by Andrea O’Sullivan & Adam Thierer

This essay originally appeared on The Bridge on September 25, 2019.

It is quickly becoming one of the iron laws of technology policy that by attempting to address one problem (like privacy, security, safety, or competition), policymakers often open up a different problem on another front. Trying to regulate to protect online safety, for example, might give rise to privacy concerns, or vice versa. Or taking steps to address online privacy through new regulations might create barriers to new entry, thus hurting online competition.

In a sense, this is simply a restatement of the law of unintended consequences. But it seems to be occurring with greater regularity in the technology policy today, and it serves as another good reminder why humility is essential when considering new regulations for fast-moving sectors.

Consider a few examples.

Privacy vs security & competition 

Many US states and the federal government are considering data privacy regulations in the vein of the European Union’s wide-reaching General Data Privacy Regulation (GDPR). But as early experiences with the GDPR and various state efforts can attest, regulations aimed at boosting consumer privacy can often butt against other security and competition concerns.

Consider how the GDPR can be abused to undermine user security—and ultimately (and ironically) privacy itself. At this year’s Black Hat computer security conference, one researcher recently explained how the GDPR’s “right of access” provision—which mandates that companies give users their personal data—can be exploited by malicious actors to steal personally identifiable information. If a hacker is convincing enough, he or she can use “social engineering” to pose as the target and coax companies to divulge the information. Without GDPR’s mandated reporting infrastructure, such an attack would be much harder.

Nor are malicious actors even necessary for the GDPR to undermine security. In 2018, a customer requested their Alexa voice recordings from Amazon. The company sent the data to the wrong person in an apparent case of human error. If mighty Amazon cannot rise to the challenge of error-free GDPR compliance, what hope do smaller outfits have?

Perhaps the biggest story about the GDPR, however, has been its malign effects on competition. After all, the law earned its nickname—the “Google Data Protection Regulation”—for a reason. Titans like Google and Facebook have dominated European ad tech market since the advent of the GDPR because they can shoulder compliance risks in a way that smaller vendors cannot. More ad money has flowed to Google’s coffers as a result.

But the GDPR applies to far more than just ad tech. Ventures as varied as publishing and virtual tabletop dice rollers have been forced to shutter their digital doors rather than risk the wrath of European data authorities.

Similar stories emanate from the US. Illinois’ biometric privacy law, which governs the use of technologies like facial recognition and fingerprint scanning, led to the prohibition of Google’s Arts and Culture app which matched user-submitted photos with a classical work of art. If Google can’t hack it in the Land of Lincoln, how could a potential Google-slayer be expected to do so?

These are just the stories we hear about. A prematurely thwarted venture is unlikely to have a platform to voice their compliance problems. What is clear is that the data privacy laws enacted so far have had predictable negative impacts on security and competition, and that ill-defined “privacy fundamentalism” too often drives ill-fitting policies.

Safety vs. free speech & competition

Content moderation at scale is extremely challenging, especially as it relates to efforts to address “hate speech” and extremist viewpoints. On the one hand, free speech activists argue that onerous private content moderation policies can limit debate and punish certain viewpoints, particularly if a platform is a public default for expression. On the other hand, social justice activists contend that lax private standards can fuel the proliferation of conspiracy theories, radicalization, and violent rhetoric.

Recently, President Trump and some conservative lawmakers have been clamoring for greater regulatory controls of social media platforms in the name of “fairness” and countering supposed anti-conservative bias. Sens. Josh Hawley (R-MO) and Ted Cruz (R-TX), for example, have introduced a bill that would require platforms to submit their content moderation policies to regular regulatory audits. If a platform is deemed to be not “politically neutral,” it will lose its liability protections under Section 230 of the Communications Decency Act.

This is reminiscent of the “fairness doctrine,” a long-standing Federal Communications Commission (FCC) policy that was a thinly-veiled attempt to influence the political content of broadcast programs. Conservatives rightly opposed such government involvement in content decisions in decades past, but with this new effort against technology platforms, many of them are repeating the mistakes of the past.

The history of the actual fairness doctrine serves as a cautionary tale here. Today the fairness doctrine is mostly remembered as an anti-conservative effort because of the attention paid to right-leaning talk radio. Former Kennedy administration official Bill Ruder admitted that their “massive strategy was to use the [fairness doctrine] to challenge and harass right-wing broadcasters, and hope that the challenges would be so costly to them that they would be inhibited and decide it was too costly to continue.”

But as testaments from previous broadcast leaders point out, the fairness doctrine was wielded against both “conservatives” and “liberals” depending on who was in power and what their objectives were. When the Nixon administration took office, they wielded the rule to muzzle broadcasters who criticized the White House. And the FCC also applied the doctrine against The Kingmen’s song “Louie Louie” for its suspiciously unintelligible lyrics.

The tension between policies to promote “safety” and government-protected rights to free speech can be literal, as well. Consider efforts to ban so-called “3-D printed guns.” Defense Distributed and other activists do not 3-D print and sell guns. Rather, they publish the schematics for others to print their own arms online. As with the encryption technologies we will discuss below, such code is probably First Amendment-protected speech, although the applications of the schematics may be considered “dual-use” (meaning with both civilian and military applications.) An outright ban on 3-D printed gun blueprints very clearly antagonizes the right to free speech in the US and could threaten innovation in other open source, peer-to-peer 3D-printed applications.

Safety vs. privacy & security

Efforts to promote “safety” can also too often backfire at the expense of privacy and security.

Perhaps the most dramatic and high-stakes illustration of this principle was the years-long legal drama that pitted law enforcement authorities against computer scientists in the so-called “Crypto Wars.” Although cryptographic technologies that conceal data for privacy or security have been around since the days of ancient Egypt—our own Founding Fathers are known to have communicated using ciphers—in the 20th century, they had mostly been limited to military and academic institutions.

The advent of public-key cryptography made these security techniques more accessible to the public for the first time. This was great news for information security: communications and devices could be made hardened to attacks, and people were given more privacy options. But law enforcement feared that criminals would use cryptography to cover their tracks. Thus, in the name of safety, law enforcement first tried banning cryptography as a dual use technology through munitions export controls. When that failed on First Amendment grounds, policymakers attempted to legislate “backdoors” into encryption protocols that would allow government access.

It is easy to see how outright bans or backdoors for encryption technologies could hurt privacy and security. Obviously, prohibiting the civilian use of a privacy and security technology limits privacy and security. But granting government access into encryption standards would ironically ultimately undermine safety as well. After all, if a government can get into an encryption standard, so might a malicious hacker. Although the “Crypto Wars” seemed settled in the 1990’s, these same debates have been cropping up again as more and more devices have default encryption technologies.

We can also think about mandated reporting requirements intended to promote public safety. Consider the “know your customer” rules imposed on financial institutions. To prevent ills like money laundering and financial fraud, banks and exchanges must keep detailed customer information on file. Yet this ostensibly “pro-safety” rule generates its own security and privacy risks. Banks must manage to responsibly store and protect this valuable customer data, lest their customers’ information get hacked and their identities stolen. This has sadly too often proven too tall an order, and third-party-managed personally identifiable information is exposed to outside parties all the time.

A similar problem arises with efforts to promote child safety online. Consider the debate over MySpace’s age verification efforts in the mid-2000s. Child safety advocates grew concerned over the risks facing children on new social media platforms. Young children lacking awareness of the dangers that could lurk online could unwittingly make friendships with predators posing as other children. So a movement grew to require these new platforms to verify age and identity with a government-provided identification card.

There were obvious technical problems. For starters, children that were young enough to fall under the age verification limit were unlikely to have a government-provided photo identification card. But beyond these simple administrative issues, there was the question of privacy and security. Could Myspace adequately protect the reams of sensitive data from outside breach? Might children actually be put more at danger should those items—which would likely include the children’s address—fall into the wrong hands? And should the government and social media platforms really be in the business of parenting to begin with? Might this actually create a “moral hazard” which leaves parents thinking that online spaces are safer than they actually are?

Tying it all together

In each of these instances, it probably seemed like there was no downside to newly proposed regulations. With time, however, the dynamic effects associated with those policies become evident, and often result in the opposite of what was intended, or the policies led to other problems that supporters did not originally envision.

The nineteenth-century French economic philosopher Frédéric Bastiat famously explained the importance of considering the many unforeseen, second-order effects of economic change and policy. Many pundits and policy analysts pay attention to only the first-order effects—what Bastiat called “the seen”—and ignore the subsequent and often “unseen” effects. Those unseen effects can have profound real-world consequences in the form of less technological innovation, diminished growth, fewer job opportunities, higher prices, diminished choices, and other costs.

Even when defenders of the failed interventions are forced to admit that their well-intentioned plans did not work out as planned, their response is typically of the  we-can-do-better variety. The result is usually just more regulation as one intervention begs another and another. As the Austrian economist Ludwig von Mises taught us 70 years ago in his masterwork, Human Action:

“All varieties of interference with the market phenomena not only fail to achieve the ends aimed at by their authors and supporters, but bring about a state of affairs which—from the point of view of their authors’ and advocates’ valuations—is less desirable than the previous state affairs which they were designed to alter. If one wants to correct their manifest unsuitableness and preposterousness by supplementing the first acts of intervention with more and more of such acts, one must go farther and farther…”

The lesson is clear: paternalistic public policies may sound sensible on the surface, but as Milton Friedman taught us long ago, “One of the great mistakes is to judge policies and programs by their intentions rather than their results. We all know a famous road that is paved with good intentions.”

Federal Communications Commission (FCC) Chairman Ajit Pai today announced plans to expand the role of economic analysis at the FCC in a speech at the Hudson Institute. This is an eminently sensible idea that other regulatory agencies (both independent and executive branch) could learn from.

Pai first made the case that when the FCC listened to its economists in the past, it unlocked billions of dollars of value for consumers. The most prominent example was the switch from hearings to auctions in order to allocate spectrum licenses. He perceptively noted that the biggest effect of auctions was the massive improvement in consumer welfare, not just the more than $100 billion raised for the Treasury. Other examples of the FCC using the best ideas of its economists include:

• Use of reverse auctions to allocate universal service funds to reduce costs.
• Incentive auctions that reward broadcasters for transferring licenses to other uses – an idea initially proposed in a 2002 working paper by Evan Kwerel and John Williams at the FCC.
• The move from rate of return to price cap regulation for long distance carriers.

More recently, Pai argued, the FCC has failed to use economics effectively. He identified four key problems:

1. Economics is not systematically employed in policy decisions and often employed late in the process. The FCC has no guiding principles for conduct and use of economic analysis.
2. Economists work in silos. They are divided up among bureaus. Economists should be able to work together on a wide variety of issues, as they do in the Federal Trade Commission’s Bureau of Economics, the Department of Justice Antitrust Division’s economic analysis unit, and the Securities and Exchange Commission’s Division of Economic and Risk Analysis.
3. Benefit-cost analysis is not conducted well or often, and the FCC does not take Regulatory Flexibility Act analysis (which assesses effects of regulations on small entities) seriously. The FCC should use Office of Management and Budget guidance as its guide to doing good analysis, but OMB’s 2016 draft report on the benefits and costs of federal regulations shows that the FCC has estimated neither benefits nor costs of any of its major regulations issued in the past 10 years. Yet executive orders from multiple administrations demonstrate that “Serious cost-benefit analysis is a bipartisan tradition.”
4. Poor use of data. The FCC probably collects a lot of data that’s unnecessary, at a paperwork cost of $800 million per year, not including opportunity costs of the private sector. But even useful data are not utilized well. For example, a few years ago the FCC stopped trying to determine whether the wireless market is effectively competitive even though it collects lots of data on the wireless market.

To remedy these problems, Pai announced an initiative to establish an Office of Economics and Data that would house the FCC’s economists and data analysts. An internal working group will be established to collect input within the FCC and from the public. He hopes to have the new office up and running by the end of the year. The purpose of this change is to give economists early input into the rulemaking process, better manage the FCC’s data resources, and conduct strategic research to help find solutions to “the next set of difficult issues.”

Can this initiative significantly improve the quality and use of economic analysis at the FCC?

There’s evidence that independent regulatory agencies are capable of making some decent improvements in their economic analysis when they are sufficiently motivated to do so. For example, the Securities and Exchange Commission’s authorizing statue contains language that requires benefit-cost analysis of regulations when the commission seeks to determine whether they are in the public interest. Between 2005 and 2011, the SEC lost several major court cases due to inadequate economic analysis.

In 2012, the commission’s general counsel and chief economist issued new economic analysis guidance that pledged to assess regulations according to the principal criteria identified in executive orders, guidance from the Office of Management and Budget, and independent research. In a recent study, I found that the economic analysis accompanying a sample of major SEC regulations issued after this guidance was measurably better than the analysis accompanying regulations issued prior to the new guidance. The SEC improved on all five aspects of economic analysis it identified as critical: assessment of the need for the regulation, assessment of the baseline outcomes that will likely occur in the absence of new regulation, identification of alternatives, and assessment of the benefits and costs of alternatives.

Unlike the SEC, the FCC faces no statutory benefit-cost analysis requirement for its regulations. Unlike the executive branch agencies, the FCC is under no executive order requiring economic analysis of regulations. Unlike the Federal Trade Commission in the early 1980s, the FCC faces little congressional pressure for abolition.

But Congress is considering legislation that would require all regulatory agencies to conduct economic analysis of major regulations and subject that analysis to limited judicial review. Proponents of executive branch regulatory review have always contended that the president has legal authority to extend the executive orders on regulatory impact analysis to cover independent agencies, and perhaps President Trump is audacious enough to try this. Thus, it appears Chairman Pai is trying to get the FCC out ahead of the curve.

“All this top-40s music sounds the same.”  I think we’ve all heard this sentiment.  The nature of regional radio broadcasting almost requires a regression to the mean in musical tastes.  A radio station cannot be all things to all people.  I suspect most people will be surprised to learn that some of the most innovative radio broadcasts are taking place at hundreds of stations across the country—and only few people can listen to them.  These stations, known as low power FM (LPFM), carry niche programming like independent folk rock music, fishing shows, political news, reggae, blues, and religious programming.  (And one station in Sitka, Alaska consists entirely of a live feed of whale sounds.)

The FCC began licensing LPFM stations in 2000.  These tiny stations typically cost under $10,000 to create but by law have the power to broadcast their signals only 3.5 miles out (the typical full power FM station has a 26-mile range).  Because of their limited listening area and alternative formats, LPFM stations have small but loyal audiences.

Using traditional FCC station spacing rules, over 100,000 LPFM stations potentially could be broadcasting in the United States.  Yet, despite the FCC’s hopes of “thousands of new voices” on the airwaves, today the number of LPFM stations is less than 1,000.  To this day, there’s only one LPFM station located in a top 50 media market, where most radio audiences live.  Why, more than a decade after these stations were first allowed, are so few in existence?

When faced with the regulatory restrictions imposed on LPFM stations it’s clear why there is so much untapped potential.  Power limits aside, LPFM stations are subject to onerous ownership and advertising rules that were pushed (typically) by the progressive media groups who lobbied for them.  LPFM stations can be licensed only to local entities, and those entities cannot own more than one station.

Further—and most limiting—stations must be noncommercial.  Despite their hyperlocal appeal, LPFM stations are prohibited from running advertisements from local restaurants, churches, retail stores, and car dealers.  Constrained to relying mostly on donations and volunteer staff, few stations ever get on the air.

Several forces conspired to bring about these crippling restrictions.  The FCC has long advocated “localism” in broadcast radio, thus the local ownership restrictions.  Further, many of the activists who pushed for LPFM stations are suspicious of large commercial enterprises and wanted noncommercial mandates.  These groups envisioned a nationwide network of nonprofit cooperatives broadcasting music and news for those with alternative tastes.  They unwittingly ensured that such a development would never become reality, outside of a few rural college towns.  (It’s also ironic that most stations seem to be church-affiliated.  But what other national nonprofit organizations can run stations comprised mainly of volunteers using donations?)

Additionally, the full power FM stations we all listen to in the car saw diminishing market share in their futures if upstart companies were able to string together several LPFM stations and siphon off some of their ad revenues and audience.  When it became obvious that LPFM was going forward a decade ago, I imagine full power stations didn’t object to the FCC and the activist groups’ efforts to make LPFM noncommercial and local.

Suddenly, this year, people are excited about LPFM again.  You see, after LPFM licensing began over a decade ago, the FCC and activists quickly saw that their vision of thousands of new stations wasn’t realistic.  In light of the disappointing launch, the FCC lobbied Congress for years to expand more LPFM licensing opportunities.  In response, Congress passed the Local Community Radio Act in 2011, which only marginally expanded opportunities for LPFM licensees.  I wish new LPFM applicants the best, but I don’t think there’s any reason to be excited.

