On July 27th, The Progress & Freedom Foundation hosted a Capitol Hill panel discussion entitled “Online Child Safety, Privacy, and Free Speech: An Overview of Challenges in Congress & the States.” The event featured remarks from:

• Parry Aftab, Executive Director, WiredSafety.org
• Todd Haiken, Senior Manager of Policy, Common Sense Media
• Jim Halpert, Partner, DLA Piper
• Berin Szoka, Senior Fellow, The Progress & Freedom Foundation

We’ve just released the transcript of the event, which I have also pasted down below the fold in a Scribd document reader. Also, the audio for this event can be heard by clicking below:

Download mp3

Here is the full event description:

Online child safety, privacy, and free speech remain hotly debated issues at both the federal and state level. Bills introduced in Congress to address cyberbullying concerns propose either educational initiatives or a criminalization approach. Access to objectionable content also remains a concern and a new, government-mandated task force is looking into those issues. Meanwhile, state officials, including many state attorneys general, continue to explore age verification mandates for social networking sites and some have considered building on the federal Children’s Online Privacy Protection Act (COPPA) to expand “parental notification” mandates. The Federal Trade Commission (FTC) has recently announced an expedited review of COPPA to see if it is keeping up with new developments. The FTC is also exploring child safety in virtual worlds. New concerns about “sexting,” or the sending of sexual explicit images over mobile devices, has also raised new concerns led some lawmakers to ponder penalties.

How serious are these concerns? Is legislation or regulation needed to address them? What free speech issues are at stake? Should Congress take the lead or leave it to the States to experiment with different models? These and other issues were discussed by a panel of leading experts in the field of online safety and privacy policy.

Transcript PFF Online Child Safety Privacy Hill Event (7-27-2009) http://d.scribd.com/ScribdViewer.swf?document_id=18756666&access_key=key-1blb7az1ag406howibuk&page=1&version=1&viewMode=

Adam Thierer & I have just released a detailed examination (PDF) of brewing efforts to expand the Children’s Online Privacy Protection Act of 1998 to cover adolescents and potentially all social networking sites—an approach we call “COPPA 2.0.”

As Adam explained on Larry Magid’s CNET podcast, COPPA mandates certain online privacy protections for children under 13, most importantly that websites obtain the “verifiable consent” of a child’s parent before collecting personal information about that child or giving that child access to interactive functionality that might allow the child to share their personal information with others. The law was intended primarily to “enhance parental involvement in a child’s online activities” as a means of protecting the online privacy and safety of children.

Yet advocates of expanding COPPA—or “COPPA 2.0″—see COPPA’s verifiable parental consent framework as a means for imposing broad regulatory mandates in the name of online child safety and concerns about social networking, cyber-harassment, etc. Two COPPA 2.0 bills are currently pending in New Jersey and Illinois. The accelerated review of COPPA to be conducted by the FTC next year (five years ahead of schedule) is likely to bring to Washington serious talk of expanding COPPA—even though Congress clearly rejected covering adolescents age 13-16 when COPPA was first proposed back in 1998.

We’ll discuss some of the key points of our paper in a series of blog posts, but here are the top nine reasons for rejecting COPPA 2.0, in that such an approach would:

• Burden the free speech rights of adults by imposing age verification mandates on many sites used by adults, thus restricting anonymous speech and essentially converging—in terms of practical consequences—with the unconstitutional Children’s Online Protection Act (COPA), another 1998 law sometimes confused with COPPA;
• Burden the free speech rights of adolescents to speak freely on—or gather information from—legal and socially beneficial websites;
• Hamper routine and socially beneficial communication between adolescents and adults;
• Reduce, rather than enhance, the privacy of adolescents, parents and other adults because of the massive volume of personal information that would have to be collected about users for authentication purposes (likely including credit card data);

• Would likely be the subject of massive fraud or evasion since it is not always possible to definitively verify the parent-child relationship, or because the system could be “gamed” in other ways by determined adolescents;
• Do nothing to prevent offshore sites and services from operating outside these rules;
• Present major practical challenges for law enforcement officials in the face of such evasion by both domestic users and offshore sites;
• Could destroy opportunities for new or smaller website operators to break into the market and offer competing services and innovations, thus contributing to consolidation of online content and services by erecting barriers to entry; and
• Violate the Commerce Clause of the U.S. Constitution, since Internet activity clearly represents interstate commerce that states have no authority to regulate.

