick — or, for that matter, anyone. At best, armed with extensive economic data and market research, we’d still only be able to make an educated guess as to how content owners should structure their businesses. Modern consumers’ preferences are simply too opaque, divergent, and dynamic for any producer to systematically squeeze out every last drop of profits or surplus.

Even under uncertainty, however, decisions must still be made. In the market for creative works, their creators (and their assignees) are empowered by the Copyright Act with an exclusive, but limited, right to decide how to monetize their works. So it is that broadcasters and affiliates may dictate how television shows are distributed, and decide how much to charge for them, for a limited time and with certain exceptions.

This is why broadcasters may give their content away for free to anybody near a metropolitan area who has an antenna and converter box, while simultaneously preventing third parties like ivi from distributing the same exact content (whether free of charge or for a fee). At first, this may seem absurd, but consider how many websites freely distribute their content on the terms they see fit. That’s why I can read all the Techdirt articles I desire, but only on Techdirt’s website. If copyright protection excluded content distributed freely to the general public, creators of popular ad-supported content would soon find others reproducing their content with fewer ads. Between Hulu — with its several minutes of ads per episode — and a competing service offering the same content, but with nothing more than a few text ads, many viewers would prefer the latter option.

Of course, the Copyright Act is no guarantee that a particular business model will succeed, or that a content creator will make a profit. It simply vests in each rights holder the  power to decide among business models for monetizing their content.

Why let creators and their assignees make these decisions? Even if we believe that that public policy ought to “promote the Progress of … useful Arts” — an admittedly controversial belief that is beyond the scope of this essay — why give content creators exclusive rights to copy, distribute, perform, transmit, and sell their expressive works? There are, after all, plenty of other ways government could encourage people to create movies, books, music, video games, and other socially valuable expressions.

For instance, we could award monetary prizes to creators of popular works, perhaps by measuring how often they’re viewed or experienced. We could create a federal Department of Creative Expression and hire 50,000 of the nation’s most talented writers, artists, and musicians to create books, movies, television shows, and songs all day. We could also give individuals and companies generous, refundable tax credits for income derived from expressive works.

But, for the most part, we don’t do these things. Of the many ways our government could foster the creation of expressive works, we chose copyrights — as have many other governments over the years.

So why copyright? Two reasons: knowledge and incentives.

In an ever-changing world, the best way to discover how to  monetize creative works is through trial-and-error. By empowering lots of individual creators and companies to experiment with different ways of distributing content, knowledge emerges through spontaneous order, as rights holders mimic their successful competitors while constantly trying to figure out an even smarter way to make money. Instead of relying on a centralized bureaucracy or a small group of lawmakers to decide how much to charge for creative works, the institution of copyright disperses such decisions, harnessing the wisdom of the crowd for a better outcome.

If decentralized decision-making works so well, why limit it to creators? Surely if  everybody could monetize creative works, we’d enjoy even more innovative distribution strategies. But this would push the value of creative works down to their marginal price, zero. While it’s still possible to make money by distributing free content, as Mike has explained as comprehensively as anyone, it’s not necessarily the best way for creators to make money. If it were, everybody would already be doing it!

Therefore, we give content creators and their assignees a limited, exclusive right — a temporary monopoly, as it’s often described — over their works. They get to decide not only what to create, but how to distribute it. Whether they reap vast rewards or lose their shirts depends solely on the decisions they make.

To be sure, our Copyright Act abounds with excesses and deficiencies, many of which we’ve discussed on these pages over the years. (For instance, it lacks a registration or renewal requirements, imposes draconian criminal penalties on noncommercial infringement, and confers copyrights on too broad a range of subject matter.) Despite these problems, however, the exclusive right to monetize expressive works — a right that ivi flagrantly violates — is at the core of copyright. If there’s one exclusive right that copyright laws  should  secure for content creators, it’s the right to sell complete copies of newly-produced creative works made for the purpose of private commercial gain.

If ivi doesn’t violate this right, I don’t know what does.

