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Video: Competition & Innovation in the Digital Economy

by on July 14, 2012 · 0 comments

Is competition really a problem in the tech industry? That was the question the folks over at WebProNews asked me to come on their show and discuss this week. I offer my thoughts in the following 15-minute clip. Also, down below I have embedded a few of my recent relevant essays on this topic, a few of which I mentioned during the show.

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Follow-up Post in Symposium on “Competition in Online Search”

by on May 24, 2012 · 2 comments

Boy, the symposium on “Competition in Online Search” that Daniel Sokol threw together this week over at the Antitrust & Competition Policy Blog could not have been better timed! As most of you know, the European Commission stepped up its attack on Google this week and all signs are that a lot more antitrust activity is on the way on this front.

Anyway, all the entries in the symposium are in and a few rebuttals have followed, including one by me. In my response, I took on Frank Pasquale and Eric Clemons, who were the most aggressive in their calls for search regulation. I thought I would just re-post it here to complement my early entry in the symposium on Monday.

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I enjoyed the entries in this symposium and learned something from each of them. I have a few things to say in response to both Frank Pasquale and Eric Clemons and their sweeping indictments of not just Google but seemingly the entire modern information economy.

Everywhere they look, it seems, Pasquale and Clemons see villainy. Someone completely alien to the modern online ecosystem would read Pasquale’s description of it — “digital feudalism,” “absolute sovereignty,” “opaque technologies,” “leaving users in the dark,” etc., etc. — and likely conclude that a catastrophe had befallen modern man. Of course, Pasquale’s narrative is missing any reference to the unparalleled expansion in the stock of knowledge and human choices that has been made possible by Google and the others companies he castigates (Apple, Facebook, Twitter, and Amazon). Meanwhile, Clemons wants to group Google in with supposed Wall Street robber barons as well as characters from Sinclair’s “The Jungle.” It’s all a bit much. Continue reading →

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Entry for Antitrust Policy Blog Symposium on “Competition in Online Search”

by on May 21, 2012 · 1 comment

It’s my great pleasure this week to be participating in a 2-day symposium on “Competition in Online Search” that is being hosted by the Antitrust & Competition Policy Blog.  Daniel Sokol, Associate Professor of Law at the University of Florida Levin College of Law, was kind enough to invite me to join the fun. Professor Sokol is the editor of the Antitrust & Competition Policy Blog. Others participating in this symposium include: James Grimmelman (NY Law); Eugene Volokh (UCLA); Marvin Ammori (Stanford Law); Mark Jamison (Univ. of Florida); Eric Clemons (Wharton School); Dan Crane (Michigan Law); and both Marina Lao and Frank Pasquale (Seton Hall); and more.

My entry is now live. In it, I focus on how dynamically competitive and innovative the digital economy has been over the past 15 years and question to need for intervention at this time, especially of the “public utility” variety. I’ve re-posted my entry below, but make sure to head over to the Antitrust & Competition Policy Blog to read all the contributions to this excellent symposium. Continue reading →

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Antitrust & Innovation in the New Economy: The Problem with the Static Equilibrium Mindset

by on April 16, 2012 · 0 comments

In this new Money Morning article, “The Antitrust Curse: What Apple Can Learn From Microsoft, IBM,”  David Zeiler wonders whether the antitrust lawsuit filed against Apple and several book publishers by the U.S. Department of Justice last week could open the door to a broader case against Apple or, at a minimum, simply become a major distraction to the firm and it’s ability to innovate going forward. He uses IBM and Microsoft as case studies in this regard and notes that, “the problem with being in the DOJ’s gunsight is that it distracts management, makes the company hesitant to innovate, and blemishes the company’s public image.  While antitrust woes may not have been entirely responsible for Microsoft and IBM ceding their dominant positions in tech, they were clearly a major factor,” he says. “And worse for Apple, the e-book case could be just the beginning.”