As TLF readers may know, I took over in July as Chairman of the Board of the Space Frontier Foundation.  As I explained in my recent interview on The Space Show, SFF has been the leading citizens’ advocacy group for space commercialization since 1988.  Dedicated to promoting Princeton physicist Gerard O’Neill‘s vision of space settlement, as described in his 1976 masterpiece The High Frontier, the Foundation has always argued that “space is a place, not a program.”

We sent out the following press release on October 28, calling for a major transformation of the U.S. government’s space program by which the U.S. government would buy commercial transportation to the International Space Station.  We’ll have more to say about this in the coming weeks.

Space Frontier Foundation Finds Funding Source for COTS-D

The Space Frontier Foundation today called upon Presidential candidates Barack Obama and John McCain to invest the $2 billion in new funds they have promised to NASA for reducing the “Gap” in U.S. human spaceflight (after the Space Shuttle is retired in 2010) to spur innovation and competition in America.

Foundation Chairman Berin Szoka said “It’s time that our national leaders give American entrepreneurs a shot at closing this gap. Let’s take the two billion dollars in the candidates’ plans and fund up to five winners of COTS-D.”

The NASA Authorization Act of 2008, recently signed into law by the President, directs NASA to “issue a notice of intent [by mid-April 2009] … to enter into a funded, competitively awarded Space Act Agreement with two or more commercial entities’ for transporting humans to the ISS”-the “Capability D” of NASA’s Commercial Orbital Transportation Services program (or COTS-D for short). But that directive is not yet funded.

Szoka continued, “Let’s have an American competition in space – to create good jobs, fuel innovation, and close the gap more quickly. With private funds matching government’s investment, we can dramatically leverage the $2 billion to produce breakthroughs in a new American industry – commercial orbital human spaceflight.”

By investing in several different approaches, the government will win no matter who wins this new race, and also benefit from the resulting price competition.

Many American companies, including Boeing, PlanetSpace, SpaceDev, SpaceX, and t/Space have each previously submitted credible COTS-D proposals to NASA. Each of these firms has reached the semi-finals of one of the previous NASA COTS competitions. Increasing funding for COTS by $2 billion would allow NASA to fund all five of these promising companies’ proposals with COTS agreements, and in so doing, build redundancy into the human spaceflight capability available to NASA and other customers.

“It’s popular in Washington to use ‘The Gap’ to cynically justify continued funding of an expensive jobs program,” concluded the Foundation’s co-founder, Bob Werb. “We’re using ‘The Gap’ to advocate a policy that will bridge a gap that matters much more: the chasm between a dying government Human spaceflight monopoly and an emerging, free and competitive marketplace that can open the space frontier to everyone.”

The Federal Circuit significantly limited the patentability of software and business methods today.  Mike Masnick at TechDirt summarizes the holding of the case as follows:

the court has said that there’s a two-pronged test to determine whether a software of business method process patent is valid: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing. In other words, pure software or business method patents that are neither tied to a specific machine nor change something into a different state are not patentable.

I’m sure several of my TLF colleagues will have a great deal to say about this.   Tim Lee has already written about this on Ars Technica:

The Bilski decision, then, is a clear signal that the pendulum has begun to swing back toward tighter limits on software and business patents. However, it remains to be seen how far the court will go in this direction. Bilski was a relatively easy case. The applicant made little effort to hide the fact that he was seeking to patent a mental process, something the Supreme Court has clearly said is not allowed. Therefore, the Federal Circuit’s rejection of this patent doesn’t tell us how it will rule when confronted with software or business method patents that are tied more directly to a physical machine or a transformation of matter. And indeed, the Federal Circuit reiterated that some software and business method patents are valid, so we are unlikely to return to the near-prohibition on such patents that prevailed until the early 1980s.

Thoughts?