I’m working on a project looking at libertarian views on copyright (more on that soon), and I’d like to solicit your feedback on an analogy I’m developing. I’ve set up a comment thread at Google+ and I’d sincerely appreciate your thoughts on this post. Email feedback is also appreciated. Here goes…

Libertarians, conservatives and other supporters of a free market tend to be critical of government programs that subsidize particular industries. For example, the loan guarantees that allowed Solyndra to set up shop. We don’t like them because they distort the market and tend to lead to rent-seeking, if not corruption.

Why do we have loan guarantees for renewable energy projects like Solyndra’s solar power technology? Quite simply it’s because we’d like to see more renewable energy technology developed; more than is profitable to develop right now. So, the government offers a subsidy to incentivize the creation of such technology, which will eventually benefit the public at large. So far so good, but there are problems with this kind of government privilege.

First, there is a knowledge problem. How do we know that we’re not already getting the right amount of investment in renewable technologies? Without a government subsidy, there would still be investment in renewable energy technologies. We just think it’s not enough. But even putting aside how we can know that, the other question is, how much investment is optimal? Without a market process to guide investment, we don’t know how much is enough. So when the government offers subsidies, it’s guessing. It’s likely offering too little or too much, with each error introducing its own inefficiencies.

Second, the process by which we decide how much subsidy to offer, and to whom it is granted, is a political one. Congress decides how much is enough. It also picks winners and losers (renewable over nuclear, solar over geothermal). The result is rent-seeking, which is not only wasteful, but it almost guarantees that we won’t answer anywhere near correctly the questions of whether to subsidize, what to subsidize, and by how much.

So, given that the above argument is obvious to libertarians and conservatives, I would think they should be just as skeptical of copyright as they are of renewable energy loan guarantee programs.

Without copyright, there would still be books and songs written and movies made. It’s just that we think there wouldn’t be enough. So, the government offers a subsidy in the form of a monopoly over one’s creations in order to incentivize more creative output. (To be clear, the government is not recognizing an existing property right, it is granting a privilege. Please see Tom Bell on this point here and here.) The same questions we have about renewable energy present themselves here: How do we know we wouldn’t have “enough” creative works without copyright? And assuming we know that, how do we know the right amount of incentive to offer? Is a 14 year term, as the Founders legislated, enough? Is life of the author plus 70 years too much?

More worryingly to conservatives and libertarians, it is Congress who decides these questions. It decides how much protection to grant, and it picks winners and losers (music over fashion, composers over performers). As a result, we see in copyright some of the most transparent rent-seeking on display in Washington. A concentrated content industry seeks longer and longer terms, and greater and greater protections and enforcement, at the expense of a dispersed public. It’s a recipe for giant inefficiency and massive loss of consumer welfare.

The Constitution explicitly grants Congress the power to establish a postal service, and Congress does this by granting to the USPS a monopoly privilege (not property, I hope we can agree) to delivering first class mail and using mailboxes. Libertarians and conservatives have long understood that although Congress has the power to do this, it might want to reconsider how it exercises that power. The USPS we have is a bloated and inefficient government program, and substituting competition for monopoly would no doubt increase efficiency and consumer welfare. We know this even though we understand that with half a million career employees at the USPS, the public choice dynamic at work might keep Congress from forbearing on its power.

Libertarians and conservatives should see copyright the same way. Although the Constitution gives Congress the power to grant monopoly rights to authors, it is not required to exercise that power. Given the concentrated benefits and dispersed costs inherent in such a system of monopoly grants, copyright has similarly become a bloated and inefficient government program. We should be as skeptical of copyright as we are of Solyndra or the USPS.

What do you think of my analogy? Please let me know here.

So, the Department of Justice has formally filed suit against Apple and several major book publishers claiming collusion over eBook pricing. Let’s say Apple and the publishers are guilty as charged and in violation of our nation’s antitrust laws. Here’s my opinion on that: So what? What Apple and the publishers are doing here is trying to find a way to sustain creative works in an era when copyright law is slowly dying. As I noted here in a post yesterday, I take no joy in reporting the fact that property rights for intellectual creations no longer function effectively. I wish they did still work, but they are failing rather miserably in an age of highly decentralized digital dissemination. Moreover, I am not prepared to see government go to absurd enforcement extremes in an attempt to make intellectual property rights work. But, that being said, something needs to sustain and cross-subsidize cultural creations in an age of mass piracy. I have increasingly come to believe that consolidation of content and conduit (or devices) is a big part of the answer. Alternatively, some sort of informal collusion among cultural creators and information distributors may be the answer.