Quite right. I raised the same concern in my recent Forbes column,”Regulatory, Antitrust and Disruptive Risks Threaten Apple’s Empire,” which Zeiler was kind enough to quote in his essay. In that piece, I argued:

Even if Apple beats back [the eBooks] investigation, broader questions are being raised about the company’s power that could invite a much broader investigation. The danger for Apple is that antitrust becomes an omnipresent threat that must be factored into all ongoing business decisions. Antitrust is a particular danger to Apple because the firm is highly vertically integrated and that integration is the source of many of their innovations.  As earlier tech titans like IBM and Microsoft learned, when antitrust hangs like the Sword of Damocles, every decision about how to evolve and innovate becomes a calculated gamble.

Regarding the earlier impact that antitrust Sword of Damocles had on Microsoft, Zeiler unearthed this terrific 2005 quote from Mark Kroese, a general manager of information services at the Microsoft Network, who described the impact of the MS antitrust case on innovation at the firm as follows: “Working at Microsoft today vs. five years ago is different,” Kroese said. “If anyone thinks the antitrust case hasn’t slowed us down, you’re wrong. If I want to meet with a products manager for Windows, there needs to be three lawyers in the room. We have to be so careful, we err on the side of caution. We are on such a fine line of conduct.” Regarding how antitrust chilled IBM, Zeiler cites veteran tech journalist Steve Wildstrom of Tech.pinions who noted,  “Twelve years of litigation were an enormous distraction in a time of rapid technological and business change. IBM management became cautious and over-lawyered, constantly looking over its shoulder-a condition that persisted for years after the case ended. The antitrust case was almost certainly a major cause of the serious decline of IBM in the late 1980s and early 90s,” Wildstrom said.

Of course, it is impossible to scientifically determine to what degree antitrust harassment contributed to either IBM or Microsoft’s inability to innovate and adapt to the rapidly changing market conditions. And let’s be clear: both IBM and MS have found ways to rebound and innovate in other ways. But one wonders what was lost in the process as the threat of antitrust constantly loomed and potentially chilled innovative efforts that could have kept both firms on the cutting-edge. Continue reading →

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new paper: The Perils of Classifying Social Media Platforms as Public Utilities

by on March 19, 2012 · 0 comments

The Mercatus Center at George Mason University has just released my new white paper, “The Perils of Classifying Social Media Platforms as Public Utilities.” [PDF] I first presented a draft of this paper last November at a Michigan State University conference on “The Governance of Social Media.” [Video of my panel here.]

In this paper, I note that to the extent public utility-style regulation has been debated within the Internet policy arena over the past decade, the focus has been almost entirely on the physical layer of the Internet. The question has been whether Internet service providers should be considered “essential facilities” or “natural monopolies” and regulated as public utilities. The debate over “net neutrality” regulation has been animated by such concerns.

While that debate still rages, the rhetoric of public utilities and essential facilities is increasingly creeping into policy discussions about other layers of the Internet, such as the search layer. More recently, there have been rumblings within academic and public policy circles regarding whether social media platforms, especially social networking sites, might also possess public utility characteristics. Presumably, such a classification would entail greater regulation of those sites’ structures and business practices.

Proponents of treating social media platforms as public utilities offer a variety of justifications for regulation. Amorphous “fairness” concerns animate many of these calls, but privacy and reputational concerns are also frequently mentioned as rationales for regulation. Proponents of regulation also sometimes invoke “social utility” or “social commons” arguments in defense of increased government oversight, even though these notions lack clear definition.

Social media platforms do not resemble traditional public utilities, however, and there are good reasons why policymakers should avoid a rush to regulate them as such. Continue reading →

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The DOJ’s Problematic Attack on Property Rights Through Merger Review

by on March 14, 2012 · 1 comment

The DOJ’s recent press release on the Google/Motorola, Rockstar Bidco, and Apple/ Novell transactions struck me as a bit odd when I read it.  As I’ve now had a bit of time to digest it, I’ve grown to really dislike it.  For those who have not followed Jorge Contreras had an excellent summary of events at Patently-O.