Debates about online privacy often seem to assume relatively homogeneous privacy preferences among Internet users.  But the reality is that users vary widely, with many people demonstrating that they just don’t care who sees what they do, post or say online.   Attitudes vary from application to application, of course, but that’s precisely the point:  While many reflexively talk about the “importance of privacy” as if a monolith of users held a single opinion, no clear consensus exists for all users, all applications and all situations.  

If a picture is worth a thousand words, this picture makes the point brilliantly—showing:

locations where [Flickr] users are more likely to post their photos as “public,” which is the default setting, in green. Places where Flickr users are more likely to put privacy controls on their photos show up in red.

Of course, geography is just one dimension across which users may vary in their attitudes about privacy, but the map makes the basic point about variation very well.  Seeing what users actually do in real life says a lot more about their preferences than merely polling them about what they think they care about in the abstract—as my colleagues Solveig Singleton and Jim Harper argued brilliantly in their 2001 paper With A Grain of Salt: What Consumer Privacy Surveys Don’t Tell Us (SSRN).

Google has just announced that it is now accepting applications from undergraduate, graduate and professional students for its summer 2009 Google Policy Fellowship.  Three think tanks employing TLFers are among the host organizations participating in the program: The Progress & Freedom Foundation, the Cato Institute and the Competitive Enterprise Institute. 

Applications are due by December 12, 2008.  The program will run for ten weeks during the summer of 2009 (June-August). Apply today!

The Progress & Freedom Foundation has just launched the new Center for Internet Freedom.  CIF offers an alternative to the proliferation of advocacy groups calling for government intervention online by offering timely analyses and critiques of proposals that diminish the vital role of free markets, free speech and property rights.  We aim to drive the Internet policy debate in new directions by emphasizing a layered approach of technological innovation, user education, user self-help, industry self-regulation, and the enforcement of existing laws consistent with the First Amendment.  Such an approach is a less restrictive—and generally more effective—alternative to increased regulation.  

Here are some of the issues I’ll be working on as CIF’s Director in conjunction with my esteemed colleagues Adam Thierer, Adam Marcus, and adjunct fellows: 

• Defending online advertising as the lifeblood of online content & services, especially in the “Long Tail”;
• Emphasizing market solutions to problems of privacy protection, especially regarding the use of cookies and packet inspection data;
• Protecting online speech and expression both in the U.S. and abroad;
• Defending Section 230 immunity for Internet intermediaries;
• Opposing online taxation and legal barriers to e-commerce and digital payments, especially at the state and local levels; and
• Ensuring that Internet governance remains transparent and accountable without hampering the evolution of the Internet.

Congress has very wisely cancelled the National Reconnaissance Office’s proposed Broad Area Space-Based Imagery Collection (BASIC) satellite system. The proposal to build two new imaging satellites at a cost to taxpayers of $1.7 billion would have represented a major break from what is possibly the U.S. government’s most successful effort to promote space commercialization to date: buying the imagery it needs from commercial providers, who can also sell imagery to other buyers.

Five years ago, the idea that Internet users could pull up a satellite image of just about any location on the planet at a whim would have seemed ludicrous. Yet that’s precisely what websites like Google Maps and Microsoft’s Live Search offer today—for free! Desktop applications like Microsoft’s Virtual Earth and Google Earth offer even more advanced geospatial tools—again, for free. But of course this library of incredibly rich imagery didn’t just “fall out of the sky,” as they say. It was collected by a handful of expensive commercial remote sensing satellites whose construction was made possible by the National Geospatial-Intelligence Agency‘s (Wikipedia) extraordinarily successful “Nextview” program implemented under the Commercial Remote Sensing Policy of 2003.  Rather than having the Federal government build its own satellites—and pay for the entire cost of the satatellites—the NGA very wisely chose to buy imagery from commercial providers in two ~$500 million, 4-year contracts with U.S. satellite imagery companies:  DigitalGlobe in 2003 and OrbImage (now GeoEye) in 2004.  