Apple and the publishers have figured that out and come up with a plan that keeps intellectual works flowing while making sure that the creators behind them get paid. At a time when copyright critics always say “just find a better business model” Apple and the publishers did just that. But now Department of Justice officials say that business model should be forbidden. That’s crazy.  If we’re going to let copyright die, we should at least grant more pricing and deal-making flexibility to the creative community to structure business arrangements that might give them a lifeline.

But won’t such deals give publishers and other creative artists and industries more pricing power that will help them keep prices up artificially? Yes, of course! That is the whole point! God forbid we actually have to pay something to cultural creators. Ain’t that a scandal. But here’s a news flash: That’s what copyright law was all about, too. It was about helping creators put some fences around their “property” to help them maintain some degree of pricing power for goods with zero marginal cost. The scheme worked brilliantly for many years. It spawned a vibrant marketplace of ideas and helped America become the leading exporter of expressive works on the planet. But now the effectiveness of traditional copyright is fading rapidly. Industry consolidation, cross-promotions, pricing deals, and so on, will increasingly be the “better business model” some will turn to.  So, are we going to allow it? Or will critics just keep mouthing “go find a better business model” and have the government step in every time they don’t like the one industry chooses?  I say let experimentation continue.

Andrew Orlowski of The Register (U.K.) recently posted a very interesting essay making the case for treating online copyright and privacy as essentially the same problem in need of the same solution: increased property rights. In his essay (“‘Don’t break the internet’: How an idiot’s slogan stole your privacy“), he argues that, “The absence of permissions on our personal data and the absence of permissions on digital copyright objects are two sides of the same coin. Economically and legally they’re an absence of property rights – and an insistence on preserving the internet as a childlike, utopian world, where nobody owns anything, or ever turns a request down. But as we’ve seen, you can build things like libraries with permissions too – and create new markets.” He argues that “no matter what law you pass, it won’t work unless there’s ownership attached to data, and you, as the individual, are the ultimate owner. From the basis of ownership, we can then agree what kind of rights are associated with the data – eg, the right to exclude people from it, the right to sell it or exchange it – and then build a permission-based world on top of that.”

And so, he concludes, we should set aside concerns about Internet regulation and information control and get down to the business of engineering solutions that would help us property-tize both intangible creations and intangible facts about ourselves to better shield our intellectual creations and our privacy in the information age. He builds on the thoughts of Mark Bide, a tech consultant:

For Bide, privacy and content markets are just a technical challenges that need to be addressed intelligently.”You can take two views,” he told me. “One is that every piece of information flowing around a network is a good thing, and we should know everything about everybody, and have no constraints on access to it all.” People who believe this, he added, tend to be inflexible – there is no half-way house. “The alternative view is that we can take the technology to make privacy and intellectual property work on the network. The function of copyright is to allow creators and people who invest in creation to define how it can be used. That’s the purpose of it. “So which way do we want to do it?” he asks. “Do we want to throw up our hands and do nothing? The workings of a civilised society need both privacy and creator’s rights.”  But this a new way of thinking about things: it will be met with cognitive dissonance. Copyright activists who fight property rights on the internet and have never seen a copyright law they like, generally do like their privacy. They want to preserve it, and will support laws that do. But to succeed, they’ll need to argue for stronger property rights. They have yet to realise that their opponents in the copyright wars have been arguing for those too, for years. Both sides of the copyright “fight” actually need the same thing. This is odd, I said to Bide. How can he account for this irony? “Ah,” says Bide. “Privacy and copyright are two things nobody cares about unless it’s their own privacy, and their own copyright.”

These are important insights that get at a fundamental truth that all too many people ignore today: At root, most information control efforts are related and solutions for one problem can often be used to address others. But there’s another insight that Orlowski ignores: Whether we are discussing copyright, privacy, online speech and child safety, or cybersecurity, all these efforts to control the free flow of digitized bits over decentralized global networks will be increasingly complex, costly, and riddled with myriad unintended consequences. Importantly, that is true whether you seek to control information flows through top-down administrative regulation or by assigning and enforcing property rights in intellectual creations or private information.