First, the impact of the 2011 law is minimal and shows the futility of the FCC playing catch up to the marketplace.  The process to approve more LPFM stations took years.  In the meantime, listeners have several platforms for instant music access, including Pandora and Spotify streaming, iTunes, Sirius-XM radio, and cloud computing music storage.  And with the increasing popularity of smartphones, it has never been easier to have personalized, portable music selections.

Still, the FCC and the Congress spent years only nibbling at the edges of the matured broadcast radio market.  The modest change in the 2011 law, recently implemented, might enable dozens or perhaps a few hundred more stations.  But when 100,000 LPFM stations is the approximate ceiling, it’s clear how little things have really changed.  The activists will blame Big Radio for limiting LPFM in Big Radio’s markets, but the blame belongs equally to the noncommercial mandates.

LPFM stations, with liberalized rules that allow them to accept commercial sponsors and band together, could provide a dynamic alternative to the current music and radio broadcast landscape.  After a decade of filings, notices, and rule changes, the FCC and the activists will have LPFM is right back where it started—small, isolated, and rare.

Loyal readers know of my generally bullish, optimistic outlook regarding the Internet’s impact on society, economy, and even politics. On that last front, columnist Peggy Noonan has a nice piece in today’s Wall Street Journal entitled, “The Internet Helps Us Get Serious.” Serious about politics and political rhetoric, she means. Speaking about how politicians are addressing the current fiscal crisis in the U.S., Noonan argues:

One way to change minds about the current crisis is through information. We all know this, and we all know about the marvelous changes in technology that allow for the spreading of messages that are not necessarily popular with gatekeepers and establishments. But there’s something new happening in the realm of political communication that must be noted. Speeches are back. They have been rescued and restored as a political force by the Internet.

She then makes the point that I always stress when debating Net pessimists: You have to measure progress against the yardstick of the past and ask yourself if we really better off in a world of information scarcity. Noonan does that beautifully when she notes:

In the past quarter-century or so, the speech as a vehicle of sustained political argument was killed by television and radio. Rhetoric was reduced to the TV producer’s 10-second soundbite, the correspondent’s eight-second insert. The makers of speeches (even the ones capable of sustained argument) saw what was happening and promptly gave up. Why give your brain and soul to a serious, substantive statement when it will all be reduced to a snip of sound? They turned their speeches into soundbite after soundbite, applause line after applause line, and a great political tradition was traduced. But the Internet is changing all that. It is restoring rhetoric as a force. When Gov. Mitch Daniels made his big speech—a serious, substantive one—two weeks ago, Drudge had the transcript and video up in a few hours. Gov. Chris Christie’s big speech was quickly on the net in its entirety. All the CPAC speeches were up. TED conference speeches are all over the net, as are people making speeches at town-hall meetings. I get links to full speeches every day in my inbox and you probably do too.

And Noonan debunks the argument skeptics like Cass Sunstein and others have made about the atomization of the audience or fracturing of the public’s attention:

People in politics think it’s all Facebook and Twitter now, but it’s not. Not everything is fractured and in pieces, some things are becoming more whole. People hunger for serious, fleshed-out ideas about what is happening in our country. … A funny thing about politicians is that they’re all obsessed with “messaging” and “breaking through” and “getting people to listen.” They’re convinced that some special kind of cleverness is needed, that some magical communications formula exists and can be harnessed if only discovered. They should settle down, survey the technological field and get serious. They should give pertinent, truthful, sophisticated and sober-minded speeches. Everyone will listen. They’ll be all over the interwebs.

Amen, sister.

It was my pleasure today to debate the future of public media funding on Warren Olney’s NPR program, “To The Point“.  I was 1 of 5 guests and I wasn’t brought into the show until about 29 minutes into the program, but I tried to reiterate some of the key points I made in my essay last week on “‘Non-Commercial Media’ = Fine; ‘Public Media’ = Not So Much.”  I won’t reiterate everything I said before since you can just go back and read it, but to briefly summarize what I said there as well as on today’s show: (1) taxpayers shouldn’t be forced to subsidize speech or media content they find potentially objectionable; and (2) public broadcasters are currently perfectly positioned to turn this federal funding “crisis” into a golden opportunity by asking its well-heeled and highly-diversified base of supporters to step up to the plate and fill the gap left by the end of taxpayer subsidies.

Just a word more on that last point. As I pointed out on the show today, it’s an uncomfortable fact of life for NPR that their average listener is old, rich, highly-educated, and mostly white.  Specifically, here are some numbers that NPR itself has compiled about its audience demographics:

• The median age of the NPR listener is 50.
• The median household income of an NPR News listener is about $86,000, compared to the national average of about $55,000.
• NPR’s audience is extraordinarily well-educated.  Nearly 65% of all listeners have a bachelor’s degree, compared to only a quarter of the U.S. population.  Also, they are three times more likely than the average American to have completed graduate school.
• The majority of the NPR audience (86%) identifies itself as white.

Why do these numbers matter? Simply stated: These people can certainly step up to the plate and pay more to cover the estimated $1.39 that taxpayers currently contribute to the public media in the U.S.  But wait, there’s more! There are plenty of other existing corporate and foundational supporters out there who already make sizable contributions to NPR. Down below, I have attached a list that appeared in the NPR’s 2008 annual donor list of just the corporations who currently support NPR and it includes only those companies who support at a level greater than a half million per year. There are many others who offer annual support for less than that and then there are the hundreds of foundations and wealthy families who give major gifts of varying amounts.

Again, these individual benefactors could all probably be prodded to give a bit more, and plenty of others out there would likely step up to the plate to meet the challenge of filling the small gap left by ending taxpayer support.  For God’s sake, just look at that list of current top-dollar corporate supporters for NPR down below!  It reads like a “Who’s Who” of the Fortune 500 giants and it must leave all of NPR’s competitors stinging with jealous about how smart it was for non-commercial media to diversify its base of philanthropic support so long ago.

Thus, there’s no reason that public media operators can’t take the next step and find alternative means of support to fill the 16% of their budgets that currently comes from taxpayers.  In these tight fiscal times, it’s only fair.

$1 Million + Supporters of NPR in 2008

• Angie’s List
• CITGO Petroleum
• Corporation CSX Corporation
• Feeding America
• Fox Searchlight Pictures
• General Motors Corporation
• Institute for Supply Management
• Insurance Company
• Intel Corporation
• Johnson Controls
• Kashi Company
• Lindamood-Bell Learning Systems
• Lumber Liquidators
• MasterCard
• MGM
• National Association of Realtors
• Netflix
• Northwestern Mutual Foundation
• Novo Nordisk
• Overture Films
• Pabst Brewing Company
• Paramount Home Entertainment
• Paramount Pictures
• Prudential Financial
• PBS Raymond James Financial Services
• Philips Healthcare
• POM Wonderful REI
• Progressive Casualty Insurance
• Scotts Miracle-Gro Company
• State Farm Mutual Automobile
• Travel Guard
• U.S. Bank Vestas
• Universal Pictures
• Visa Warner Home Video
• Walden University Yahoo!
• Wind Systems

$500,000-$999,999 Supporters of NPR in 2008

• Cargill
• Citibank
• Constant Contant
• Constellation Energy
• Focus Features
• iShares
• Leanding Tree
• Lenovo
• Lionsgate
• Entertainment
• CNetApp
• Pajamagram Company
• Saturn
• Sit4Less.com
• Subaru
• T. Rowe Price
• UPS
• Vanguard Group

[Read rest of the list of this impressive list of NPR corporate and foundational supporters here.  Has there ever been a more well-diversified base of support for any media operation in American history?  I think not. As Jill Lawrence points out on Politics Daily, public media’s extremely loyal — and rich — fan base are not about let NPR and PBS die.]

[Note: This post is updated regularly as I discover relevant old or new material.]

“Regulatory capture” occurs when special interests co-opt policymakers or political bodies — regulatory agencies, in particular — to further their own ends.  Capture theory is closely related to the “rent-seeking” and “political failure” theories developed by the public choice school of economics.  Another term for regulatory capture is “client politics,” which according to James Q. Wilson, “occurs when most or all of the benefits of a program go to some single, reasonably small interest (and industry, profession, or locality) but most or all of the costs will be borne by a large number of people (for example, all taxpayers).”  (James Q. Wilson, Bureaucracy, 1989, at 76).

While capture theory cannot explain all regulatory policies or developments, it does provide an explanation for the actions of political actors with dismaying regularity.  Because regulatory capture theory conflicts mightily with romanticized notions of “independent” regulatory agencies or “scientific” bureaucracy, it often evokes a visceral reaction and a fair bit of denialism.  (See, for example, the reaction of New Republic’s Jonathan Chait to Will Wilkinson’s recent Economist column about the prevalence of corporatism in our modern political system.)  Yet, countless studies have shown that regulatory capture has been at work in various arenas: transportation and telecommunications; energy and environmental policy; farming and financial services; and many others.

I thought it might be useful to build a compendium of quotes from various economists and political scientists who have studied the regulatory process throughout history and identified regulatory capture or client politics as a major problem.  I would greatly appreciate having others suggest additional quotes and studies to add to this list since I plan to update it frequently and eventually work all of this into a future paper or book. [ Note: I have updated this compendium over a dozen times since the original post, so please check back for updates.]

The following list is chronological and begins, surprisingly, with the thoughts of progressive hero Woodrow Wilson…

Woodrow Wilson, The New Freedom: A Call For the Emancipation of the Generous Energies of a People (1913) at 201-202:

“If the government is to tell big business men how to run their business, then don’t you see that big business men have to get closer to the government even than they are now? Don’t you see that they must capture the government, in order not to be restrained too much by it? Must capture the government? They have already captured it. Are you going to invite those inside to stay? They don’t have to get there. They are there.”

A. C. Pigou, Economics of Welfare, (1920), Ch. 20, Para. #4

“It is not sufficient to contrast the imperfect adjustments of unfettered private enterprise with the best adjustment that economists in their studies can imagine. For we cannot expect that any public authority will attain, or will even whole-heartedly seek, that ideal. Such authorities are liable alike to ignorance, to sectional pressure and to personal corruption by private interest. A loud-voiced part of their constituents, if organised for votes, may easily outweigh the whole.”

Anthony Downs, “An Economic Theory of Political Action in a Democracy,” 65 Journal of Political Economy 2 (1957), 135-150, at 136:

“…even if social welfare could be defined, and methods of maximizing it could be agreed upon, what reason is there to believe that the men who run the government would be motivated to maximize it? To state that “they should do so does not mean that they will.”

Ronald Coase, “The Federal Communications Commission” 2 Journal of Law and Economics (1959), 1-40, at 37. In commenting on the fact that many lawmakers bemoaned “the extent to which pressure is brought to bear on the [FCC] by politicians and businessmen,” Coase said “that this should be happening is hardly surprising.”  He continued on:

“When rights, worth millions of dollars, are awarded to one businessman and denied to others, it is no wonder if some applicants become overanxious and attempt to use whatever influence they have (political and otherwise), particularly as they can never be sure what pressure the other applicants may be exerting.”

Milton Friedman, Capitalism & Freedom (1962) at 140:

“the pressure on the legislature to license an occupation rarely comes from the members of the public . . . On the contrary, the pressure invariably comes from the occupation itself.”

Harold Demsetz, “Why Regulate Utilities?,” 11(1) Journal of Law and Economics (Apr., 1968), at 61.

“…in utility industries, regulation has often been sought because of the inconvenience of competition.”

Richard Posner, “Natural Monopoly and Its Regulation,” 21(3) Stanford Law Review 548 (Feb., 1969):

“Because regulatory commissions are of necessity intimately involved in the affairs of a particular industry, the regulators and their staffs are exposed to strong interest group pressures.  Their susceptibility to pressures that may distort economically sound judgments is enhanced by the tradition of regarding regulatory commissions as ‘arms of the legislature,’ where interest-group pressures naturally play a vitally important role.”

George Stigler, “The Theory of Economic Regulation,” 2(1) Bell Journal of Economics and Management Science, (1971), 3-21 at 3:

“…as a rule, regulation is acquired by the industry and is designed and operated primarily for its benefits.”

George Stigler, “Can Regulatory Agencies Protect the Consumer?” in The Citizen and the State: Essays on Regulation (1975), at 183:

“Regulation and competition are rhetorical friends and deadly enemies: over the doorway of every regulatory agency save two should be carved: ‘Competition Not Admitted.’ The Federal Trade Commission’s doorway should announce , “Competition Admitted in Rear,” and that of the Antitrust Division, ‘Monopoly Only by Appointment.’”

Theodore J. Lowi, The End of Liberalism: The Second Republic of the United States (2nd Ed., 1969, 1979) at 280:

“a considerable proportion of federal regulation, regardless of its own claim to consumer protection, has the systematic effect of constituting and maintaining a sector of the economy or the society. These are the policies of receivership by regulation.”

Alfred Kahn, The Economics of Regulation: Principles and Institutions (1971):

“When a commission is responsible for the performance of an industry, it is under never completely escapable pressure to protect the health of the companies it regulates, to assure a desirable performance by relying on those monopolistic chosen instruments and its own controls rather than on the unplanned and unplannable forces of competition.” (p. 12) “Responsible for the continued provision and improvement of service, [the regulatory commission] comes increasingly and understandably to identify the interest of the public with that of the existing companies on whom it must rely to deliver goods.” (p. 46)

Mark Green and Ralph Nader, “Economic Regulation vs. Competition: Uncle Sam the Monopoly Man,” Yale Law Journal 82, no. 5 (April 1973), 876

“a kind of regular personnel interchange between agency and industry blurs what should be a sharp line between regulator and regulatee, and can compromise independent regulatory judgment. In short, the regulated industries are often in clear control of the regulatory process.”

Richard B. McKenzie and Gordon Tullock, Modern Political Economy: An Introduction to Economics (1978) at 220:

“although regulation is begun with the good intentions of those who promote and pass the laws, somewhere along the line regulators may become pawns of the regulated firms.”

Milton and Rose Friedman, Free to Choose (1980) at 193:

“Every act of intervention establishes positions of power.  How that power will be used and for what purposes depends far more on the people who are in the best position to get control of that power and what their purposes are than on the aims and objectives of the initial sponsors of the intervention.”

Barry M. Mitnick, The Political Economy of Regulation: Creating, Designing, and Removing Regulatory Forms (New York: Columbia University Press, 1980), at 38:

“Much relatively recent research has argued that regulation was often sought by industries for their own protection, rather than being imposed in some ‘public interest.’ Although the distinction is not always made clear in this recent literature, we may add that regulation which is not directly sought at the outset is generally ‘captured’ later on so it behaves with consistency to the industry’s major interests, or at least has been observed to behave in this manner.”

Barry Weingast, “Regulation, Reregulation and Deregulation: The Foundation of Agency-Clientele Relationships,”44 Law and Contemporary Problems, (1981) pp. 147-77, at 151:

“Often, agencies are the vehicle for this endeavor. Agency heads and commission members, anxious to further their careers and goals (including large budgets) as well as completing their own of power and prestige pet projects and policy initiatives, depend upon service to interest their success groups and key committee members for their success.”

George Gilder, Wealth & Poverty (New York: Bantam Books, 1981), pp. 283:

“One reason for government resistance to change is that the process of creative destruction can attack not only an existing industry, but also the regulatory apparatus that subsists on it; and it is much more difficult to retrench a bureaucracy than it is to bankrupt a company. A regulatory apparatus is a parasite that can grow larger than its host industry and become in turn a host itself, with the industry reduced to parasitism, dependent on the subsidies and protections of the very government body that initially sapped its strength.”

Bruce Yandle,”Bootleggers and Baptists — The Education of a Regulatory Economist,” Regulation, Vol. 3, No. 3, (May/June 1983) p. 13:

“what do industry and labor want from the regulators? They want protection from competition, from technological change, and from losses that threaten profits and jobs. A carefully constructed regulation can accomplish all kinds of anticompetitive goals of this sort, while giving the citizenry the impression that the only goal is to serve the public interest.”

Thomas K. McCraw, Prophets of Regulation, (Cambridge, MA: Harvard University Press, 1984), p. 263 [recounting the history of the Civil Aeronautics Board up until the time of Alfred Kahn ascendency to chairman and its eventual deregulation and abolition.]