These long-term purchase agreements essentially made the U.S. Government the “anchor tenant” in a new class of remote sensing satellites, providing the initial funding for both companies to build and operate their satellites. But because the companies sell roughly half of imagery to foreign governments and commercial buyers like Google and Microsoft, these deals have saved U.S taxpayers money for the purchase of imagery for a wide variety of needs, ranging from agricultural monitoring to military intelligence. At the same time, the Nextview contracts have given birth to a vibrant geospatial industry whose immediate benefits should be obvious to anyone who’s ever pulled up a satellite map online and whose macroeconomic impact is potentially enormous. 

So why mess with success?  If the U.S. Government thinks it needs more satellite imagery, why not simply award another long-term purchase agreement to a commercial provider? Besides reducing the burden on the taxpayers, continuing the NextView approach would support the construction of a new generation of commercial satellites like GeoEye-1, which was launched just last month, and DigitalGlobe’s WorldView-1, launched last year.  Rather than rolling back NextView in favor of building its own systems, the U.S. Government should be looking for other space services it can buy on a commercial basis as a way of building industries rather than programs, ranging from sending crew & cargo to the International Space Station to communications and navigation services for NASA’s planned Return to the Moon.

Rather than giving up on the NextView approach in the area where it has already produced spectacular results, the U.S. government should be looking for other areas in which to apply the NextView model by buying space services from commercial providers.

Full disclosure: I was proud to handle FCC matters for GeoEye while practicing law at Latham & Watkins LLP. I currently have no greater personal interest in their success than should any American who wants to see the private sector succeed where the government has failed in opening up the space frontier to all mankind.

By Berin Szoka & Adam Thierer Progress Snapshot 4.19 (PDF)

Since the fall of 2008, a debate has raged in Washington over “targeted online advertising,” an ominous-sounding shorthand for the customization of Internet ads to match the interests of users.  Not only are these ads more relevant and therefore less annoying to Internet users than untargeted ads, they are more cost-effective to advertisers and more profitable to websites that sell ad space.  While such “smarter” online advertising scares some—prompting comparisons to a corporate “Big Brother” spying on Internet users—it is also expected to fuel the rapid growth of Internet advertising revenues from $21.7 billion in 2007 to $50.3 billion in 2011-an annual growth rate of more than 24%. Since this growing revenue stream ultimately funds the free content and services that Internet users increasingly take for granted, policymakers should think very carefully about what’s really best for consumers before rushing to regulate an industry that has thrived for over a decade under a layered approach that combines technological “self-help” by privacy-wary consumers, consumer education, industry self-regulation, existing state privacy tort laws, and Federal Trade Commission (FTC) enforcement of corporate privacy policies.

In an upcoming PFF Special Report, we will address the many technical, economic, and legal aspects of this complicated policy issue-especially the possibility that regulation may unintentionally thwart market responses to the growing phenomenon of users blocking online ads.

We will also issue a three-part challenge to those who call for regulation of online advertising practices:

1. Identify the harm or market failure that requires government intervention.
2. Prove that there is no less restrictive alternative to regulation.
3. Explain how the benefits of regulation outweigh its costs.

The Online Advertising Market

While there are other forms of targeted advertising based on who you are (“demographic”) or where you are (“locational”), the most important varieties are based on what you’re searching for, seeing or doing online at any particular moment (“contextual”) and the pattern of what you’re searching for, seeing or doing over time (“behavioral”). The bulk of Internet advertising falls into one or both of these last two categories, with behavioral advertising growing rapidly.

Search engines deliver contextual ads on search results pages based on the search keywords entered by a user, while third-party advertising networks (some of which also run search engines) deliver contextual ads on behalf of website operators who sell ad space to the network, with the ads displayed on each page chosen according to keywords on that page. Contextual advertising is far “smarter” than displaying the same “dumb” untargeted banner ads to every user, because the contextual ad uses keywords to “guess” what the user is interested in based on the context of each page. But the purely contextual ad network doesn’t “remember” what the user has looked at in the past, so its insights into what the user would find relevant are very limited, especially for some websites. Online behavioral advertising (OBA) solves this problem and increases the value of advertising space on all websites by targeting ads based on a “profile” of the user created by tracking websites the user has visited—as well as limiting the number of times a user is shown a particular ad.