Let me elaborate a bit (and I apologize for the rambling mess of rant that follows).

Parallels in Debates over Copyright & Privacy Protection

In several essays here over the past few years I have attempted to draw parallels between the battles over protecting digital copyright and online privacy, as well as battle over online safety/speech and cybersecurity. Here are a few of those essays in case you’re interested in seeing the evolution of my thinking about this:

• When It Comes to Information Control, Everybody Has a Pet Issue & Everyone Will Be Disappointed
• And so the IP & Porn Wars Give Way to the Privacy & Cybersecurity Wars
• SOPA & Selective Memory about a Technologically Incompetent Congress
• Privacy as an Information Control Regime: The Challenges Ahead
• Isn’t “Do Not Track” Just a “Broadcast Flag” Mandate for Privacy?

In those essays I have argued that a combination of selective morality and wishful thinking are at work in the information policy world these days. In essence, people hate Internet regulation… until they love it! Here’s how I summarized that fact during the debate over SOPA:

… conservatives rush out and breathlessly denounce each and every effort to impose Net neutrality regulation because of the danger of empowering an already over-zealous bunch of bumbling bureaucrats at the FCC. (And I agree with them.) Yet, with their next breath many conservatives praise SOPA even though it also empowers government to muck with the inner workings of the Internet. Some of those conservatives are also turning a blind eye to the growing appetite of the defense/security community to meddle with the Net’s architecture in the name of avoiding any number of non-catastrophes. Meanwhile, the liberals decry SOPA and want it stopped at all costs. There’s never been a copyright protection measure they liked, of course, but each time one pops up we hear them claim that our analog era Congress is not well-positioned to be designing industrial policy schemes for the Internet. (And I generally agree with them.) But most liberals do a complete 180 whenever online privacy or Net neutrality regulations are the subject of congressional inquiry. Suddenly, the cyber-oafs in Congress are considered veritable technocratic philosopher kings who we should trust to guard our cyber-freedoms to lead us to the digital promised land.

Again, it’s both selective morality and wishful thinking. It’s selective morality in that some folks think certain values are sacrosanct and deserving of a “by-any-means-necessary” enforcement attitude, yet they are often just as likely to denounce similar information control efforts when it comes to issues or values they don’t give a damn about.  And it is wishful thinking in that you can’t run around insisting that “information wants to be free” in some contexts but then express outrage when something that you want to bottle up turns out to “just want to be free” as well!

But the important takeaway here is that, consistent with what Orlowski argues, I believe that online copyright and privacy are essentially the same problem: It’s an information control problem.

Potential Costs of Control

Once you start thinking about Internet policy debates as a single issue — namely, information control — you can begin to investigate the potential costs of control in a somewhat more objective fashion. Of course, challenging issues remain:

1. Which method of control should we choose? On one hand, there are many varieties of administrative regulation, technical infrastructure controls, and device mandates. On the other hand, there are property rights and liability / tort schemes. And there are many hybrid enforcement models, such as increasingly popular “co-regulation” models, government standard-setting, and “nudging” of system defaults. Each method will entail different costs and trade-offs.
2. What metric(s) should we use when attempting to determine whether the benefits of control exceed the costs? Ask any advocate of information control about whether the costs might exceed the benefits of regulation for their pet issue and they will typically suggest that either (a) there are no costs or that (b) the benefits dwarf any costs that may exist. But all too often the benefits they identify are extremely subjective and amorphous in character (“privacy,” “safety,” and “security” are hard to quantify, after all) while the costs are very real and increasingly substantial.

In my view, these practical questions are increasingly the most interesting issues to explore in the field of cyberlaw and digital economics. We can debate the normative or ethical considerations until we’re all blue in the face and ready to rip each other’s heads off, but I am less and less interested in such squabbles. Instead, I keep coming back to the question of how we’ll go about controlling info flows and how much effort and resources it makes sense to expend in pursuit of each of the values identified above. Some of the specific considerations I find myself asking in every paper I write these days include:

(A) Will the proposed form of information control tie us up in the courts forever, lead to increasingly onerous and unworkable liability norms, and end up yielding outrageous litigation costs?