“Clearly, in passing the Civil Aeronautics Act [of 1938], Congress intended to bring stability to airlines. What is not clear is whether the legislature intended to cartelize the industry. Yet this did happen. During the forty years between passage of the act of 1938 and the appointment of [Alfred] Kahn to the CAB chairmanship, the overall effect of board policies tended to freeze the industry more or less in its configuration of 1938. One policy, for example, forbade price competition. Instead the CAB ordinarily required that all carriers flying a certain route charge the same rates for the same class of customer. […] A second policy had to do with the CAB’s stance toward the entry of new companies into the business. Charged by Congress with the duty of ascertaining whether or not ‘the public interest, convenience, and necessity’ mandated that new carriers should receive a certificate to operate, the board often ruled simply that no applicant met these tests. In fact, over the entire history of the CAB, no new trunkline carrier had been permitted to join the sixteen that existed in 1938. And those sixteen, later reduced to ten by a series of mergers, still dominated the industry in the 1970s. All these companies… developed into large companies under the protective wing of the CAB. None wanted deregulation.”

Robert Higgs, Crisis and Leviathan: Critical Episodes in the Growth of American Government (1987) p. 8:

“The government’s regulatory agencies have created or sustained private monopoly power more often than they have precluded or reduced it.  This result was exactly what  many interested parties desired from government regulation, though they would have been impolitic to have said so in public.”

Jeffrey M. Berry, The Interest Group Society (1989) p. 151:

“The ties between interest groups and [regulatory] agencies can become too close. A persistent criticism by political scientists is that agencies that regulate businesses are overly sympathetic to the industries they are responsible for regulating.  Critics charge that regulators often come from the businesses they regulate and thus naturally see things from an industry point of view.  Even if regulators weren’t previously involved in the industry, they have been seen as eager to please powerful clientele groups rather than have them complain to the White House or to the agency’s overseeing committees in Congress.”

Jonathan Emord, “The Electronic Press and the Industry Capture Movement,” Chapter 11 from: Freedom Technology and the First Amendment (1991), p. 146 (discussing the early history of radio licensing):

“The minutes of the First National Radio Conference in 1922 reveal that even at this early date, industry leader clamored for government limits on the number of licenses issued; they sought protection against entry by new licenses. For its part, the government desired control over the industry’s structure and programming content. Certain members of Congress, joined by [Secretary of Commerce Herbert] Hoover, agreed with broadcast industry leaders that the system of broadcasting in the United States would be brought within the federal government’s control. The classic rent/content control quid pro quo soon developed: in exchange for regulatory controls on industry structure and programming content, industry leaders would be granted restrictions on market entry that they wanted. These restrictions would ensure monopoly rents for licensees and would provide the government with assurance that the broadcast industry would not oppose regulatory controls.”

David Schoenbrod, Power Without Responsibility: How Congress Abuses the People Through Delegation (New Haven, CT: Yale University Press, 1993), p. 13:

“Agency heads are usually not apolitical and, indeed, concentrated interests often prevail more easily in an agency than they can in Congress. Effective participation in agency lawmaking usually requires expensive legal representation as well as close connections to members of Congress who will pressure the agency on one’s behalf. The agency itself is often closely linked with the industry it regulates. Not only large corporations, but also labor unions, cause-based groups, and other cohesive minority interests sometimes can use delegation to triumph over the interests of the larger part of the general public, which lacks the organization, finances, and know-how to participate as effectively in the administrative process.”

Douglass North, “Economic Performance through Time,” 84 American Economic Review 3, (1994), 359-363, at p. 360:

“Institutions are not necessarily or even usually created to be socially efficient; rather they, or at least the formal rules, are created to serve the interests of those with the bargaining power to create new rules.”

P.A. McNutt, The Economics of Public Choice (1996), p. 105-6:

“The more successful the interest group becomes the greater the probability that it will be in a position to impact on the policy making process of successive governments. … Aspiring monopolists will retain lobbyists to assure a favourable outcome and devote resources to the acquisition of the monopoly right.  A government will more than likely grant monopoly privileges to various groups of politically influential people.  Cartels and anti-competitive behaviour will be maintained and politicians will react to the demands of the more vociferous and well organised interest groups.”

Andrew Odlyzko, “Privacy, Economics, and Price Discrimination on the Internet,” July 27, 2003, p. 12:

“It is now widely accepted that the passage of the Interstate Commerce Act of 1887 was not a pure triumph of the populist movement and its allies in the anti-railroad camp. The railway industry largely decided that regulation was in its best interests and acquiesced in and even encouraged government involvement. This is often portrayed as the insidious capture of the regulators by the industry they regulate. There is certainly much evidence to support this view.”

Lawrence Lessig,”Reboot the FCC,” Newsweek, December 23, 2008

“Economic growth requires innovation. Trouble is, Washington is practically designed to resist it. Built into the DNA of the most important agencies created to protect innovation, is an almost irresistible urge to protect the most powerful instead. The FCC is a perfect example. … With so much in its reach, the FCC has become the target of enormous campaigns for influence. Its commissioners are meant to be “expert” and “independent,” but they’ve never really been expert, and are now openly embracing the political role they play. Commissioners issue press releases touting their own personal policies. And lobbyists spend years getting close to members of this junior varsity Congress.”

Thomas Frank, “Obama and Regulatory Capture,” Wall Street Journal, June 24, 2009:

“There are powerful institutions that don’t like being regulated. Regulation sometimes cuts into their profits and interferes with their business. So they have used the political process to sabotage, redirect, defund, undo or hijack the regulatory state since the regulatory state was first invented. The first federal regulatory agency, the Interstate Commerce Commission, was set up to regulate railroad freight rates in the 1880s. Soon thereafter, Richard Olney, a prominent railroad lawyer, came to Washington to serve as Grover Cleveland’s attorney general. Olney’s former boss asked him if he would help kill off the hated ICC. Olney’s reply, handed down at the very dawn of Big Government, should be regarded as an urtext of the regulatory state: ‘The Commission… is, or can be made, of great use to the railroads. It satisfies the popular clamor for a government supervision of the railroads, at the same time that that supervision is almost entirely nominal. Further, the older such a commission gets to be, the more inclined it will be found to take the business and railroad view of things. … The part of wisdom is not to destroy the Commission, but to utilize it.'”

Tim Wu, The Master Switch: The Rise and Fall of Information Empires (2010), p. 308:

“Again and again in the histories I have recounted, the state has shown itself an inferior arbiter of what is good for the information industries. The federal government’s role in radio and television from the 1920s through the 1960s, for instance, was nothing short of a disgrace…. Government’s tendency to protect large market players amounts to an illegitimate complicity … [particularly its] sense of obligation to protect big industries irrespective of their having become uncompetitive.”

David J. Farber & Gerald R. Faulhaber, “Net Neutrality: No One Will Be Satisfied, Everyone Will Complain,” The Atlantic, December 21, 2010:

“When the FCC asserts regulatory jurisdiction over an area of telecommunications, the dynamic of the industry changes. No longer are customer needs and desires at the forefront of firms’ competitive strategies; rather firms take their competitive battles to the FCC, hoping for a favorable ruling that will translate into a marketplace advantage. Customer needs take second place; regulatory “rent-seeking” becomes the rule of the day, and a previously innovative and vibrant industry becomes a creature of government rule-making.”

Holman Jenkins, “Let’s Restart the Green Revolution,” Wall Street Journal, February 2, 2011, (regarding how misguided agricultural & environmental policies are hurting consumers):

“When some hear the word ‘regulation,’ they imagine government rushing to the defense of consumers. In the real world, government serves up regulation to those who ask for it, which usually means organized interests seeking to block a competitive threat. This insight, by the way, originated with the left, with historians who went back and reconstructed how railroads in the U.S. concocted federal regulation to protect themselves from price competition. We should also notice that an astonishingly large part of the world has experienced an astonishing degree of stagnation for an astonishingly long time for exactly such reasons.”

Bruce Schneier, Liars & Outliers: Enabling the Trust that Society Needs to Thrive (New York: John Wiley & Sons, Inc., 2012), p. 204.

“There’s one competing interest that’s unique to enforcing institutions, and that’s the interest of the group the institution is supposed to watch over. If a government agency exists only because of the industry, then it is in its self-preservation interest to keep that industry flourishing. And unless there’s some other career path, pretty much everyone with the expertise necessary to become a regulator will be either a former or future employee of the industry with the obvious implicit and explicit conflicts. As a result, there is a tendency for institutions delegated with regulating a particular industry to start advocating the commercial and special interests of that industry. This is known as regulatory capture, and there are many examples both in the U.S. and in other countries.”

Bruce Owen, “Communication Policy Reform, Interest Groups, and Legislative Capture” (Stanford, CA: Stanford Institute for Economic Policy Research, January 19, 2012), SIEPR Discussion Paper No. 11-006, p. 2. Owen argues that it is the legislative branch, not the regulatory agencies themselves, where regulatory capture takes root:

“It is rather legislative oversight and budget committees and their chairs that are (willingly) captured by special interests in the first instance. One could equally say that legislators capture the special interests, seeking campaign funding The behavior of regulatory agencies simply reflect the preferences of their congressional masters. Regulators generally seek to please their committees, not to defy them.”

Mark Zachary Taylor, The Politics of Innovation: Why Some Countries Are Better Than Others at Science and Technology (Oxford University Press, 2016), p. 213:

“political resistance to technological change can obstruct or warp otherwise ‘good’ S&T [science and technology] policy. Time and again, the losing interest groups created by scientific progress or technological change have been able to convince politicians to block, slow, or alter government support for scientific and technological progress. They support taxes, regulations, subsidies, procurement policies, spending, and so forth that obstruct progress in new S&T, and favor the status quo S&T. The losers and their political representatives have interfered with markets, public institutions and policies, and even the scientific debate itself–whatever they can to protect their interests.”

Additional readings:

• RegBlog – “A Resource List on Regulatory Capture and Reform” (2016)
• Frédéric Boehm, “Regulatory Capture Revisited – Lessons from Economics of Corruption” (2007)
• Ernesto Dal Bo, “Regulatory Capture: A Review,” Oxford Review of Economic Policy (2006)
• William W. Bratton & Joseph A. McCahery, “Regulatory Competition, Regulatory Capture, and Corporate Self-Regulation,” North Carolina Law Review 73 (1995), 1861.
• Slavisa Tasic, “Are Regulators Rational?” Instituto Bruno Leoni (October 2010)
• Michael E. Levine and Jennifer L. Forrence, “Regulatory Capture, Public Interest, and the Public Agenda: Toward a Synthesis” 6 Journal of Law, Economics, and Organization (1990), 167-198.
• William A. Jordan, “Producer Protection, Prior Market Structure and the Effects of Government Regulation,” Journal of Law and Economics 15, no. 1, (April 1972), 151-176.
• David Martimort, “The Life Cycle of Regulatory Agencies: Dynamic Capture and Transaction Costs,” Review of Economic Studies 66, no. 4 (October 1999), 929-947,
• J.J. Lafont & Jean Tirole, “The Politics of Government Decision-Making: A Theory of Regulatory Capture” 106 Quarterly Journal of Economics 4 (Nov. 1991) 1089-1127.
• Fred S. McChesney, “Rent Extraction and Rent Creation in the Economic Theory of Regulation,” Journal of Legal Studies 16 (1987) 101-118.
• Horace M. Gray, “The Passing  of the Public Utility Concept,” Journal of Land & Public Utility Economics 16, no. 1 (February 1940), 8-20.
• Jeffrey T. Macher, John W. Mayo, and Mirjam Schiffer, “The Influence of Firms on Government,” The B.E. Journal of Economic Analysis & Policy, 11, no. 1 (2011).
• Gabriel Kolko, The Triumph of Conservatism: A Reinterpretation of American History, 1900-1916 (1963)
• Lawrence G. Baxter, “Understanding Regulatory Capture: An Academic Perspective from the United States, in Stefano Pagliari, ed., The Making of Good Financial Regulation (2012), p. 31-39.
• an essay of mine from Jan. 2015 highlighting a particularly vivid example of capture at the FAA
• Ambrose Bierce’s satirical Devil’s Dictionary definitions of… Politics: “A strife of interests masquerading as a contest of principles. The conduct of public affairs for private advantage.” Legislator: “A person who goes to the capital of his country to increase his own; one who makes laws and money.”
• Finally, down below I’ve embedded a funny Tom Toles cartoon about regulatory capture that appeared in the Washington Post on January 20, 2011:

PFF today released the fifth installment in our ongoing series on “The Wrong Way to Reinvent Media.” This series of papers explores various tax and regulatory proposals that would have government play an expanded role in supporting the press, journalism, or other media content. In the latest essay, Berin Szoka, Ken Ferree, and I discuss proposals for direct subsidies for failing media outlets and out-of-work journalists.

We argue taxpayer support for failing outlets and unemployed journalists implicates significant First Amendment concerns. On the whole, subsidies can make “journalists and media operators more dependent upon the State; compromise press independence and diminish public trust in the free press; and result in government discrimination in the politically inescapable dilemma of determining eligibility for subsidies.” Such an agenda would also entail huge cost to taxpayers—initially about $35 billion per year according to advocates—and would represent “a massive wealth transfer from one class of speakers to another…”

We warn that calls for seemingly beneficent bailouts “to save” the media and journalism may actually be driven by those who have something more nefarious in mind: a “post-corporate” world shorn of media capitalists, and “such radicalism must be rejected if we hope to sustain a truly free press and uphold America’s proud tradition of keeping a high and tight wall of separation between Press and State.”

The ideas within these and other essays in the series will be worked into a major PFF filing in the Federal Communications Commission’s (FCC) proceeding on the “Future of Media” on May 7. The paper may be viewed online here and I’ve attached it down below in a Scribd reader.

Wrong Way to Reinvent Media Part 5 – Media Bailouts [Thierer Szoka Ferree – PFF] http://d1.scribdassets.com/ScribdViewer.swf

As I’ve mentioned here previously, PFF has been rolling out a new series of essays examining proposals that would have the government play a greater role in sustaining struggling media enterprises, “saving journalism,” or promoting more “public interest” content. We’re releasing these as we get ready to submit a big filing in the FCC’s “Future of Media” proceeding (deadline is May 7^th).  Here’s a podcast Berin Szoka and I did providing an overview of the series and what the FCC is doing.

In the first installment of the series, Berin and I critiqued an old idea that’s suddenly gained new currency: taxing media devices or distribution systems to fund media content. In the second installment, I took a hard look at proposals to impose fees on broadcast spectrum licenses and channeling the proceeds to a “public square channel” or some other type of public media or “public interest” content.

In our latest essay, “The Wrong Way to Reinvent Media, Part 3: Media Vouchers,” Berin and I consider whether it is possible to steer citizens toward so-called “hard news” and get them to financially support it through the use of “news vouchers” or “public interest vouchers”?  We argue that using the tax code to “nudge” people to support media — while less problematic than direct subsidies for the press — will likely raise serious issues regarding eligibility and be prone to political meddling.  Moreover, it’s unlikely the scheme will actually encourage people to direct more resources to hard news but instead just become a method of subsidizing other content they already consume.

I’ve attached the entire essay down below.

The Wrong Way to Reinvent Media, Part 3: Media Vouchers

by Adam Thierer & Berin Szoka*

PFF Progress on Point 17.4 [PDF]

Should the government play a greater role in the media sector in the name of sustaining struggling media enterprises, “saving journalism,” or promoting public media?  In this ongoing series of essays, we’ve been analyzing proposals that would have public policymakers use taxes, subsidies, or regulations to accomplish those objectives.

Part 1 of this series examined proposals to fund media content via a tax on consumer electronics, broadband service, or cell phone bills.^[1] Part 2 critiqued proposals to impose fees on broadcast spectrum licenses and channeling the proceeds to a “public square channel” or some other type of public media or “public interest” content.^[2] Other essays in this series will address proposals to tax private advertising revenues to support public media; expand postal subsidies; directly subsidize out-of-work journalists; and to prop up or bail out failing media entities.  A wrap-up essay will then focus on some potentially constructive policy reforms that could assist media enterprises without a massive infusion of state support or regulation of the press.

In this installment, we will consider whether it is possible to steer citizens toward so-called “hard news” (“serious” journalism)—and get them to financially support it—through the use of “news vouchers” or “public interest vouchers”?  We will argue that using the tax code to nudge people to support media—while less problematic than direct subsidies for the press—will likely raise serious issues regarding eligibility and be prone to political meddling.  Moreover, it’s unlikely the scheme will actually encourage people to direct more resources to hard news but instead just become a method of subsidizing other content they already consume.

Funding Hard News is Hard

Funding “hard news” has always been challenging.  Financing a team of dedicated local beat reporters, investigative journalists, national desks, foreign bureaus, and all the associated production facilities and support staff is an extremely expensive undertaking.[3] And, for all that trouble and expense, hard news rarely turns a healthy profit.  Often it has been considered a “loss leader” for media companies and has been cross-subsidized by other types of content or services.[4] This is why “bundling” has been such a popular model for many media operations such as newspapers, magazines, and cable television.  By tying news production to other types of content or services, media operators have been able to sustain the production of hard news, despite its general unprofitability on its own.