For those of us who have been following the telecom patent battles, something remarkable happened a couple of weeks ago.  On February 7, the Wall St. Journal reported that, back in November, Apple sent a letter[1] to the European Telecommunications Standards Institute (ETSI) setting forth Apple’s position regarding its commitment to license patents essential to ETSI standards.  In particular, Apple’s letter clarified its interpretation of the so-called “FRAND” (fair, reasonable and non-discriminatory) licensing terms that ETSI participants are required to use when licensing standards-essential patents.  As one might imagine, the actual scope and contours of FRAND licenses have puzzled lawyers, regulators and courts for years, and past efforts at clarification have never been very successful.  The next day, on February 8, Google released a letter[2] that it sent to the Institute for Electrical and Electronics Engineers (IEEE), ETSI and several other standards organizations.  Like Apple, Google sought to clarify its position on FRAND licensing.  And just hours after Google’s announcement, Microsoft posted a statement of “Support for Industry Standards”[3] on its web site, laying out its own gloss on FRAND licensing.  For those who were left wondering what instigated this flurry of corporate “clarification”, the answer arrived a few days later when, on February 13, the Antitrust Division of the U.S. Department of Justice (DOJ) released its decision[4] to close the investigation of three significant patent-based transactions:  the acquisition of Motorola Mobility by Google, the acquisition of a large patent portfolio formerly held by Nortel Networks by “Rockstar Bidco” (a group including Microsoft, Apple, RIM and others), and the acquisition by Apple of certain Linux-related patents formerly held by Novell.  In its decision, the DOJ noted with approval the public statements by Apple and Microsoft, while expressing some concern with Google’s FRAND approach.  The European Commission approved Google’s acquisition of Motorola Mobility on the same day. Continue reading →

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When an Idea Become a Meme, and Why

by on February 21, 2012 · 1 comment

Ceci c’est un meme.

On Forbes today, I look at the phenomenon of memes in the legal and economic context, using my now notorious “Best Buy” post as an example. Along the way, I talk antitrust, copyright, trademark, network effects, Robert Metcalfe and Ronald Coase.

It’s now been a month and a half since I wrote that electronics retailer Best Buy was going out of business…gradually.  The post, a preview of an article and future book that I’ve been researching on-and-off for the last year, continues to have a life of its own.

Commentary about the post has appeared in online and offline publications, including The Financial Times, The Wall Street Journal, The New York Times, TechCrunch, Slashdot, MetaFilter, Reddit, The Huffington Post, The Motley Fool, and CNN. Some of these articles generated hundreds of user comments, in addition to those that appeared here at Forbes. Continue reading →

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Did Google Defeat People’s Privacy Preferences?

by on February 19, 2012 · 3 comments

Given the importance of privacy self-help—that is, setting your browser to control what it reveals about you when you surf the Web—I was concerned to hear that Google, among others, had circumvented third-party cookie blocking that is a default setting of Apple’s Safari browser. Jonathan Mayer of Stanford’s Center for Internet and Society published a thorough and highly technical explanation of the problem on Thursday.

The story starts with a flaw in Safari’s cookie blocking. Mayer notes Safari’s treatment of third-party cookies:

Reading Cookies Safari allows third-party domains to read cookies.
Modifying Cookies If an HTTP request to a third-party domain includes a cookie, Safari allows the response to write cookies.
Form Submission If an HTTP request to a third-party domain is caused by the submission of an HTML form, Safari allows the response to write cookies. This component of the policy was removed from WebKit, the open source browser behind Safari, seven months ago by Google engineers. Their rationale is not public; the bug is marked as a security problem. The change has not yet landed in Safari.

Mayer says Google was exploiting this yet-to-be-closed loophole to install third-party cookies, the domain of which Safari would then allow to write cookies. After describing “(relatively) straightforward” cookie synching, Mayer says:

But we noticed a special response at the last step for Safari browsers. … Instead of responding with the “_drt_” cookie, the server sends back a page that includes a form and JavaScript to submit the form (using POST) to its own URL.

Third-party cookie blocking evaded, and users’ preferences frustrated.

Ars Technica has published Google’s response, which doesn’t seem to have gone up on any of its blogs, in full. Google says they created this functionality to deliver better services to their users, but doing so inadvertently allowed Google advertising cookies to be set on the browser.