(B) Will the proposed form of information control require a significant increase in regulatory bureaucracy? How many levels of government will need to be involved in the proposed enforcement scheme? How many new offices and officials will need to be empowered in the hope of achieving some measure of control?

(C) What are the alternatives to the proposed form of information control? Are there less costly or less restrictive means of addressing the concern in question? For example, education and empowerment effort are often an effective way to address many online safety and digital privacy concerns. Can we use those methods in conjunction with social norms, public pressure, self-regulation, informal contracting, and other methods to address these and other concerns?

For me, the costs associated with the A & B are increasing so rapidly that I almost always default to C as the better approach. Importantly, although A & B will be less onerous or costly when the solution is of the increased property-ization variety than of the administrative regulation variety, that does not mean property rights-based solutions for information are costless. Indeed, I increasingly find myself concluding that C solutions are more cost-effective even compared to increased property rights.

Practical Advice Once You Accept the Increasing Costs & Complications of Control

At this point, readers may be thinking: “Wait a minute, this dude is just some kooky libertarian who doesn’t want any form of information control, so he’s just trying to rationalize anarchy here.” No, I’m not. I certainly favor less control across the board than most people, but I also understand that there are times, at the margin, when some forms of “control” are necessary. But my views on the wisdom of control are heavily influenced by the costs of control. The costs of control — broadly defined — are a key factor in every cost-benefit analysis I do related to the wisdom of Net regulation and information control methods — even when one of those methods is increased “property-ization.” And because I have come to believe that those costs are going up and that most information control efforts will not work well in practice, I have boiled down my advice on this front to two simple principles:

1. Choose your info control battles wisely. Figure out where the most serious harms or threats lie and then target the info control solution accordingly and forget about the rest. For example, in child safety debates, that would mean going after child porn rings but leaving run-of-the-mill adult porn alone entirely. In copyright, it would mean nailing the largest commercial mass piracy sites but accepting a certain amount of casual sharing. In the field of personal info, it means singling out health and financial information and data for special protections and likely giving up on most other forms of info control. And so on. In essence, these are where the greatest potential harms lie that most people would consider intolerable. As you move further away from such issues, the case for control becomes harder and harder and the costs will almost certainly exceed the benefits.
2. Have a good backup plan in mind when those info control plans fail anyway. That backup plan should generally be based on education, empowerment, coping strategies, and resiliency. Again, these are the “C” solutions mentioned above. [I developed this model more robustly in the second half of this recent paper.] This approach won’t be perfect but it will likely be what you’ll end up relying on anyway, so you better start thinking about plowing more resources into this alternative approach even while you’re trying to devise info control mechanisms.

Let me just say a brief word to my market-oriented friends who are dismayed by my inclusion of property rights in the mix of “information control” efforts. I’m a big believer in the importance of property rights in many contexts, but context does matter. More specifically, physicality matters. It is easy to create property rights in tangible goods and almost always right to do so. Property rights in intangible ideas and creations raise special issues, however. Because ideas are non-rivalrous and have public good qualities, it makes property-ization more complicated and less effective. Property rights in facts can also come into conflict with other values and more well-established rights, especially freedom of speech and expression.

On the privacy front, Eugene Volokh made this point in his famous 2000 law review article, “Freedom of Speech, Information Privacy, and the Troubling Implications of a Right to Stop People from Speaking About You,” when he noted that, “The difficulty[with] the right to information privacy — the right to control other people’s communication of personally identifiable information about you — is a right to have the government stop people from speaking about you. And the First Amendment (which is already our basic code of “fair information practices”) generally bars the government from “control[ling the communication] of information,” either by direct regulation or through the authorization of private lawsuits.” That doesn’t mean free speech values should always trump privacy values, but denying this tension is just plain silly. If you want to propertytize all personal information, then you better be prepared to explain how that plays out in practice. How far are you prepared to go to ban the dissemination of facts? Would you place prior restraint on the press to accomplish it? Would you ban a historian from writing a biographies that reveal intimate facts about the subject? Would you shut down all the online sites and services that rely on a certain amount of personal information to fuel their free offerings?