It’s worth recalling that a business model to sustain hard news production and dissemination on a mass scale really only developed mid-way through our Republic.  The early history of media in this country was characterized by the “partisan press” due to the heavy reliance on a patronage model and direct association with political parties and figures. This changed with the rise of large daily newspapers in the mid-1800s and then broadcast radio and television in the early half of the 20 ^th century.[5] Media providers were able to cross-subsidize news production independent of private or political patronage thanks to three things: (1) high-speed printing presses or broadcast facilities, (2) geographic-based market and pricing power, and (3) the widespread advertising base that was made possible by (1) and (2).

Over just the past 15-20 years, we’ve seen this traditional model upended.  Increased competition and technological/platform proliferation are placing an enormous strain on traditional media operations and business models. Schumpeterian “creative destruction” is at work in a serious, and for many, painful, way.

This is what is keeping the Federal Communications Commission,[6] the Federal Trade Commission,[7] some in Congress,[8] and many media worrywarts up at night: the fear that, as traditional financing mechanisms falter (advertising, classifieds, subscription revenues, etc.), many traditional news-gathering efforts and institutions will disappear.  And that’s leading to calls for government intervention or assistance of some sort to prop up struggling entities or directly subsidize the hard news that many of them have traditionally provided but may not be able to for much for longer.

Can Vouchers “Nudge” Citizens to Support Hard News?

One much-discussed proposal would create a “public interest voucher” or what Robert W. McChesney & John Nichols, authors of the new book The Death and Life of American Journalism, call a “Citizenship News Voucher.”^[9] This is a variant on the “artistic freedom voucher,” an idea first put forward in 2003 by economist Dean Baker as an alternative to copyright law as a means of incentivizing artistic creation.[10] The regulatory activist group Free Press, which McChesney founded, has also endorsed a news voucher scheme.[11]

The idea is fairly straightforward: give every American a voucher (McChesney and Nichols propose $200) to support the non-profit news entities of their choice by listing those entities on their tax return.  (If half of all adult Americans actually used their voucher, that would cost at least $20 billion/year.[12])  They assume this would be an efficient way of channeling money to hard news providers while avoiding the serious concerns that arise when government officials or agencies are the ones providing or steering the subsidies.  McChesney and Nichols go so far as to call their tax-and-redistribute proposal “a libertarian’s dream,” since “people can support whatever political viewpoint they prefer or do nothing at all.”[13]

McChesney and Nichols seem to be building on the approach popularized by Richard Thaler and Cass Sunstein in their highly influential 2008 book Nudge: Improving Decisions about Health, Wealth, and Happiness.^[14] Based on behavioral economics studies, Thaler and Sunstein argue that both government and private actors must inevitably make decisions about “choice architecture” and that, by setting defaults, incentives and rules smartly, “choice architects” can and should improve private decision-making—but only where they can do so without blocking, fencing-off or significantly burdening choices.^[15] While their proposal might not qualify as a nudge in the strict sense defined by Thaler and Sunstein, the essential similarity between the concepts lies in trying to restructure the choices Americans make about media consumption by changing how they spend money on media—with the declared goal of “improving” both media consumption and the media itself (by “freeing it” of supposedly evil corporate influences).

Problems with the News Voucher Proposal

While nudges might be less objectionable in circumstances where it’s objectively evident what’s really “good” for us, the same can hardly be said for media consumption.  “Nudging” consumers towards better media choices isn’t based on clear science about, say, eating better or getting more exercise, but on highly subjective decisions about what kind of information consumption is really good for individuals, communities, and polities.  For policymakers to imagine that they can steer the public’s tastes or behavior in more desirable directions through law (including media subsidy schemes) is a profoundly elitist enterprise.^[16] In the case of “news vouchers,” the hope is that the public can be encouraged to at least channel some additional support to news-gathering activities and institutions.  The problem, however, is that some people just don’t much like being “nudged” by officials from afar and they’ll often take steps to evade such paternalism—however ostensibly “libertarian” it might be.  And it could lead to a host of unintended consequences, discussed further below.[17]

As a general matter, it simply isn’t possible to make consumers choose the “right” media in an age of information abundance.^[18] With so many voices competing for our attention, it’s impossible make people watch, listen, or read if they don’t want to.  That’s especially true with hard news, which has never netted major ratings.  As Ellen P. Goodman of the Rutgers-Camden School of Law has noted: “Given the proliferation of consumer filtering and choice, these kinds of interventions are of questionable efficacy.  Consumers equipped with digital selection and filtering tools are likely to avoid content they do not demand no matter what the regulatory efforts to force exposure.”[19] As Goodman rightly argues, “regulation cannot, in a liberal democracy, force viewers to consume media products they do not think they want in the name of the public interest.”[20] There’s no reason to believe this situation has ever been different or will ever change:  Writing in 1922, famed journalist Walter Lippmann noted that, “it is possible to make a rough estimate only of the amount of attention people give each day to informing themselves about public affairs,” but “the time each day is small when any of us is directly exposed to information from our unseen environment.”[21]

McChesney and Nichols’ effort to sell this scheme as “a libertarian’s dream” is a huge stretch.  There aren’t too many libertarians—or anyone else for that matter—who favor sending more money to the federal government only to win back the right to spend it on “qualifying media entities.”  And regarding their claim that “people can support whatever political viewpoint they prefer or do nothing at all,” well, people are already free to do whatever they want with their money when it comes to media products!  Why do we need to send money to Washington first and then have policymakers tell us how we can spend it?  This seems like a needless nudge—and one that would likely result in government bureaucracy taking a cut of the money or meddling in media markets.

Analogies to educational vouchers don’t work because we long ago decided to treat education as a public good and force everyone to pay for it.  “Voucherization” may make sense as a more efficient and “libertarian” way to fund such traditional public goods, when we absolutely have to force people to spend money on certain goods or services.  While McChesney and Nichols claim that the time has come for the government to fund media as such a public good, most people probably wouldn’t agree, since the private provision of media services has worked quite well for some time—being funded by a mix of advertising and subscription revenues for centuries.  They repeatedly claim that era is over (with little substantiation) but, in reality, it is their policies that would end private, for-profit media by taxing and regulating it to death.[22]

Second, what counts as a “qualifying media entity,” and how will the IRS make that call?  Can just any outlet that purports to gather and report “news” draw support from this new federal program?  McChesney and Nichols aren’t clear: They want the IRS to “determine eligibility—according to universal standards that err on the side of expanding rather than constraining the number of serious sources covering and commenting on issues of the day.”[23] They specify only that the entity must be a non-profit (though not necessarily a federally-recognized 501(c)(3)); not accept advertising; “do exclusively media content”; “cannot be part of a larger organization or have any non-media operations”; and that everything the medium produces must be made available immediately upon publication on the Internet and made available for free to all.”[24] But, anticipating objections about the dangers of political meddling, they also insist that “the government will not evaluate the content to see that the money is going toward journalism.  Our assumption is that these criteria will effectively produce that result, and if there is some slippage so be it.”[25] The only mechanism they can suggest for reducing fraud and ensuring “seriousness” is that, “for a medium to receive funds it would have to get commitments for at least $20,000 worth of vouchers” (100 full donations of the $200 voucher).[26]

But will policymakers really let citizens redeem their vouchers on The National Inquirer or People magazine?  How about the satirical The Onion or Jon Stewart’s Daily Show?  “This is a risk we are more than willing to take,” McChesney and Nichols say since they are “operating on a gut instinct that people will use their vouchers to fund serious media while reaching into their pockets to pay for copies of The National Inquirer at the supermarket checkout.”^[27] Of course, it’s always easier to take such risks when you are playing with other people’s money!  (Nearly half of all Americans don’t pay any Federal income taxes,[28] so their $200 news voucher is definitely coming out of someone else’s tax bill.)

But it’s naïve to believe this idea is going to change the face of journalism in any serious way.  Most people will spend their vouchers on whatever media outlets and content they are currently consuming, which probably isn’t what McChesney and Nichols (or most policymakers) would prefer.  “The program may not develop exactly the type of journalism our greatest thinkers believe is necessary,” McChesney and Nichols admit.[29] But the real question is: What sort of demands will policymakers begin making if the voucher program ends up channeling money into media entities that don’t measure up to their standards or desires?  Qualification criteria would inevitably become the tool of political meddling.

The Inevitable Strings & the Political/Constitutional Paradox

This raises a fourth concern: How long will it be before government starts attaching more strings to the vouchers?  To borrow a recent headline from The Wall Street Journal, how long will it be before the “Economic Policy ‘Nudge’ Gives Way to a Shove?”^[30] Although, in theory, the news voucher idea lets consumers figure out how to steer the funds, it’s unlikely much of those funds would go toward hard news, civic-minded or “high brow” content if consumers were actually free to choose.  How do we know this?  Because we already know what consumers choose today—and those “poor” choices are part of the supposed “problem” to be solved by media vouchers.  Once people start redirecting taxpayer dollars to content that the elites and policymakers don’t like, the nudge will become a shove and more interventions will follow in the form of “voucher guidance and compliance” hearings, rules, etc.

But the pressure for strings won’t just come from the top down because, as Thomas Jefferson famously put it in the 1786 Virginia Act for Establishing Religious Freedom, “to compel a man to furnish contributions of money for the propagation of opinions which he disbelieves, is sinful and tyrannical.”[31] That is, we naturally—and rightly—resent subsidizing speech that is antithetical to our own values.  McChesney and Nichols dismiss this natural (presumably bourgeois?) indignation by saying, “people will have to accept that some of the vouchers are going to go to media that they detest.”^[32] In one sense, they are dead wrong: People won’t just accept that.  They may accept subtle, indirect subsidies, but the more clear it becomes that they are being forced to pay for media they detest—and that could scarcely be more clear than with a refundable tax credit “voucher”—they will protest and demand that certain viewpoints, or at least kinds of content, be deemed out of bounds.

But in another sense, McChesney and Nichols are probably correct: For such a scheme to work, it probably can’t come with any content strings, because this is probably what the First Amendment would require.  Yet they don’t actually explain that point, stopping only to say that we all just have to become more tolerant of “dissent”— i.e., subsidize those who disagree with us!  In this sense, news vouchers therefore would likely fall prey to a common paradox faced by proposals for the government to subsidize speech: What’s politically feasible is unconstitutional and what’s constitutional is politically impossible.  Specifically, the kinds of eligibility restrictions necessary to push a voucher scheme through Congress would probably cause the courts to strike down the whole scheme.  Even if the courts were willing to strike down only the eligibility provisions as “severable” from the rest of the scheme, the whole scheme would likely die in the very next federal budget if the courts require the funding of “offensive” or “frivolous” content.  Understanding why this is the case requires a brief overview of key First Amendment case law.

In general, “when the Government appropriates public funds to establish a program it is entitled to define the limits of that program.”^[33] Thus, in its 1991 Rust v. Sullivan decision, the Supreme Court upheld a law forbidding federal funding for family planning services to go to abortion counseling.^[34] But the Supreme Court later clarified that such viewpoint discrimination is permissible only “[w]hen the government disburses public funds to private entities to convey a governmental message.”^[35] By contrast, where subsidies are “designed to facilitate private speech,” government may not discriminate against viewpoints it does not like.^[36] Thus, the government may not fund legal services but bar funding for defendants trying to amend or otherwise challenge existing welfare law.^[37]

The First Amendment prohibits not only such viewpoint discrimination but content discrimination as well.  In 2003, the Supreme Court held that the University of Virginia could not exclude religious groups from drawing on the University’s Student Activity Fund, even though the Fund’s eligibility requirements did not discriminate against any particular religion.^[38] Yet in 1995, the Court had upheld another content restriction: a requirement that the National Endowment for the Arts (NEA) “take into consideration general standards of decency and respect for the diverse beliefs and values of the American public” when making grants to “help create and sustain not only a climate encouraging freedom of thought, imagination, and inquiry but also the material conditions facilitating the release of . . . creative talent.”^[39] The Court concluded, in an 8-1 majority, that the “’decency and respect’ criteria do not silence speakers by expressly threaten[ing] censorship of ideas.”^[40] This decision rested largely on the fact that “Educational programs are central to the NEA’s mission” and “it is well established that ‘decency’ is a permissible factor where ‘educational suitability’ motivates its consideration.”^[41] The Court left the door open to future First Amendment challenges to the statute “as applied,” such as “[i]f the NEA were to leverage its power to award subsidies on the basis of subjective criteria into a penalty on disfavored viewpoints.”^[42]

What explains these starkly different outcomes is that the Court decided that the University of Virginia’s Student Activity Fund constituted a “limited public forum”^[43] intended to “encourage a diversity of views from private speakers,” but the NEA did not.  The University had funded all speech except “religious editorial viewpoints” from its Student Activities Fund, into which every student paid a $14 mandatory fee each semester.  By contrast, the NEA made only a limited number of grants through a “competitive process” according to principles of inherently content-based principles of “excellence” as well as “geographic, ethnic, and esthetic diversity.”  Thus, it was permissible, in principle, for the NEA to exclude “indecent” content.

The Supreme Court’s decision in U.S. v. American Library Association, Inc. (2003) also suggests that content restrictions regarding Citizen News Vouchers would be struck down.  The Court held that the First Amendment did not bar Congress from requiring in the Children’s Internet Protection Act (CIPA) that “a public library may not receive federal assistance to provide Internet access unless it installs software to block images that constitute obscenity or child pornography, and to prevent minors from obtaining access to material that is harmful to them.”^[44] Critically, the Court held that libraries were not public fora:

A public library does not acquire Internet terminals in order to create a public forum for Web publishers to express themselves, any more than it collects books in order to provide a public forum for the authors of books to speak. It provides Internet access, not to “encourage a diversity of views from private speakers” … but for the same reasons it offers other library resources: to facilitate research, learning, and recreational pursuits by furnishing materials of requisite and appropriate quality.^[45]

But what is the purpose of the news voucher scheme if not to “encourage a diversity of views from private speakers?”  Indeed, this is precisely how McChesney and Nichols attempt to sell their scheme—as a “libertarian’s dream.”  But, paradoxically, the more “libertarian” and broader subsidies for speech are, the more likely the political/constitutional paradox mentioned above is to arise.

The Citizenship News Voucher Fund proposed by McChesney and Nichols strongly resembles the University of Virginia’s Student Activity Fund:  In both cases, consumers are taxed to finance a fund that is, in theory, available to any entity that meets certain basic eligibility criteria.  No attempt is made in either case to ensure the quality of content or activities being funded.  Indeed, McChesney and Nichols explicitly reject such oversight of voucher spending and insist that taxpayers must accept that much of the fund will simply be wasted on media that falls well short of the “hard” or “serious” news they’re trying to save.  (By contrast, the Corporation for Public Broadcasting, whose budget McChesney and Nichols propose increasing nine-fold to fund more public media,[46] more closely resembles the NEA as a selective grant-maker.)

Also distinguishing the Court’s decision upholding CIPA’s content-based restrictions is the fact that both Justice Kennedy in his concurrence and Justice Souter in his dissent (joined by Justice Ginsburg) agreed that First Amendment problems could be solved to the extent that adults could opt-out of filtering.^[47] But with news vouchers, the government either restricts the eligibility of certain publications to receive vouchers depending on their eligibility or it does not.

Furthermore, unlike with CIPA or the NEA, the Citizenship News Voucher wouldn’t be related to educational settings, so it’s not even clear a “decency” requirement like that Congress imposed on the NEA’s grant-making could be imposed on voucher eligibility.[48] Magazines like Playboy offer a mix of pornography and thoughtful commentary on the news, proving that there is a market for such combination of journalism and controversial entertainment and photography.  Going even further, “Naked News” is a daily show whose buxom anchors strip while delivering the news.^[49] Why wouldn’t millions of Americans, especially younger men, use their voucher for such content?  Who’s going to draw the line between porn-spiced news and “serious” content?

The typical taxpayer will be outraged by having to subsidize some media outlet, whether because of its objectionable viewpoint or indecent or unserious content.  He will fiercely resist being compelled “to furnish contributions of money for the propagation of opinions which he disbelieves and abhors,” as Jefferson put it.  Good luck getting even the most “tolerant” gay voters, for example, to accept being taxed to pay for fundamentalist Christian perspectives on the news—or vice versa!  McChesney and Nichols don’t actually say anything about the First Amendment, but do recognize that, for their program to be accepted, the American people will have to swallow the “hard pill” of accepting that “some of the vouchers are going to go to media that they detest” and “embrace dissent in reality and not just rhetoric.”^[50] They seem to think this “hard pill” is a benefit of their scheme because it would teach us all to be more tolerant of “dissent.”  That’s easy for an endowed professor at a taxpayer-funded university and avowed neo-Marxist like Robert McChesney to say, but it’s not likely to fly with most Americans.  Disputes over “qualifying entity” eligibility will only add new rancor to the Culture Wars (over sex, abortion, religion, politics, etc.).