The Perceived Harm Driving Calls for Regulation

For a decade, the basic technology behind OBA has changed little: When a user visits the typical webpage, they download not only the webpage contents but also a small piece of code that allows the website to distinguish that user’s browser from other browsers (a “cookie”)—without personally identifying the user. Some cookies are required to make sites work properly (“site cookies”) while others (“tracking cookies”) are used by the third party ad network in which that site participates to recognize that browser across multiple sites participating in the ad network, and thus create a “profile” of what the user might be interested in. Even though such profiles themselves are anonymous, many privacy advocates have pointed to four reasons why online profiling is becoming “too invasive:” (i) It is sometimes possible to infer the actual identity of the user; (ii) though all browsers allow users to opt-out of tracking by “cleaning out” their tracking cookies, a website may be able to restore deleted tracking cookies through the use of cookie alternatives such as “Flash cookies”; (iii) certain vulnerabilities in current browser design make it theoretically possible to “sniff” a user’s browsing history, cache or bookmarks; and (iv) the use of “packet inspection” by Internet Service Providers (ISPs) (instead of the use of cookies) to track online browsing amounts to illegal wiretapping.

The other concerns expressed by the advocates of regulation vary significantly. Some fear that browsing profiles could be captured by hackers, somehow associated with personally identifying information, and used for identity theft. These advocates demand limits on data retention as well as data security mandates. Others demand that users have access to their own profiles—a goal inherently in tension with data security. Most share a vague queasiness about “being tracked” and about advertising in general, while downplaying the effectiveness of self-regulation or user self-help.

Perhaps most legitimately, others fear that the real “Big Brother”—the government—will gain access to a “honeypot” of surveillance data that might be associated with individual users. A variety of other solutions have been proposed to what is, for the most part, a poorly defined problem, including a government-run “Do Not Track” registry to make it easier for users to block tracking cookies; mandating opt-in for some or all forms of profiling; and banning completely the collection of tracking data about sensitive subjects, cross-referencing of data sets, and use of packet inspection data for OBA.

The Less Restrictive Means: A Layered Approach

But how should policymakers decide which, if any, of these interventions are really necessary–or would even be effective? Ironically, those who demand immediate OBA regulation to protect user privacy are often the first to insist on less burdensome approaches whenever a policy “problem” involves purely non-commercial speech. For example, emphasizing personal and parental responsibility is often favored as the more sensible approach to dealing with free speech and child protection concerns. But, as Chapman University Law Professor Tom Bell has asked, why not apply the same standard across the board? Why not expect those especially privacy-sensitive users who object to OBA to do something about it? To the extent effective self-help privacy tools exist, they provide a means of solving policy problems that is not only “less restrictive” than government regulation but generally more effective and customizable as well. Why settle for one-size-fits-all solutions of incomplete effectiveness when users can quite easily and effectively manage their own privacy? Indeed, those who advocate personal responsibility and industry self-regulatory approaches to free speech and child protection issues should be advancing the same position with regards to privacy.

Fortunately, a wide variety of self-help tools and “technologies of evasion” are readily available to all users and can easily thwart traditional cookie-based tracking, as well as more sophisticated tracking technologies such as packet inspection. While cookie management tools that allow users to delete their cookies have been standard in browsers for some time, the latest generation of browsers incorporates far more advanced control over what kind of cookies browsers will accept from websites in the first place. Furthermore,  the extensible nature of modern browsers allows any freelance software developer who sees a way to improve a browser to do so by writing an add-on that “plugs in” to the browser using standard programming interfaces designed by each browser developer.  Many such add-ons are wildly popular, but even those users who never install a single one benefit from the acceleration of browser evolution made possible by add-ons.  We will be documenting examples of these tools in our upcoming Special Report and in an ongoing  series of blog essays.

The Benefits of Smarter Advertising

The “free” Internet economy is based on a simple value exchange: Users get access to an ever-expanding collection of content and services at no cost from websites that are able to generate revenue from “eyeballs” on their pages by selling space on their sites to advertisers, usually through ad networks. The smarter that advertising, the more free content and services it can support. This is the same value exchange that has supported free, over-the-air television and radio content for decades. The only difference is technological: Because websites can connect directly with the user, they need not rely on crude profiling tools such as Nielsen ratings.