Likewise, copyright law was far more effective in the analog age when we were still pressing music on vinyl and plastic. As soon as digitization become widespread, it was pretty much game over for traditional copyright law and now we are off and running with all sorts of convoluted and increasingly costly regulatory regimes. It’s not that I don’t want these some of these schemes to work — I’ve been a long-time copyright defender — but, again, the practicality of control simply must be considered here. I am not will to “pay any price, bear any burden” in defense of protecting intellectual property rights even as I remain outraged by the staggering amount of free-riding at work every single second of the day on the Internet. So, adopting the framework I outlined about, we might try targeted solutions to go after the biggest of those freeloaders — commercial mass piracy hubs — but we should generally avoid the sort of ham-handed technical control methods we saw in SOPA and other fights, like the broadcast flag battle among others. But, generally speaking, property rights just aren’t going to work as well in this space going forward. I’ve come to believe that the best hope lies in massive consolidation of content and conduit. In other words, pipe and device owners need to buy out all the content-creating industries and just embed a small fee in their monthly services to cross-subsidize content. This is essentially a private collective licensing solution and it is not unprecedented. Nor is it perfect. It will be very leaky. Plenty of piracy will still take place. But it will probably offer creators a better chance of finding a sustainable revenue stream than the current system does. The old copyright system that served them and us so well is dying and they had better start thinking of alternatives like this. Of course, antitrust law may never allow it, so I could be wasting my breath here. (Just look at all the grief that antitrust officials both here and abroad are giving Apple and eBook sellers for working together even though that it probably the best scheme devised in recent memory to sustain publishing in an age of mass piracy. Policymakers should be encouraging more of that sort of thing, not punishing it.)

An Uncertain Future

So, to wrap up… I can imagine a future in which both heavy-handed, top-down info control efforts and property / liability solutions are failing almost universally because of the ubiquitous, instantaneous, quicksilver-like flow of information across decentralized digital networks. Some utopians will argue that such a world will be better in every way than the one we live in today. I do not share such hyper-optimism. While I believe that, on balance, the free flow if information generally benefits society, I also understand how it creates enormous angst and intractable challenges for many. It’s a world in which copyright is a hollow shell of its former self that offers creators very little protection for their expressive works. And it’s a world in which personal privacy is harder to safeguard with each passing day because no matter how hard we try to property-tize facts about ourselves, that enforcement model simply breaks down at some point or becomes socially and economically intolerable. As with copyright, efforts to property-tize personal information will lose the battle against data sharing. As computer scientist Ben Adida argued in his essay, “(Your) Information Wants to be Free,” “unfortunately, information replication doesn’t discriminate: your personal data, credit cards and medical problems alike, also want to be free. Keeping it secret is really, really hard.”

Indeed, and it is growing harder by the day. Contrary to what Orlowski suggests, therefore, this isn’t a simple engineering problem. I wish it were as easy as he suggests to build “permissions-based markets” because they could have real benefits for individuals and society. But it is most certainly not that simple. It is far more costly and complicated than ever to devise workable information control schemes on one hand and “permissions-based” property rights schemes on the other. In some cases, I might still be willing to try the latter, but unlike Orlowski, I just don’t place much faith in the success of the endeavor.

On numerous occasions here at the TLF over the past eight years, I’ve noted the profound influence that the late Ithiel de Sola Pool had on my thinking about the interaction of technology, information, and public policy. In fact, when I needed to pick a thematic title for my weekly Forbes column, it only took me a second to think of the perfect one: “Technologies of Freedom.” I borrowed that from the title of Pool’s 1983 masterpiece, Technologies of Freedom: On Free Speech in an Electronic Age. As I noted in my short Amazon.com review, Pool’s technological tour de force is simply breathtaking in its polemical power and predictive capabilities. Reading this book three decades after it was published, one comes to believe that Pool must have possessed a crystal ball or had a Nostradamus-like ability to foresee the future.