Realistically, it would likely take years for a news voucher bill to make its way through Congress, and if it ever did pass, it would likely be tied up in the courts for years, requiring at least one visit to the Supreme Court.  If any content strings are included, the law could well lead to the same kind of ordeal as with the 1998 Child Online Protection Act, which spent nearly 9 years in litigation and went up to the Supreme Court twice.^[51] Yet somehow McChesney and Nichols imagine their proposal will save media today at this critical moment of technological transition.

Down with Copyright, Down with Capitalism?

There’s another problematic caveat to the McChesney-Nichols variant of the news voucher idea: They would disallow any copyright protection or advertising support for an entity who receives voucher funds.  That’s an effort by the authors to steer even more media activity away from the commercial sphere and toward what might be thought of as a “public option” for the press—what McChesney and Nichols euphemistically (and repeatedly) call “post-corporate” media.

Let’s not forget that McChesney has argued (during an interview on the Canadian-based “Socialist Project”) that “the ultimate goal is to get rid of the media capitalists,” and that, “unless you make significant changes in the media, it will be vastly more difficult to have a revolution.”  So, it’s important to keep his true intentions in mind when he starts claiming to have found “a libertarian’s dream” of a solution to what ails America’s media sector.^[52] It sounds more like a central planner’s dream.  The true “libertarian’s dream” would be to leave Americans free to make their own choices about media without additional meddling from the State, and to look to innovation to fund media through a combination of advertising, sponsorship, subscriptions and micropayments.

Related PFF Publications

• The Wrong Way to Reinvent Media, Part 2: Broadcast Spectrum Taxes to Subsidize Public Media , Adam Thierer, Progress on Point 17.2, March 2010.
• The Wrong Way to Reinvent Media, Part 1: Taxes on Consumer Electronics, Mobile Phones & Broadband, Adam Thierer & Berin Szoka, PFF Progress on Point 17.1, March 2010.
• Testimony at FCC’s Hearing on “Serving the Public Interest in the Digital Era”, Adam Thierer, March 2010.
• Public Option for Press Should Get the Red Pen, Adam Thierer, The Daily Caller, Jan. 2010.
• Chairman Leibowitz’s Disconnect on Privacy Regulation & the Future of News, Adam Thierer & Berin Szoka, Progress Snapshot 6.1, Jan. 13, 2010.
• Socializing Media in Order to Save It, Adam Thierer, City Journal, March 2009.
• A Manifesto for Media Freedom, Adam Thierer and Brian Anderson, 2008.
• Media Ownership Proceedings, W. Kenneth Ferree, Testimony before the Federal Communications Commission, Nov. 3, 2009.
• Media Myths: Making Sense of the Debate over Media Ownership, Adam Thierer, June 2005.

[1] Adam Thierer & Berin Szoka, The Progress & Freedom Foundation, The Wrong Way to Reinvent Media, Part 1: Taxes on Consumer Electronics, Mobile Phones & Broadband, PFF Progress on Point 17.1, March 2010, www.pff.org/issues-pubs/pops/2010/pop17.1-the_wrong_way_to_reinvent_media.pdf.

[2] Adam Thierer, The Progress & Freedom Foundation, The Wrong Way to Reinvent Media, Part 2: Broadcast Spectrum Taxes to Subsidize Public Media, Progress on Point 17.2, March 2010, www.pff.org/issues-pubs/pops/2010/pop17.2-wrong_way_part_2.pdf

[3] “Until now, the iron core of news has been somewhat sheltered by an economic model that was able to provide extra resources beyond what readers—and advertisers—would financially support. This kind of news is expensive to produce, especially investigative reporting.” Alex S. Jones, Losing the News: The Future of the News that Feeds Democracy (2009) at 4.

[4] “For a long time, publishers have used news as a ‘loss leader,’ a product sold below costs to create other sales.” The Media Consortium, The Big Thaw: Charting a New Future for Journalism, July 2009, at 36, www.themediaconsortium.org/thebigthaw.

[5] James T. Hamilton notes that, “nonpartisan reporting emerged as a commercial product in American newspaper markets in the 1870s.  Before that time, many papers openly proclaimed association with a particular political party.”  James T. Hamilton, All the News That’s Fit to Sell (2004), at 3.

[6] The Federal Communications Commission (FCC) recently kicked off a new “Future of Media” effort with a workshop on “Serving the Public Interest in the Digital Era.” See Federal Communications Commission, FCC Launches Examination of the Future of Media and Information Needs of Communities in a Digital Age, FCC Public Notice, GN Docket No. 10-25, Jan. 21, 2010, at 2, http://hraunfoss.fcc.gov/edocs_public/attachmatch/DA-10-100A1.pdf

[7] The Federal Trade Commission (FTC) has hosted two workshops asking “How Will Journalism Survive the Internet Age?” www.ftc.gov/opp/workshops/news/index.shtml

[8] Both the Senate and House of Representatives have held hearings about “the future of journalism,” and Senator Benjamin L. Cardin (D-MD) recently introduced the “Newspaper Revitalization Act,” which would allow newspapers to become nonprofit organizations in an effort to help them stay afloat—but also curtail their political editorializing.  See http://cardin.senate.gov/news/record.cfm?id=310392.

[9] Robert W. McChesney & John Nichols, The Death and Life of American Journalism (2010) at 201-206. McChesney discussed this idea in more detail when he spoke at the recent FTC event on saving journalism.  Robert W. McChesney, Rejuvenating American Journalism: Some Tentative Policy Proposals, Presentation to FTC Workshop on Journalism, March 10, 2010, www.ftc.gov/opp/workshops/news/mar9/docs/mcchesney.pdf

[10] Dean Baker, The Artistic Freedom Voucher: An Internet Age Alternative to Copyrights, Nov. 5, 2003, www.cepr.net/documents/publications/ip_2003_11.pdf.

[11] Free Press, Saving the News: Toward a National Journalism Strategy, May 2009, at 36, www.freepress.net/files/saving_the_news.pdf.

[12] McChesney & Nichols, supra note 9 at 205.

[13] Id. at 204.

[14] Richard H. Thaler & Cass R. Sunstein, Nudge: Improving Decisions About Health, Wealth, and Happiness (2008).

[15] They define choice architecture as follows:  “A structure designed by a choice architect(s) to improve the quality of decisions made by homo sapiens. Often invisible, choice architecture is the specific user-friendly shape of an organization’s policy or physical building when homo sapiens come into contact with it. Examples of choice architecture include a voter ballot, a procedure for handling well-meaning people who forget a deadline, or a skyscraper.”  Nudge Glossary of Terms, www.nudges.org/glossary.cfm.

[16] See Adam Thierer & Berin Szoka, The Progress & Freedom Foundation, What Unites Advocates of Speech Controls & Privacy Regulation?, Progress on Point 16.19, Aug. 11, 2009, www.pff.org/issues-pubs/pops/2009/pop16.19-unites-speech-and-privacy-reg-advocates.pdf.

[17] As Glen Whitman notes in challenging such “nudging”: “the new paternalism carries a serious risk of expansion. Following its policy recommendations places us on a slippery slope from soft paternalism to hard. This would be true even if policymakers — including legislators, judges, bureaucrats, and voters — were completely rational. But the danger is especially great if policymakers exhibit the same cognitive biases attributed to the people they’re trying to help.”  Glen Whitman, The Rise of the New Paternalism, Cato Unbound, April 5, 2010, www.cato-unbound.org/2010/04/05/glen-whitman/the-rise-of-the-new-paternalism.

[18] Adam Thierer, The Progress & Freedom Foundation, Why Expansion of the FCC’s Public Interest Regulatory Regime is Unwise, Unneeded, Unconstitutional, and Unenforceable, Testimony Before the Federal Communications Commission Hearing on “Serving the Public Interest in the Digital Era,” March 4, 2010, www.pff.org/issues-pubs/testimony/2010/2010-03-04-Thierer_Remarks_at_FCC_Hearing.pdf.

[19] Ellen P. Goodman, “Proactive Media Policy in an Age of Content Abundance,” in Philip M. Napoli, ed., Media Diversity and Localism: Meaning and Metrics (2007) at 370, 374.

[20] Id.

[21] Walter Lippmann, Public Opinion (1922), at 53, 57.

[22] For example, among other things, McChesney and Nichols call for a 5% tax on consumer electronics, a 3% tax on monthly ISP & cell phone bills, a 2% sales tax on advertising, and a 7% tax on broadcasters.  See McChesney & Nichols, supra note 9 at 209-11.

[23] Id. at 202.

[24] Id.

[25] Id.

[26] Id.

[27] Id. at 205.

[28] http://www.taxpolicycenter.org/UploadedPDF/1001289_who_pays.pdf

[29] McChesney & Nichols, supra note 9 at 205.

[30] Jonathan Weisman, Economic Policy ‘Nudge’ Gives Way to a Shove, Wall Street Journal, March 8, 2010, http://online.wsj.com/article/SB10001424052748704869304575103980232739138.html.

[31] http://religiousfreedom.lib.virginia.edu/sacred/vaact.html

[32] McChesney & Nichols, supra note 9 at 205.

[33] Rust v. Sullivan, 500 U.S. 173, 194 (1991).

[34] Id. (emphasis added).

[35] Rosenberger v. Rector and Visitors of Univ. of Va., 515 U.S. 819, 833 (1995) (emphasis added).

[36] Legal Services Corp. v. Velazquez, 531 US 533, 542 (2001).  The Court in Rosenberger noted:

even in the provision of subsidies, the Government may not “ai[m] at the suppression of dangerous ideas,” Regan v. Taxation with Representation of Wash., 461 U.S. 540, 550 (1983), and if a subsidy were “manipulated” to have a “coercive effect,” then relief could be appropriate. See Arkansas Writers’ Project, Inc. v. Ragland, 481 U.S. 221, 237 (1987) (Scalia, J., dissenting); see also Leathers v. Medlock, 499 U.S. 439, 447 (1991) (“[D]ifferential taxation of First Amendment speakers is constitutionally suspect when it threatens to suppress the expression of particular ideas or viewpoints”). In addition…, a more pressing constitutional question would arise if Government funding resulted in the imposition of a disproportionate burden calculated to drive “certain ideas or viewpoints from the marketplace.” Simon & Schuster, Inc. v. Members of N. Y. State Crime Victims Bd., 502 U.S. 105, 116 (1991).

Id. at 587.

[37] 531 U.S. at 542.

[38] Rosenberger v. Rector and Visitors of Univ. of Va., 515 U.S. 819, 833 (1995).  The University’s rule prohibited funding of any group that “primarily promotes or manifests a particular belie[f] in or about a deity or an ultimate reality.”

[39] National Endowment for the Arts v. Finley, 524 U.S. 569, 574 (1998).

[40] 524 U.S. at 583 (quoting R. A. V. v. St. Paul, 505 U.S. 377 (1992) (internal quotations omitted).

[41] Id. at 584 (citing  Board of Ed., Island Trees Union Free School Dist. No. 26 v. Pico, 457 U.S. 853, 871 (1982); see also Bethel School Dist. No. 403 v. Fraser, 478 U.S. 675, 683 (1986)).

[42] Id. at 587.

[43] 515 U.S. 819 (1995).

[44] U.S. v. American Library Association, Inc., 539 U.S. 194 (2003).  See generally Robert Corn-Revere, United States v. American Library Association: A Missed Opportunity for the Supreme Court to Clarify Application of First Amendment Law to Publicly Funded Expressive Institutions, Cato Supreme Court Rev. 105, 2003, www.cato.org/pubs/scr2003/publiclyfunded.pdf.

[45] Id. at 207 (quoting Rosenberger, 515 U.S. at 834).

[46] McChesney & Nichols, supra note 9 at 192, 199.

[47] “If, on the request of an adult user, a librarian will unblock filtered material or disable the Internet software filter without significant delay, there is little to this case.” American Library Association, 539 U.S. at 214 (Kennedy, J. concurring).  Justice Souter agreed that it would ‘‘tak[e] the curse off the statute for all practical purposes’’ if adult patrons could obtain an unblocked Internet terminal ‘‘simply for the asking,’’ but doubted this would actually happen in practice.  Id. at 232.

[48] Cf. Rosenberger, 515 U.S. at 584 (“Educational programs are central to the NEA’s mission.… And it is well established that ‘decency’ is a permissible factor where ‘educational suitability’ motivates its consideration.”).

[49] See www.nakednews.com.

[50] Id. at 205.

[51] See Adam Thierer, Closing the Book on COPA?, Technology Liberation Front, Jan. 21, 2009, http://techliberation.com/2009/01/21/closing-the-book-on-copa/.

[52] Adam Thierer, The Progress & Freedom Foundation, Free Press, Robert McChesney & the “Struggle” for Media, Aug. 10, 2009, http://blog.pff.org/archives/2009/08/free_press_robert_mcchesney_the_struggle_for_media.html

Wrong Way to Reinvent Media Part 3 – Media Vouchers [Thierer & Szoka – PFF] http://d1.scribdassets.com/ScribdViewer.swf

Here are two radio programs that took place today discussing the ramifications of this week’s Comcast v. FCC decision. The first was today’s Diane Rehm Show on NPR and it featured Ben Scott of Free Press, Amy Schatz of The Wall Street Journal, and Kyle McSlarrow of the National Cable and Telecommunications Association (NCTA).  I can’t embed it directly here but you can listen to the hour-long show here.

The second program was on KQED – San Francisco’s “Forum with Michael Krasny.” It featured Declan McCullagh of CNET.com, Art Brodsky of Public Knowledge, Eric Klinker, president and CEO of BitTorrent, and me. You can listen to this hour-long debate by clicking below.

As mentioned last week, in a new series of essays, PFF scholars will be examining proposals that would have the government play a greater role in sustaining struggling media enterprises, “saving journalism,” or promoting more “public interest” content. With many traditional media operators struggling, and questions being raised about how journalism in particular will be supported in the future, Washington policymakers are currently considering what role government can and should play in helping media providers reinvent themselves in the face of tumultuous technological change wrought by the Digital Revolution. We will be releasing 6 or 7 essays on this topic leading up to our big filing in the FCC’s “Future of Media” proceeding (deadline is May 7^th).  And here’s a podcast Berin Szoka and I did providing an overview of the series.

In the first installment of the series, Berin and I critiqued an old idea that’s suddenly gained new currency: taxing media devices or distribution systems to fund media content. In the second installment, “The Wrong Way to Reinvent Media, Part 2: Broadcast Spectrum Taxes to Subsidize Public Media,” I discuss proposals to impose a tax on broadcast spectrum licenses to funnel money to public media projects or other “public interest” content or objectives. Such a tax would be fundamentally unfair to broadcasters, who are struggling for their very survival in the midst of unprecedented marketplace turmoil.  Moreover, such a tax is unnecessary in light of the many other sources of “public interest” programming available today. Finally, even if the government creates or subsidizes wonderful, civic- and culturally-enriching content, there’s no way to force people to consume it.  Nor should government force such media choices upon the public. There’s no good reason for government to be socially-engineering media choices through taxes.

I’ve attached the entire essay down below.

The Wrong Way to Reinvent Media, Part 2: Broadcast Spectrum Taxes to Subsidize Public Media

PFF Progress on Point 17.2 [PDF]

by Adam Thierer*

In an ongoing series of essays, we‘re discussing proposals to have the government play a greater role in the media sector in the name of sustaining struggling enterprises or “saving journalism.”  Washington policymakers are currently considering what, if any, role government can and should play in assisting media operators, supporting journalism, or expanding public media.  For example, the Federal Communications Commission (FCC) recently kicked off a new “Future of Media” effort with a workshop on “Serving the Public Interest in the Digital Era.” Likewise, the Federal Trade Commission (FTC) has hosted two workshops on “How Will Journalism Survive the Internet Age?”  Meanwhile, the Senate has already held hearings about “the future of journalism,” and Senator Benjamin L. Cardin (D-MD) recently introduced the “Newspaper Revitalization Act,” which would allow newspapers to become nonprofit organizations in an effort to help them stay afloat—but also curtail their political editorializing.

Part 1 of this series examined proposals to fund media content via a tax on consumer electronics, broadband service, or cell phone bills.^[1] Other essays will address proposals to tax private advertising revenues to support public media; directly subsidize out-of-work journalists; expand postal subsidies; and to prop up or bail out failing media entities.  A wrap-up essay will then focus on some potentially constructive policy reforms that could assist media enterprises without a massive infusion of state support or regulation of the press.