There are larger economic benefits of smarter online advertising. First, it makes the overall economy more open and competitive by allowing small market entrants to reach consumers with messages about their products. Second, those who attack the use of packet inspection by ISPs for OBA fail to see that it is precisely the kind of “game-changer” that could disrupt Google’s currently dominant market position. Third, the involvement of ISPs in OBA could help defer broadband costs: Even if OBA revenue does not completely subsidize monthly service costs, smarter advertising could at least keep prices in check and potentially lower them significantly going forward.

But smarter advertising isn’t just about selling products or services. It is ultimately about making all kinds of speech more cost-effective. The ability to “target” listeners more narrowly also increases the ability of political and other not-for-profit speakers to communicate their messages. In short, smarter advertising means more voices, more choices, and more speech. The line between “advertising” and “content” is already blurring rapidly, as the technologies used to customize advertising are also used to customize webpages and ad networks themselves are used to deliver content.

The Larger Implications of Potential Regulation

As if reducing the advertising revenue generated by each web ad didn’t do enough to reduce the total amount of funding for free web content and services, government regulation of targeted online advertising could reduce advertising revenues even further by aggravating the problem of adblocking in two ways. First, the less relevant ads are, the more annoying users will find them, and the more likely users are to try to block them. Increased relevance is perhaps the most important remedy for adblocking and the best way to maintain the implicit value exchange that currently supports free Internet content and services

Second, regulation could short-circuit the eternal battle of technological one-upmanship between online advertisers and those users who rely on the technologies of evasion to “opt-out” of seeing ads or being tracked. Such privacy-conscious users are “free-riding” off of those users who don’t opt-out, since (at present) they generally don’t lose access to the free content and services supported by the targeted advertisements that other users do see. The user who blocks tracking, but not ads, is still free-riding off those users who don’t opt-out of tracking. On a large enough scale, such self-help has the potential to disrupt the value exchange of the Internet, just as automatic commercial-skipping has already disrupted the value exchange of television. As with all “Spy v. Spy” battles, this long-term trend is inevitable: As more sophisticated technologies of evasion are incorporated seamlessly into browsers and can be used without significantly degrading the browsing experience, their use will become increasingly mainstream. But ultimately, just as with television commercial-skipping, market forces can and will, if permitted, respond through technological means and the development of new business models. Today’s implicit quid pro quo may become, of necessity, explicit: Websites and ad networks will have to find increasingly creative ways to grant access to certain content and services for users who do not block ads or the tracking that makes ad space more valuable. Policymakers should take care not to ban such technologies or cripple such business models (e.g., through requiring opt-in), which may rely on more sophisticated forms of targeting such as the use of packet inspection data.

As users face an increasingly clear choice between (i) getting content and services for free supported by behavioral advertising and (ii) paying to receive those same services and content without tracking or even without ads altogether, policymakers will finally see whether users are really as bothered by profiling as the advocates of OBA regulation insist. Given the ongoing and widespread replacement of fee- or subscription-supported web business models with ad-supported models, it seems likely that the vast majority of consumers will continue to choose ad-supported models, including profiling.

Conclusion

The questions raised above—about the harm that supposedly requires intervention, the availability of less restrictive means, and the cost/benefit analysis of regulation—are vital considerations for the future of the Internet. Indeed, if smarter online advertising will not fund the Internet’s future, what will? As both the desire for “free” services and content and the need for bandwidth expand, OBA has the potential to offer important new revenue sources that can help support the entire ecosystem of online content creation and service innovation, while also providing a new source of funding for Internet infrastructure and making ads less annoying and more informative. That would certainly seem preferable to increased user fees or other “pay-per-view” pricing models for Internet content and services.

But looming legislative and regulatory action could stop all of that by replacing the current regime—in which the FTC merely enforces industry self-regulatory policies—with one in which the government preemptively dictates how data may be collected and used. The more enlightened approach is a “layered” approach to privacy protection that combines industry self-regulation, enforcement of industry-established privacy policies, consumer education, and user “self-help” solutions. These and other issues will be addressed in greater detail in our upcoming PFF Special Report.