I felt that same was this week when I was re-reading some chapters from his posthumous book, Technologies without Boundaries: On Telecommunications in a Global Age–a collection of his remaining essays nicely edited and tied together by Eli Noam after Pool’s death in 1984. Re-reading it again reminded me of Pool’s remarkable predictive powers. In particular, the closing chapter on “Technology and Culture” includes some of Pool’s thoughts on the future of copyright. As you read through that passage below, please try to remember he wrote these words back in the early 1980s, long before most people had even heard of the Internet and when home personal computing was only just beginning to take off. Yet, from what he already knew about networked computers and digital methods of transmitting information, Pool was able to paint a prescient portrait of the future copyright wars that we now find ourselves in the midst of. Here’s what he had to say almost 30 years ago about how things would play out:

Can a computer infringe copyright? The printed output of recorded copyright material is likely to be a statutory violation of the Copyright Act which vests the exclusive right “to print, reporting, publish, copy and vend the…work.”

In short, the process of computer communication entails processing of texts that are partly controlled by people and partly automatic. They are happening all through the system. Some of the text is never visible but is only stored electronically; some is flashed briefly on a terminal display; some is printed out in hard copy. What started as one text varies and changes by degrees to other things. The receivers may be individuals and clearly identified, or they may be passers­by with access but whose access is never recorded; the passer­by may only look, as a reader browsing through a book, or he may make an automatic copy; sometimes the program will record that, sometimes it will not.

To try to apply the concept of copyright to all these stages and actors would require a most elaborate set of regulations. It has none of the simplicity of checking what copies rolled off a printing press. Good intentions about what one would like can be defined. One would like to compensate an author if a computer terminal is used as a printing press to run off numerous copies of a valuable text. One would like not to impose any control as someone works at a terminal in the role of a reader and checks back and forth through various files. The boundary, however, is impossible to draw. In the new technology of interactive computing, the reader, the writer, the bookseller, and the printer have become one. In the old technology of printing one could have a right to free press for the reader and the writer but try to enforce copyright on the printer and the bookseller. That distinction will no longer work, any more than it would ever have worked in the past on conversation.

Those whose livelihood is at stake in copyright do not like that kind of comment. They contend that creative work must be compensated. Indeed it must. Publishers may point the finger in accusation and charge that one is taking bread out of the mouths of struggling writers. But the system must be practical to work. On highly charged subjects there is an impulse to insist that those who make a negative comment must have a panacea to offer instead. If one says prisons do not cure criminals, the rejoinder is apt to be, “Do you want to let them out to kill people?” One does not necessarily want that at all, but it may still be true the prisons do not cure criminals. Likewise, one can say that in an era of infinitely varied, automated text manipulation there is no reasonable way to count copies and charge royalties on them.

That is the situation now emerging. It may be very unfair to authors. It may have a profoundly negative effect on some aspects of culture, and in any case, whether positive or negative, it may change things considerably. If it becomes more difficult for authors and artists to be paid by a royalty scheme, more of them will seek salaried bases from which to work. Some may try to get paid by personal appearances or other auxiliaries to fame. Or the highly illustrated, well-bound book may acquire a special marketing significance if the mere words of the text are hard to protect. Or one may try to sell subscriptions to a continuing service, with the customer knowing that he will be a first recipient.

These are the kinds of considerations one must think about in speculating about the consequences for culture of a world where the royalty-carrying unit copy is no longer easy to protect in many of the domains where it has been dominant. While Congress tries to hold the fort, it is clear that with photocopiers and computers, copyright is an anachronism. Like many other unenforceable laws that we keep on the statute books from the past, this one may be with us for some time to come, but with less and less effect. (pp. 257-59)

Indeed, as I wrote in one of my recent Forbes column’s (The Twilight of Copyright?”), it appears that–whether some of us like it or not–“copyright is dying… [as it] is being undermined by the unrelenting realities of the information age: digitization, instantaneous copying, borderless transactions, user-generated content, and so on.” Of course, I’m basing that assertion on the facts on the ground around me circa 2012. By contrast, Ithiel de Sola Pool already had it figured out 30 years ago. Absolutely remarkable.

A new report says the opposite, though perhaps “legacy” entertainment companies are failing to keep up.

By any measure, it appears that we are living in a true Renaissance era for content. More money is being spent overall. Households are spending more on entertainment. And a lot more works are being created.

Good news! Check out: “The Sky is Rising.”