This essay will discuss proposals to impose a tax on broadcast spectrum licenses to funnel money to public media projects or other “public interest” content or objectives.^[2] Such a tax would be fundamentally unfair to broadcasters, who are struggling for their very survival in the midst of unprecedented marketplace turmoil.  Moreover, such a tax is unnecessary in light of the many other sources of “public interest” programming available today. Finally, even if the government creates or subsidizes wonderful, civic- and culturally-enriching content, there’s no way to force people to consume it.  Nor should government force such media choices upon the public. There’s no good reason for government to be socially-engineering media choices through taxes.

Why the “Public Interest” Regulatory Regime Can’t Continue

There’s always been a bit of mythology surrounding so-called “public interest” regulation of broadcasting in America.^[3] Those who advocate expansive regulatory obligations for licensed radio and television operators typically claim they’re directing the content or character of broadcasting toward a nobler end—a sort of noblesse oblige for the Information Age.  At times, their rhetoric takes on a fairy-tale quality as lawmakers and regulatory advocates speak of “the public interest” in reverential and fantastic terms, all the while deftly evading any attempt to define the term.  Indeed, while public interest regulation has been considered the cornerstone of communications and media policy since the 1930s, at no time during these seven decades has the term been adequately defined.[4]

Former FCC Commissioner Glen Robinson has argued that the public interest standard “is vague to the point of vacuousness, providing neither guidance nor constraint on the agency’s action.”^[5] And Nobel Prize-winning economist Ronald Coase argued 50 years ago that “The phrase… lacks any definite meaning.  Furthermore, the many inconsistencies in commission decisions have made it impossible for the phrase to acquire a definite meaning in the process of regulation.”^[6]

And that is still true today.  Simply put, the public interest standard is not really a “standard” at all since it has no fixed meaning; the definition of the phrase has shifted with the political winds to suit the whims of those in power at any given time.[7] Nonetheless, the public interest regulatory regime remains with us and continues to apply to licensed broadcast radio and television operators.

Regardless of the rationale used to advance public interest regulation—public spectrum ownership, licensing, scarcity,^[8] pervasiveness,^[9] or “public enlightenment”—it is hard to explain why we have singled out broadcasters for unique regulatory obligations while operators of other media platforms have been given a free pass.  Such regulatory asymmetry is more difficult to justify today in light of rising competition for many new platforms and players.^[10] And it is difficult to believe that Congress or the FCC could concoct a constitutionally-defensible rationale for extending “public interest” regulation to new media platforms.^[11] Indeed, efforts to do so for both old (newspapers, print) and new (Internet, video games) media have failed when tested in the courts.  And, practically speaking, even if expansion of the old regime was desirable, it would be exceedingly difficult to do so in light of the sheer scale and volume of new media that would need to be covered.^[12]

Spending Money Instead of Imposing Mandates?

The combination of these factors has forced many traditional public interest regulatory advocates to reconsider the wisdom—or at least the practicality—of the old broadcasting regime.  One alternative that has received increasing attention in recent years would see broadcasters largely relieved of their public interest obligations and charged instead an annual fee for their use of the airwaves.  The proceeds from such a spectrum fee or tax would then be used to subsidize a variety of programs or content.  For example:

• Henry Geller, a former FCC general counsel, first advocated such a spectrum fee scheme as a method of financing more public broadcasting programming.^[13]
• Likewise, Charles Firestone, executive director of the Aspen Institute’s Communications and Society Program, has argued that the scheme could fund “educational programs for children, free political spots on an equal opportunities basis, public service announcements, or other programming that the Government wants.”[14]
• American Enterprise Institute scholar Norman Ornstein has advocated that the money be spent on a “Public Square” channel to “focus on local and national politics, policy issues, debates, campaigns, and other vital issues.”^[15]
• Elsewhere, along with Paul Taylor, Ornstein has said the money raised from such fees might be spent to ensure greater election coverage or to subsidize political advertising.^[16]
• Leonard Downie, Jr., Vice President at Large of The Washington Post, and Michael Schudson, a Professor at the Columbia University Graduate School of Journalism, have advocated the creation of a “Fund for Local News” that “would make grants for advances in local news reporting and innovative ways to support it.”^[17] The Fund would make grants to news organizations through “Local News Fund Councils” and would be financed by “fees paid by radio and television licensees, or proceeds from auctions of telecommunications spectrum, or new fees imposed on Internet service providers.”^[18]
• Most recently, Robert W. McChesney and John Nichols, authors of the new book The Death and Life of American Journalism, have proposed a 7% tax on broadcasters, which they estimate would generate $3-6 billion annually.  They would use it to fund some combination of all of the above items and far more, including welfare for journalists.^[19]

A Spectrum Tax as a Regulatory Reparations Policy

We might think of spectrum tax proposals as a sort of reparations policy for the regulatory sins of the past.  That is, broadcast spectrum fees are typically pitched as a way to “repay the public” for use of the spectrum that broadcasters obtained originally at no charge.  As Charles Firestone explains, in theory, the spectrum fee proposal:

provides a specific dollar value to the trade-off that has traditionally marked the public trusteeship theory of broadcast regulation. That is, for the initial grant and/or exclusive use of a valuable frequency, protected against interference or encroachment by governmental enforcement mechanisms, the broadcaster serves the needs and interests of the local audience service area.[20]

But like the “public interest” standard itself, spectrum taxes are also an idea whose time has passed.^[21] Broadcast spectrum fees make little sense today, even if the notion might have made some sense two or three decades ago as a method of monetizing public interest obligations.

First, using spectrum fees as a reparations policy today fails to “punish” those who originally got their spectrum free-of-charge.  The vast majority of broadcast spectrum licenses have traded hands in the secondary market for lucrative sums.  In many cases, those television and radio properties have traded hands numerous times.  Thus, the current spectrum-holders who would be taxed are generally not the beneficiaries of any “windfall,” but have instead paid competitive market prices for the spectrum they use that should be roughly commensurate with the economic value of that spectrum (at least for the limited range of uses allowed by the FCC).

Second, although broadcasting remains an important medium, its once-supreme relevance has eroded significantly over the past three decades.  Even Norm Ornstein, a defender of broadcast spectrum fees, has noted that “Over-the-air broadcasting is a dinosaur.  It’s not going to last very long.”^[22] Although that might be hyperbole, it’s certainly true that whatever weight the broadcast medium might have had in the past, that is now ancient history.

For most of the past century, broadcasting was a fairly stable industry that did not witness business model-shattering types of changes.  As its very name implies, broadcasting attracted broad audiences.  Consequently, returns were stable, even substantial at times.  Today, however, stability has given way to volatility.  The entire media marketplace is in a state of seemingly constant upheaval.  Long-standing industry players are shedding assets or even disappearing as underdogs rapidly enter the sector and become big dogs overnight.  This has become a textbook example of Schumpeterian “creative destruction” in action.^[23]

Consider what this has meant for broadcasters in terms of audience share and advertising revenues.  Start with broadcast television.  The television audience has grown increasingly fragmented since the 1950s.  The top shows on TV during that era ( e.g., “I Love Lucy”) garnered 40-50% of the viewing audience.  By the 1970s, the top broadcast TV shows (e.g., “All in the Family”) were pulling in roughly 30% of the audience.  Today, however, with so many other media options vying for our increasingly scarce attention, the top shows on television (e.g., “American Idol”) are lucky to break 15% and most shows rarely break single digits.

The “problem” is growing competition for eyeballs.  Broadcasters face a growing array of rivals: cable and satellite multi-channel distributors; DVDs and Netflix; VOD and online video; video game platforms; and much more.  According to Nielsen Media Research, the “Big 3” networks of the past (ABC, CBS, NBC), which held 90% of the primetime market in 1980, control only 30% share today.  In terms of total day shares, cable blew past broadcast television at the turn of the century and never looked back.  The advertising situation is equally bleak for television broadcasters.  According to McCann Erickson Worldwide, broadcast television’s overall share of media advertising revenues dipped below 20% back in 1990 and continues to fall steadily, standing at approximately 15% today.

Unsurprisingly, the financial outlook for the broadcast TV sector is bleak.  “Almost all the indicators for local TV are pointing down,” notes the Pew Project for Excellence in Journalism in its annual State of the News Media report.  It continues:

Revenue, too, was in a free fall.  Ad revenue is always lower in a year without federal elections or the Olympics, but the drop in 2009 was especially severe even with the unexpected bounty of political spending on health care legislation.  Revenues were estimated to have fallen by 22% from the year before.  The last two non-election years, by contrast, recorded much smaller declines: 5% in 2005 and 6% in 2007.  Looking ahead, most market analysts project revenues to grow only slightly, in the 3%-to-5% range in 2010, but that is hardly taken as good news given that it is a year that will include both the off-year elections and winter Olympic games.^[24]

In light of the recent turmoil, some major network television executives are now thinking about doing what was unthinkable just a decade ago: casting off their local broadcast affiliates and repurposing their content on alternative media platforms ( e.g., cable, satellite, Internet). For example, in early 2009, CBS Corp. President and CEO Les Moonves told an investor conference that moving all CBS network programming to cable and satellite platforms would be “a very interesting proposition.”^[25] If television networks start following their audience in the continuing mass exodus to alternative distribution platforms, how would local broadcast affiliates pay for a new federal spectrum fee? Even if that scenario does not develop, local television broadcasters face an uncertain future, and likely declining revenues for some time to come.

The situation for broadcast radio operators is even grimmer.  The competition for our ears has never been more intense with satellite radio, non-commercial radio, iPods and MP3 players, online radio, downloadable music, podcasting, etc. with terrestrial broadcasters for audience share.  As a result, radio operators have seen their audiences dwindle and their revenues nose-dive. According to Arbitron, time spent listening to radio has dropped for every age demographic they’ve measured for the past decade.  And BIA Financial Network notes that while the radio revenue growth rate ran between 7% and 14% during the late 1990s, the industry hasn’t seen growth above 3% since 2002 and in recent years growth has rarely broken 1%.  Furthermore, the Pew Project for Excellence in Journalism reports that:^[26]

• Total radio revenue was down 18% in 2009 from 2008, according to the Radio Advertising Bureau.
• Local and national radio advertising—the biggest sources of revenue for radio—were both down and projected to continue falling at least through 2011.  There was growth in online advertising, but not enough to make up for the loss of on-air advertising.
• National and local advertising fell by 20% and 19% respectively in 2009 compared to 2008.  Local advertising has always been radio’s lifeblood.
• Online advertising revenue saw a 13% increase in 2009, but represented only 3% of industry advertising revenue and was not enough to offset the losses in other categories.
• Off-air revenues, such as billboards and concert sponsorships, fell 9% in 2009 compared to 2008, to 1.3 billion.  While these revenues currently make up only a small part of radio revenue, the continued decline of national and local advertising may add to their importance.

Again, can struggling radio broadcasters absorb the added burden of a new national spectrum tax in light of their precarious situation? Indeed, it’s numbers like these that usually leads intervention-minded analysts to advocate subsidies, not taxes, for some struggling media entities!

Where Would the Money Go?

Questions also surround the pool of funds that would be amassed through the creation of a broadcast spectrum fee.  Given the declining fortunes of the broadcast industry, it seems unlikely the fee would generate as much revenue as some proponents might imagine. Let’s assume, however, that the spectrum levy netted respectable sums.  How would those funds be used?

America’s recent experience with spectrum auction proceeds suggests that Congress would first look to use a spectrum fee to pay for federal spending priorities or pay off past budget deficits instead of channeling those funds to new “public square” or “public interest” initiatives.  But, for the sake of argument, let’s assume Congress honored a pledge to use the broadcast fee only for its intended purpose.  What exactly counts as a “public square” or “public interest” initiative, and who would be in charge of it?

Some proponents of a spectrum fee seem to long for a world in which everything looks or sounds like a combination of National Public Radio, the Public Broadcasting Service, and cable “public access” channels.  But regardless of the quality of such networks or the programming on them, the viewing and listening public has shown a clear desire for programming of a very different nature.  While critics might lament what they regard as the “low-brow” entertainment or supposedly lower-quality news seen or heard on some commercial networks or stations, there is no denying that citizens tune in to commercial programs in very large numbers.  Whether regulatory advocates care to admit it, supply and demand are at work in America’s media marketplace and citizens vote with their eyes and ears all the time.  Media scholar Ben Compaine, co-author of Who Owns the Media?, focuses on the real issue here, choice:

If large segments of the public choose to watch, read, or listen to content from a relatively small number of media companies, that should not distract policy makers from the key word there: choose. … It may indeed be that at any given moment 80 percent of the audience is viewing or reading or listening to something from the 10 largest media players.  But that does not mean it is the same 80 percent all the time, or that it is cause for concern.^[27]

Commenting on efforts to make the modern media landscape look more like PBS or NPR, Compaine notes: “Content might well be different.  But it wouldn’t necessarily be better.… This might work only in a … world of enforced equality, where no democracy of content was allowed, where the voice of the audience was not heard.”^[28] He notes that PBS is instructive in this regard since, even in the days when it only had three primary rivals, it could rarely get the attention of more than 2% of the total TV audience.  And as television journalist Jeff Greenfield has noted, “[W]hen you no longer need the skills of a safecracker to find PBS in most markets, you have to realize that the reason people aren’t watching is that they don’t want to.”^[29]

Simply put, in a world of unlimited options and freedom of media choice, there’s just no way to force the audience to tune in.^[30] Absent truly repressive measures to limit choice or alter consumer media consumption patterns, it will be impossible for policymakers to force the masses to pay attention to what they want them to see or hear in an age of abundant media content and unrestricted choice.  “[R]egulation cannot, in a liberal democracy, force viewers to consume media products they do not think they want in the name of the public interest,” argues Ellen P. Goodman of the Rutgers-Camden School of Law.^[31]

Our Many “Public Squares”

More importantly, there seems to be little need for a new spectrum fee for “public interest” content or a “public square” channel in light of the explosion of civic-oriented and culturally enriching programming on both traditional and new media platforms.  In essence, we now have many “public square” channels.

For example, the growth of news channels and programs (CNN, Fox News, MSNBC, Current TV, many financial news networks, and more) and international news outlets (BBC America, CNN International, etc.) has been well-documented.  Most notable in this regard is the stunning success of the cable industry’s C-SPAN network and its sister properties.^[32] But these cable news channels and programs are also a growing force online as well.  “Like their television programs, the major cable news channels’ websites attracted record viewership in 2008, driven in a large part by the political and economic news of the year,” reports the Pew Project for Excellence in Journalism.^[33] Moreover, these cable news sites “have also evolved into true multimedia destinations.  All now feature video archives, RSS feeds and features for accessing the sites on mobile devices.  They all offer live streaming content.”^[34] Meanwhile, C-SPAN recently created the C-SPAN Video Library,[35] which archives 23 years worth (1987-on) of fully searchable (and free) video content, including: 161,000 overall hours of programming; 56,600 hours of House & Senate floor activity; and, 20,152 hours of House & Senate committee hearings.[36]

Americans have many other ways of finding important news and civic information online.  The 2008 presidential election serves as a dramatic illustration of how voters have become better informed and how candidates have exciting new ways to connect with them.  The Pew Internet & American Life Project found that “some 74% of Internet users—representing 55% of the entire adult population—went online in 2008 to get involved in the political process or to get news and information about the election.”^[37] And President Barack Obama’s unprecedented use of new media tools during 2008 is often credited with helping to propel him into the White House.  Millions of Americans made their views known about various issues on sites such as Obama’s Change.gov website.  Wired reported that “Obama’s online success dwarfed [Senator John McCain’s], and proved key to his winning the presidency.”^[38]

Volunteers used Obama’s website to organize a thousand phone-banking events in the last week of the race—and 150,000 other campaign-related events over the course of the campaign.  Supporters created more than 35,000 groups clumped by affinities like geographical proximity and shared pop-cultural interests.  By the end of the campaign, myBarackObama.com chalked up some 1.5 million accounts.  And Obama raised a record-breaking $600 million in contributions from more than three million people, many of whom donated through the web.^[39]

Four years earlier, Joe Trippi, former campaign manager of Howard Dean’s 2004 presidential campaign and the author of The Revolution Will Not Be Televised: Democracy, The Internet, and The Overthrow of Everything, had noted that the Dean campaign’s heavy use of new, interactive media and communications technologies was, “a sneak preview of coming attractions—the interplay between new technologies and old institutions.  The end result will be massive communities completely redefining our politics, our commerce, our government, and the entire public fabric our culture.”^[40] He concluded: “what we are seeing—at its core—is a political phenomenon, a democratic movement that proceeds from our civic lives and naturally spills over in the music we hear, the clothes we buy, the causes we support.”^[41] President Obama’s campaign certainly seems to have been proof of that.