I don’t know that I’m technically sophisticated enough to register a firm judgement, but it looks to me like Google was faced with an interesting dilemma: They had visitors who were signed in to their service and who had opted to see personalized ads and other content, such as ‘+1’s but those same visitors had set their browsers contrary to those desires. Google chose the route better for Google, defeating the browser-set preferences. That, I think, was a mistake.

I wonder if there isn’t some Occam’s Razor that a Google engineer might have applied at some point in this process, thinking, “Golly, we are really going to great lengths to get around a browser setting. Are we sure we should be doing this?” Maybe it would have been more straightforward to highlight to Safari users that their settings were reducing their enjoyment of Google’s services and ads, and to invite those users to change their settings. This, and urging Apple to fix the browser, would have been more consistent with the company’s credo of non-evil.

Now, to the ideological stuff, of which I can think of two items:

1) There is a battle for control of earth out there—well, a battle over whether third-party cookie blocking is good or bad. Have your way advocates. I think the consuming public—that is, the market—should decide.

2) There is a battle to make a federal case out of every privacy transgression. An advocacy group called Consumer Watchdog (which has been prone to privacy buffoonery in the past) hustled out a complaint to the Federal Trade Commission. I think the injured parties should be compensated in full for their loss and suffering, of which there wasn’t any. De minimis non curat lex, so this is actually just a learning opportunity for Google, for browser authors, and for the public.

Kudos and thanks are due to Jonathan Mayer, as well as ★★★★★ and Ashkan Soltani, for exposing this issue.

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The FTC, Mobile Apps, Kids’ Privacy, Prices & Competition

by on February 16, 2012 · 19 comments

Today the Federal Trade Commission released a new report entitled, “Mobile Apps for Kids: Current Privacy Disclosures Are Disappointing,” which concludes that “confusing and hard-to-find disclosures do not give parents the control that they need in this area. The FTC argues that “parents need consistent, easily accessible, and recognizable disclosures regarding in-app purchase capabilities so that they can make informed decisions about whether to allow their children to use apps with such capabilities.”

It’s hard to be against the FTC’s “the more disclosure, the better” policy recommendation and I’m not about to come out against it here. But the question is: how much disclosure is enough? Reading through the report and seeing how hard the FTC hammers this point home makes me think the agency wants our app store checkout process to be littered with the pages of fine print disclosure policies that now accompany our credit card statements and home mortgage payments! Seriously, would that make us better off?

As a parent of two kids who both download countless apps on my Android phone, my wife’s iPhone, and our family’s Android tablet, I appreciate a certain amount of disclosure about what sort of information apps are collecting and how they are using it. I think Google’s Android marketplace strikes a nice balance here, providing us with the most crucial facts about what the application will access or share. Apple could do more on disclosure but the company also prides itself (to the dismay of some!) on its rigorous pre-screening process to make sure the apps in the App Store are safe and don’t violate certain privacy and security policies. Yet, as the FTC correctly points out, “the details of this screening process are not clear.” Of course, most Apple users simply don’t give a damn. They’re all too happy to let Apple just take care of it for them even if they’re not really sure what’s happening to their data behind the scenes. The more privacy-sensitive crowd wants greater disclosure and control, of course, and I’m sympathetic to that plea.  But again, how much disclosure is enough? Are you going to wade through pages of disclosure policies and privacy opt-ins before downloading that latest iteration of “Angry Birds” or “Cut the Rope”? Yeah, I didn’t think so.

Anyway, I don’t want to dwell on that. The more interested findings in the survey relate to price and market dynamics and I am hoping people don’t ignore them. Continue reading →

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Kashmir Hill has it Right…

by on February 1, 2012 · 4 comments

…on the Google privacy policy change.

The idea that people should be able to opt out of a company’s privacy policy strikes me as ludicrous.

Plus she embeds a valuable discussion among her Xtranormal friends.

Read the whole thing. Watch the whole thing. And, if you actually care, take some initiative to protect your privacy from Google, a thing you are well-empowered to do by the browser and computer you are using to view this post.

http://www.youtube.com/v/7jHxfJW7Zww&rel=0&hl=en_US&feature=player_embedded&version=3

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