Of course, all this comes in addition to the stunning proliferation of user-generation media such as blogs, discussion boards, listservs, social networking sites, Twitter, You Tube, and so on.  Dan Gillmor, author of We the Media: Grassroots Journalism By the People, For the People, notes just how profound the impact of new media and citizen journalism will be:

Tomorrow’s news reporting and production will be more of a conversation, or a seminar.  The lines will blur between produces and consumers, changing the role of both in ways we’re only beginning to grasp now.  The communications network itself will be a medium for everyone’s voice, not just the few who can afford to buy multimillion-dollar printing presses, launch satellites, or win the government’s permission to squat on the public’s airwaves.^[42]

Likewise, in its recent State of the News Media 2010 report, the Pew Project for Excellence in Journalism reported that “Citizen journalism at the local level is expanding rapidly and brimming with innovation.”^[43] The report also noted that:

highly promising citizen and alternative sites are emerging daily.  Imaginative news formats, partnerships, formats, technological capabilities and passionate supporters of journalism values offer significant reasons for optimism as journalism continues its mission to inform citizens, make their lives better and nurture democratic processes.^[44]

Conclusion

In light of these developments, it’s hard to take seriously the charge that “deliberative democracy” is somehow on the decline in America and that the imposition of a spectrum fee to create a government-controlled “public square channel” or more “public interest” content in general would actually change the constitution of news, culture, or civic engagement in any significant way.  And even if government creates or subsidizes wonderful, civic- and culturally-enriching content, there’s no way to force people to consume it.

Finally, regardless of how spectrum fee proceeds might be spent, the proposal raises fundamental fairness issues for broadcasters.  Indeed, it is doubly insulting for them.  Not only has public broadcasting and non-commercial media been siphoning off more and more market share in recent years, but this proposal would impose a new tax on private broadcasters to fund those competitors (or some other media outlets) at a time when broadcasters are struggling for their very existence.  If Congress imposed a spectrum fee on broadcasters, it would essentially be signing a death warrant for the medium.  It’s hard to see how that’s in “the public interest.”

Related PFF Publications

• The Wrong Way to Reinvent Media, Part 1: Taxes on Consumer Electronics, Mobile Phones & Broadband, Adam Thierer & Berin Szoka, PFF Progress on Point 17.1, March 2010.
• Testimony at FCC’s Hearing on “Serving the Public Interest in the Digital Era”, Adam Thierer, March 2010.
• Public Option for Press Should Get the Red Pen, Adam Thierer, The Daily Caller, Jan. 2010.
• Chairman Leibowitz’s Disconnect on Privacy Regulation & the Future of News, Adam Thierer & Berin Szoka, Progress Snapshot 6.1, Jan. 13, 2010.
• Socializing Media in Order to Save It, Adam Thierer, City Journal, March 2009.
• A Manifesto for Media Freedom, Adam Thierer & Brian Anderson, 2008.
• Media Ownership Proceedings, W. Kenneth Ferree, Testimony before the Federal Communications Commission, Nov. 3, 2009.
• Media Myths: Making Sense of the Debate over Media Ownership, Adam Thierer, June 2005.

[2] This essay is condensed from a chapter that appeared in a new book from Congressional Quarterly Press. See: Resolved, Broadcasters Should be Charged a Spectrum Fee to Finance Programming in the Public Interest, Pro: Norm Ornstein, Con: Adam Thierer, in Richard J. Ellis and Michael Nelson, Debating Reform: Conflicting Perspectives on How to Fix the American Political System (2010) at 53-69.

[3] See generally Adam Thierer, The Progress & Freedom Foundation, Media Myths: Understanding the Debate over Media Ownership (2005) at 85-104, www.pff.org/issues-pubs/books/050610mediamyths.pdf.

[4] Adam Thierer, The Progress & Freedom Foundation, Why Expansion of the FCC’s Public Interest Regulatory Regime is Unwise, Unneeded, Unconstitutional, and Unenforceable, Testimony Before the Federal Communications Commission Hearing on “Serving the Public Interest in the Digital Era,” March 4, 2010, www.pff.org/issues-pubs/testimony/2010/2010-03-04-Thierer_Remarks_at_FCC_Hearing.pdf.

[5] Glen O. Robinson, The Federal Communications Act: An Essay on Origins and Regulatory Purpose, in A Legislative History of the Communications Act of 1934 3, 14 (Max D. Paglin ed., 1989). Likewise, Lawrence J. White has noted that, “The ‘public interest’ is a vague, ill-defined concept. Under the ‘public interest’ banner the Congress and the FCC have established far too many protectionist, anticompetitive, anti-innovative, inflexible, output-limiting regulatory regimes and have unnecessarily infringed on the First Amendment rights of broadcasters.” See Lawrence J. White, Spectrum for Sale, The Milken Institute Review (June 2001) at 38. See also William T. Mayton, The Illegitimacy of the Public Interest Standard at the FCC, 38 Emory Law Journal 715, 716 (1989).

[6] Ronald H. Coase, The Federal Communications Commission, 2 J. L. & Econ. 1, 8–9 (1959). Even supporters of broadcast regulation such as Paul Taylor and Norman Ornstein admit that, “neither in the 1927 [Radio] Act nor in the 1934 [Communications] Act, nor subsequently, did Congress define clearly what actions by broadcasters would represent managing their stations in the public interest.” Paul Taylor & Norman Ornstein, New America Foundation, A Broadcast Spectrum Fee for Campaign Finance Reform, Spectrum Series Working Paper No. 4, (2002) at 6.

[7] See Adam Thierer, Media Myths: Making Sense of the Debate over Media Ownership (2005) at 85-104; www.pff.org/issues-pubs/books/050610mediamyths.pdf; Adam Thierer, Is the Public Served by the Public Interest Standard? The Freeman, Vol. 46, No. 9, Sept. 1996, at 618-20, www.thefreemanonline.org/featured/is-the-public-served-by-the-public-interest-standard; William T. Mayton, The Illegitimacy of the Public Interest Standard at the FCC, 38 Emory Law Journal, 1989, at 715-69.

[8] See John W. Berresford, Federal Communications Commission, The Scarcity Rationale for Regulating Traditional Broadcasting: An Idea Whose Time Has Passed, FCC Media Bureau, Staff Research Paper No. 2005-2, (March 2005) www.fcc.gov/ownership/materials/already-released/scarcity030005.pdf. Berresford refers to the scarcity rationale as “outmoded,” “based on fundamental misunderstandings of physics and economics,” and “no longer valid.”

[9] Adam Thierer, Why Regulate Broadcasting : Toward a Consistent First Amendment Standard for the Information Age, 15 CommLaw Conspectus (Summer 2007) at 431-482; http://commlaw.cua.edu/articles/v15/15_2/Thierer.pdf.

[10] See Adam Thierer & Grant Eskelsen, The Progress & Freedom Foundation, Media Metrics: The True State of the Modern Media Marketplace, Summer 2008, www.pff.org/mediametrics.

[11] Thierer, supra note 4.

[12] Id. at 7-12.

[13] “By taking some modest fee from commercial broadcasters for their use of the public spectrum in lieu of the public trustee obligation, noncommercial television could be adequately funded to deliver high-quality public service programming.” Henry Geller, Geller to FCC: Scrap the Rules, Try a Spectrum Fee, Current.org, Oct. 30, 2000, www.current.org/why/why0020geller.shtml. Also see Henry Geller, Promoting the Public Interest in the Digital Era, Federal Communications Law Journal, Vol. 55, No. 3, 2003, www.law.indiana.edu/fclj/pubs/v55/no3/Geller.pdf.

[14] Charles M. Firestone, The Aspen Institute, The Spectrum Check Off Alternative to Public Interest Regulation of Broadcasters, www.aspeninstitute.org/policy-work/communications-society/papers-interest/-spectrum-check-alternative-public-interest-regul

[15] See Ornstein supra 2 at 61. Also see Remarks of Norman Ornstein at George Mason University event, The Gore Commission, 10 Years Later: The Public Interest Obligations of Digital TV Broadcasters in Perfect Hindsight, Oct. 3, 2008, www.iep.gmu.edu/documents/Ornstein.doc.

[16] Paul Taylor and Norman Ornstein, New America Foundation, A Broadcast Spectrum Fee for Campaign Finance Reform, Spectrum Series Working Paper #4, June 2002, www.newamerica.net/files/IssueBrief5.FreeAirTime.TaylorOrnstein.pdf.

[17] Leonard Downie, Jr. & Michael Schudson, The Reconstruction of American Journalism, Columbia Journalism Review, Oct. 20, 2009, at 92, available at www.scribd.com/doc/21268382/Reconstruction-of-Journalism.

[18] Id.

[19] See Robert W. McChesney & John Nichols, The Death and Life of American Journalism (2010) at 209-10.

[20] Firestone, supra note 14.

[21] Adam Thierer and Wayne Crews, Cato Institute, Just Don’t Do It: The Digital Opportunities Investment Trust (DO IT) Fund, Cato TechKnowledge, No. 35, May 6, 2002, www.cato.org/tech/tk/020506-tk.html

[22] Quoted in Neil Hickey, TV’s Big Stick: Why the Broadcast Industry Gets What it Wants in Washington, Columbia Journalism Review, September/October 2002, p. 53.

[23] See Thierer & Eskelsen, supra note 7.

[24] Pew Project For Excellence in Journalism, Local TV, The State of the News Media 2010, March 2010, www.stateofthemedia.org/2010/local_tv_summary_essay.php.

[25] Michael Grotticelli, Local TV Stations Face Uncertain Future, Broadcast Engineering, Feb. 23, 2009, http://broadcastengineering.com/news/local-stations-face-uncertain-future-0223.

[26] Pew Project for Excellence in Journalism, Audio – Traditional Broadcast and Broadcast Online, The State of the News Media 2010, March 2010, www.stateofthemedia.org/2010/audio_traditional_broadcast.php.

[27] Ben Compaine, Domination Fantasies, Reason, Jan. 2004, at 33, http://reason.com/archives/2004/01/01/domination-fantasies

[28] Id.

[29] Quoted in Thomas G. Krattenmaker and Lucas A. Powe, Jr., Regulating Broadcast Programming (1994) at 314.

[30] Ellen P. Goodman of the Rutgers-Camden School of Law argues: “Given the proliferation of consumer filtering and choice, these kinds of interventions are of questionable efficacy. Consumers equipped with digital selection and filtering tools are likely to avoid content they do not demand no matter what the regulatory efforts to force exposure.” Ellen P. Goodman, “Proactive Media Policy in an Age of Content Abundance,” in Philip M. Napoli, ed., Media Diversity and Localism: Meaning and Metrics (2007) at 370, 374.  And there is no reason to believe this situation has ever been different or will ever change. Writing in 1922, famed journalist Walter Lippmann noted that, “it is possible to make a rough estimate only of the amount of attention people give each day to informing themselves about public affairs,” but “the time each day is small when any of us is directly exposed to information from our unseen environment.” Walter Lippmann, Public Opinion (1922), p. 53, 57.

[31] Id. at 374.

[32] Importantly, many people fail to realize that C-SPAN is a private, non-profit company that is provided as a public service by cable industry contributions. It receives no government or taxpayer contributions. From 1979-2009, total license fees paid by cable & satellite companies to support C-SPAN totaled $922 million. See Adam Thierer, The Progress & Freedom Foundation, C-SPAN, Civic-Minded Programming & Public Interest Regulation, PFF Blog, March 2, 2010, http://blog.pff.org/archives/2010/03/c-span_civic-minded_programming_public_interest_re.html

[33] Cable TV, in State of the News Media 2009, www.stateofthemedia.org/2009/narrative_cabletv_digitaltrends.php?media=7&cat=6/#key6

[34] Id.

[35] www.c-spanvideo.org/videoLibrary

[36] See Thierer, supra note 28. See also Brian Stelter, C-Span Puts Full Archives on the Web, New York Times, March 15, 2010,  www.nytimes.com/2010/03/16/arts/television/16cspan.html

[37] Aaron Smith, The Internet’s Role in Campaign 2008, The Pew Internet & American Life, April 15, 2009, www.pewinternet.org/Reports/2009/6–The-Internets-Role-in-Campaign-2008.aspx

[38] Sarah Lai Stirland, Propelled by Internet, Barack Obama Wins Presidency, Wired.com, Nov. 4, 2008,  www.wired.com/threatlevel/2008/11/propelled-by-in

[39] Id.

[40] Joe Trippi, The Revolution Will Not Be Televised: Democracy, The Internet, and The Overthrow of Everything (2004), at 203. [emphasis original].

[41] Id.

[42] Dan Gillmor, We the Media: Grassroots Journalism By the People, For the People (2004), at xiii.

[43] Pew Project For Excellence in Journalism, Introduction, State of the News Media 2010, March 2010,   www.stateofthemedia.org/2010/overview_intro.php

[44] Pew Project For Excellence in Journalism, Community Journalism, State of the News Media 2010, March 2010,  www.stateofthemedia.org/2010/specialreports_community_journalism.php

Wrong Way to Reinvent Media Part 2 – Broadcast Spectrum Taxes [Thierer- PFF] http://d1.scribdassets.com/ScribdViewer.swf

By Adam Thierer & Berin Szoka

In a series of upcoming essays, we will be examining proposals being put forward today that would have the government play a greater role in sustaining struggling media enterprises, “saving journalism,” or promoting more “public interest” content. The reason we’re working up this multi-part series is because, with many traditional media operators struggling, and questions being raised about how journalism in particular will be supported in the future, Washington policymakers are currently considering what role government can and should play in helping media providers reinvent themselves in the face of tumultuous technological change wrought by the Digital Revolution.

For example, the Federal Communications Commission (FCC) recently kicked off a new “Future of Media” effort with a workshop on “Serving the Public Interest in the Digital Era.” (The  filing deadline for the FCC’s “Future of Media” proceeding is May 7^th).  Likewise, the Federal Trade Commission (FTC) has hosted two workshops asking “How Will Journalism Survive the Internet Age?”  Meanwhile, the Senate has already held hearings about “the future of journalism,” and Senator Benjamin L. Cardin (D-MD) recently introduced the “Newspaper Revitalization Act,” which would allow newspapers to become tax-exempt non-profits in an effort to help them stay afloat.

Thus, in light of Washington’s sudden interest in the future of media and journalism, we will be taking a hard look at several issues and proposals that are being floated today, including:

• Taxes on media devices, mobile phones, or broadband bills to channel money to media enterprises / content;
• Taxes / fees on broadcasters to funnel support to their public sector competitors or to public interest programs;
• “News vouchers” or “public interest vouchers” that would encourage citizens to channel support to media providers;
• Taxes on private advertising to subsidize non-commercial / public media content;
• Expanded postal subsidies for media mail; and
• Targeted welfare programs for out-of-work journalists or corporate welfare in the form of bailouts for failing media enterprises.

You won’t be surprised to hear that we are generally quite skeptical of most of these ideas, but we promise to give each one serious consideration.  We’ll kick things off tomorrow with our essay on why taxing media devices or distribution systems to fund media content is not a particularly good idea.

Just FYI.. Tomorrow’s “Diane Rehm Show” on NPRs local affiliate station (WAMU 88.5FM) will feature a debate about the Federal Communications Commission’s (FCC) National Broadband Plan, which is due out tomorrow. [Here’s the executive summary.]  The show airs at 10:00 locally, but you can listen to the show here online, and I’ll repost a link or embedded audio file once it becomes available.

I’ve been invited to be on the show alongside Ben Scott, policy director at Free Press, Dennis Wharton, spokesperson for the National Association of Broadcasters (NAB), and a few other guests who haven’t been announced just yet. (Here are some of my early musings on the plan: 1, 2.)

Today I am testifying at an FCC hearing on “Serving the Public Interest in the Digital Era.” [Speaker lineup here.] The purpose of the workshop is to explore:

• A brief history and overview of policies involving “public interest” requirements for commercial media and telecommunications companies;
• The state of local commercial broadcast TV and radio news and information; and
• The impact of media convergence and the emergence of the Internet, mobile technologies, and digital media on FCC media policy.

In my remarks, I focused on “Why Expansion of the FCC’s Public Interest Regulatory Regime is Unwise, Unneeded, Unconstitutional, and Unenforceable.” Down below I have attached my written remarks.

Why Expansion of the FCC’s Public Interest Regulatory Regime is Unwise, Unneeded, Unconstitutional, and Unenforceable

by Adam Thierer

I.       Introduction

Thank you for inviting me here today for this FCC workshop on “Serving the Public Interest in the Digital Era.” I have been asked to discuss “the impact of media convergence and the emergence of the Internet, mobile technologies, and digital media on FCC media policy”^[1] on the FCC’s “public interest” regulatory regime.

In my remarks, I will outline both the normative and practical cases against the expansion of “public interest” notions and corresponding regulatory requirements. I will argue that such considerations counsel that the Commission exercise extreme caution as it looks to revise regulations that govern America’s media marketplace.

II.     The Normative Case against Expansion of Public Interest Regulation

A.     The Inherent Ambiguity of “the Public Interest” Notion

The normative case against expansion of public interest regulation begins with the fact that this notion has always been haunted by an inherent ambiguity that is fundamentally at odds with America’s First Amendment tradition. Indeed, while public interest regulation has been considered the cornerstone of communications and media policy since the 1930s, at no time during these seven decades has the term been adequately defined.

Former FCC Commissioner Glen Robinson has argued that the public interest standard “is vague to the point of vacuousness, providing neither guidance nor constraint on the agency’s action.”^[2] And Nobel Prize-winning economist Ronald Coase argued 50 years ago that “The phrase… lacks any definite meaning. Furthermore, the many inconsistencies in commission decisions have made it impossible for the phrase to acquire a definite meaning in the process of regulation.”^[3]

And that is still true today. Simply put, the public interest standard is not really a “standard” at all since it has no fixed meaning; the definition of the phrase has shifted with the political winds to suit the whims of those in power at any given time.

B.      None Dare Call it Elitism

Still, many policymakers continue to prop up public interest notions and regulations in the belief that they are directing the content or character of media toward a nobler end. At times, their rhetoric takes on a fairy-tale quality as lawmakers and regulators speak of the public interest in reverential and fantastic terms, again, all the while deftly evading any attempt to define the term.

But the fundamental problem here is that public interest proponents assume that their values or objectives—which, in their opinion, are consistent with the needs and desires of the public—should ultimately triumph within the public policy arena. Simply stated, what motivates much public interest regulation is a simple desire by some here in Washington to tell the American people what’s best for them.

Worse yet, how the term has been interpreted and applied by the FCC has often depended on the ideological disposition of whatever party is in charge at the time.  As Ford Rowan, author of Broadcast Fairness, once noted: “Many liberals want regulation to make broadcasting do wonderful things; many conservatives want regulation to restrain broadcasting from doing terrible things.”^[4] Consequently, during periods of liberal rule, the “public interest” has been seen as a method of politically engineering more “educational” and “community-based” programming. By contrast, in the hands of conservative appointees, the public interest has been seen as an instrument to curb “indecent” speech.

Few have dared to call this elitism—but I will.^[5] What else should we call it when a five unelected officials here at the FCC sit in judgment of acceptable media content and dictate media marketplace outcomes? The viewing and listening public, however, has a broad array of interests and desires that cannot be easily gauged by this agency. As media scholar Benjamin Compaine has rightly noted, “[i]n democracies, there is no universal ‘public interest.’ Rather there are numerous and changing ‘interested publics.’”^[6]

Perhaps what some are afraid to ask is this: Does the public really want to watch what some policymakers and regulatory advocates consider to be more “culturally enriching” or “civic-minded” content, or would they rather tune into something else? Given the choice, many viewers will opt for what many public interest regulatory supporters would consider to be “low-brow” offerings over the programming that policymakers feel the masses should be consuming. Public interest supporters may bemoan the lack of civic spirit, or claim that this represents the end of our culture as we know it, but these are voluntary choices made by the citizenry that must be respected by government officials. In particular, government should not censor Americans’ choice of content through open-ended public interest regulatory rationales.^[7]

C.      There’s More “Public Internet” Content Than Ever Before, But You Can’t Force Citizens to Consume It

Generally speaking, however, the media marketplace traditionally has reflected what the public on average really wants to see and hear. And that’s even truer today. Viewers and listeners are being offered a stunning array of diverse media inputs and options. Just because the American people sometimes make choices that policymakers find distasteful, it does not mean that citizens don’t have good choices at their disposal.

For example, we are blessed to be living in the golden age of children’s video programming.^[8] As I have documented in my ongoing PFF special report on Parental Controls & Online Child Protection [9] and in other filings to the Commission,[10] there’s never been more educational and enriching kids programming available to families than there is today. Similarly, consider the stunning diversity of programming available thanks to the 500-plus channel universe of multichannel video options now at our disposal.[11] Almost every conceivable interest or hobby is now covered by a video network.^[12]

And is there really any shortage political programming or “civic-minded” content from which to choose?  C-SPAN alone covers more activity in the course of a week than most of us probably came into contact with in our entire lives just 30 years ago. Consider these data points.[13] In the 2009 calendar year, C-SPAN provided the following amount of first run programming across their three channels:

• 8,438 overall hours of programming;
• 2,709 hours of House & Senate floor activity; and,
• 1,222 hours of House & Senate committee hearings.

Moreover, C-SPAN recently created the C-SPAN Video Library,[14] which archives 23 years worth (1987-on) of fully searchable (and free) video content, including:

• 161,000 overall hours of programming;
• 56,600 hours of House & Senate floor activity; and,
• 20,152 of House & Senate committee hearings.

Importantly, many people fail to realize that C-SPAN is a private, non-profit company that is provided as a public service by cable industry contributions. It receives no government or taxpayer contributions. From 1979-2009, total license fees paid by cable & satellite companies to support C-SPAN totaled $922 million.

And let’s not forget about what the Internet has made available to us. It has given us unprecedented access to public affairs information—local, state, national, and international.

But, again, you can’t make people watch, listen, or read if they don’t want to. “Today, the scarce resource is attention, not programming,” notes Ellen P. Goodman of the Rutgers-Camden School of Law. “Given the proliferation of consumer filtering and choice, these kinds of interventions are of questionable efficacy. Consumers equipped with digital selection and filtering tools are likely to avoid content they do not demand no matter what the regulatory efforts to force exposure.”^[15]

Absent truly repressive measures to limit choice or alter consumer media consumption patterns, it will be impossible for policymakers to force the masses to pay attention to what they want them to see or hear in an age of abundant media content and unrestricted choice. “[R]egulation cannot, in a liberal democracy, force viewers to consumer media products they do not think they want in the name of the public interest,” argues Goodman.[16] (This dilemma creates additional practical problems for proposals to expand public interest regulation, which will be discussed in Sec. II below.)

D.     Returning to First Principles

Yet now we face the prospect of this arbitrary regulatory regime being expanding to cover more platforms and speech.^[17] But, instead of first looking to expand regulation, we should use this as an opportunity to return to first principles—especially in light of the dubious constitutionality of the FCC’s existing public interest regulatory regime.^[18]

We should begin by recalling that, from the time of the republic’s founding, public interest regulation has never been applied to newspapers, magazines, pamphlets, or books. Instead, the First Amendment has reigned supreme.[19] And when policymakers attempted to apply such public interest obligations to print media, those edicts were ruled flatly unconstitutional.^[20]

The characteristics of broadcast radio and television, however, were considered sufficiently unique to justify a different regulatory approach and second-class citizenship status in terms of First Amendment rights.  Scarcity, of course, was the lynchpin of the regulatory regime imposed on the broadcast industry, and it yielded calls for public interest regulation of the medium. But whatever one thinks of the scarcity rationale for differential treatment of broadcasting—and, personally, I don’t believe it was ever a legitimate excuse for diminished First Amendment treatment—that era of scarcity is clearly over.^[21] We now live in an age of information abundance—even information overload.^[22] We have more media options and diversity at our disposal today than ever before, and generally at falling prices.^[23] And yet, at the Commission, it continues to be business as usual.

The courts, however, have acknowledged that the situation on the ground has changed, and changed radically. When policymakers have sought to expand broadcast-like regulatory requirements to newer media platforms in recent years, the Courts have pushed back. That has particularly been the case for the Internet^[24] and video game content.^[25] The jurisprudential Twilight Zone will live in today—in which we classify services and determine free speech rights based on technical characteristics or functional features—makes no sense and can’t last for much longer for reasons discussed next.[26]

III.  The Practical Case against Expansion of Public Interest Regulation

Let’s look beyond these normative concerns and instead focus on the practical considerations associated with any effort to expand the horizons of public interest regulation.

A.     The Scale & Volume Problem

As the title of this particular panel quite rightly noted, we now live in an age of media and technological convergence.^[27] All bits are coming together.^[28] Because convergence is now upon us, media can be distributed instantaneously across numerous platforms. Thus, a regulatory attack on one type of media outlet or technology might necessitate an attack on many other media outlets if it has any hope of being effective.

But how will this work? If we are to achieve regulatory parity in an age of convergence, we must come to grips with the sheer scale of the task at hand. The modern mediasphere is massive—and growing rapidly. Consider some statistics about online media activity:

• 1.73 billion Internet users worldwide as of Sept 2009; an 18% increase from the previous year.^[29]
• 81.8 million .COM domain names at the end of 2009; 12.3 million .NET names & 7.8 million .ORG names.^[30]
• 234 million websites as of Dec 2009; 47 million were added in 2009.^[31] In 2006, Internet users in the United States viewed an average of 120.5 Web pages each day.^[32]
• There are roughly 26 million blogs on the Internet^[33] and even back in 2007, there were over 1.5 million new blog posts every day (17 posts per second).^[34]
• In December 2009, 86% of the total U.S. online population viewed video content.^[35] The average online viewer watched 187 videos (up 95 percent from the previous year), while the average video length viewed grew from 3.2 to 4.1 minutes.^[36] The majority of online video viewing (52%) occurred at video sites ranked outside of the top 25, suggesting the increased fragmentation of online video and the emergence of sites in the “long tail.”^[37]
• YouTube reports that 20 hours of video are uploaded to the site every minute,^[38] and 1 billion videos are served up daily by YouTube, or 12.2 billion videos viewed per month.^[39]
• For video hosting site Hulu, as of Nov 2009, 924 million videos were viewed per month in the U.S.^[40]
• Developers have created over 140,000 apps for the Apple iPhone and iPod and iPad and made them available in the Apple App Store.^[41] Customers in 77 countries can choose apps in 20 categories, and users have downloaded over three billion apps since its inception in July 2008.^[42] Apple’s iTunes Store has a catalog of 12 million songs, over 55,000 TV episodes, and 8,500 movies. It has sold more than 10 billion songs.^[43]
• Social networking giant Facebook reports that each month, its 400+ million users upload more than 3 billion photos, and create over 3.5 million events. More than 3 billion pieces of content (web links, news stories, blog posts, notes, photos, etc.) are shared each week. There are also more than 3 million active Pages on the site.^[44]
• There are 10 million edits made to Wikipedia every seven weeks.^[45]

• Twitter users send out 50 million tweets per day, an average of 600 tweets per second.^[46]
• 4 billion photos hosted by Flickr as of Oct 2009.^[47]

Even in “traditional” media sectors, the scale and volume problem is formidable: [48]

• 565 cable TV channels^[49]
• over 2,200 broadcast TV stations ^[50]
• over 13,000 broadcast radio stations ^[51]
• over 20,000 magazines ^[52]
• over 276,000 books ^[53]

In sum, the mediasphere is bigger than ever and it begs the question how the FCC plans to wrap its public interest regulatory tentacles around all of it if analog era regulations are to cover digital era content, platforms, and technologies.

B.      The Definitional Problem: Who’s Covered (or Subsidized?)

Another intractable problem associated with expansion of public interest regulation will arise once policymakers are forced to define who or what counts as a “media entity” or a “journalist” in today’s wide-open media world. And this will be a problem whether public officials are regulating media entities or subsidizing them.

For example, will bloggers be regulated or, conversely, eligible for public media subsidies? Will foreign-owned news entities be regulated or be eligible for support?  What’s the public interest standard that applies to MySpace or Facebook? Are YouTube, Hulu, and Vimeo, and Joost “just like TV stations” and, therefore, regulated like one? There may well be rational ways to make cuts along these lines, but they could raise constitutional questions. Government preferences among speakers or classes of speakers are prior restraints, constitutional sins of the highest order.

Further, it would be just these sorts of choices that would open the door to the most abusive government intrusion into the production of journalism.  It is not hard to imagine that government regulators, even with the best of intentions and acting in the utmost good faith, would, perhaps unconsciously, favor speakers and classes of speakers to whom they felt the closest affinity.  And, because Administrations come and go, as do members of Congress, no particular class of speakers would ever be truly safe — no story would be reported without at least a glance by the author over her shoulder to make sure that she had not offended the “wrong” person.  This is not an approach consistent with a free press reporting to a free people.

C.      Expanded Regulation Will Kneecap Media Providers As They Are Struggling to Reinvent Themselves

Meanwhile, this inquiry comes at a time when many traditional media providers are fighting for their very existence. Audiences are fragmenting. Advertisers are fleeing. Revenues are shrinking.  And yet, again, here we are toying with the idea of expanding regulatory burdens while the media marketplace is experiencing unprecedented upheaval and gut-wrenching creative destruction.

And if the FCC’s intends to simply continue to impose public interest regulations on the narrow set of media operations they currently control—broadcast television and radio—that’s tantamount to the FCC signing a death warrant for those media operators. But, as noted below, any proposal to “spread the pain around” by burdening everyone equally is a recipe for even greater economic catastrophe, and it wouldn’t likely pass constitutional muster in the courts anyway.

This all begs the question: Do traditional media providers really have too much power, or do they actually have too little.  Indeed, the viability of traditional media operators is increasingly in doubt since they lack pricing power and the ability to control when, where, and how their content is delivered and consumed. They no longer have protected geographic markets or “protectable scarcity.” Meanwhile, advertising—the traditional lifeblood of the media sector^[54]—is increasingly being subjected to new scrutiny and regulation here in Washington.^[55] And copyright infringement has also made monetization more challenging and placed strains on many operators.  Regardless, with traditional media operators in such serious trouble, now certainly isn’t the time to impose new rules and red tape that could hamstring their ability to respond to new competitive pressures.

Perhaps the most destructive set of ideas floating around today are those that would essentially burn the village in order to save it. For example, some regulatory advocates have toyed with ideas like “public interest vouchers,”[56] broadcast spectrum taxes,[57] expanded ownership restrictions or forced media divestiture plans,[58] or even taxes on commercial advertising,^[59] consumer electronics, cell phone providers, and ISPs.[60] In each case, the cure would be worse than the disease that ails the body. We’re not going to get a more diverse media marketplace in this country by forcing private media providers to fund their non-commercial or public-subsidized competitors.  While some of these proposals are well-intentioned and aimed at addressing perceived deficiencies in the market for “public interest” content, there are better ways for policymakers to achieve that goal.

IV.  Using Existing Public Platforms to Promote Preferred Content Through a “Public Interest Portal”

Most obviously, support for the Corporation for Public Broadcasting (CPB) could be expanded. However, that should be achieved without skimming funds off of commercial advertising budgets or through “fees” on private media operators. Enhanced support for CPB and non-commercial media in general should be derived from general treasury funds, not special levies on commercial media operators.

If the FCC believes something more must be done to create—or drive citizens to—“public interest” or civic-minded content, the best approach would be for the agency to work with other federal and state entities and leverage existing government platforms and resources to accomplish this task.

Consider how federal agencies are already doing so in an effort to promote Internet safety and security. A dozen federal agencies and several private child safety organizations have collaborated^[61] to create the OnGuardOnline.gov website, which “provides practical tips from the federal government and the technology industry to help you be on guard against Internet fraud, secure your computer, and protect your personal information.”^[62] Among other things, the effort includes a “Stop-Think-Click” promotion that recommends “Seven Practices for Safer Computing.” In October 2009, OnGuardOnline also released a new online safety resource called Net Cetera: Chatting with Kids about Being Online . [63] This 54-page document, which is being widely distributed by the government (both online and offline), is an outstanding resource for parents and kids.

In a similar vein, the FCC could work with several other agencies to create a massive “Public Interest Portal” that aggregates and promotes the sort of the public interest programming and content that policymakers hope will gain more widespread distribution—whether produced by traditional programmers, niche professionals, or amateurs. The collaborating agencies might even be able to create a downloadable widget or toolbar for use on any web browser that could enable citizens to instantaneously access a wide variety of public interest content. Many organizations already offer similar portals for children’s content. (Examples include: KidZui,[64] Glubble,[65] Browser Buddy,^[66] KidRocket,^[67] KIDO’Z,^[68] Noodle Net,^[69] Hoopah Kidview Computer Explorer^[70] and Peanut Butter PC.^[71]) There’s no reason that model couldn’t be significantly expanded by the FCC and other government agencies if they put their resources behind it.

The success of this approach, of course, is by no means guaranteed since, as noted above, it is impossible to force a free people to consume content they do not demand.  Nonetheless, it would allow the government to at least accomplish the objective it has long sought to achieve through affirmative regulation of commercial media providers: increasing the availability and practical accessibility of public interest programming. Moreover, this approach would have the advantage of not raising serious constitutional objections or burdening commercial media operators with onerous new regulatory requirements or fees. If, however, policymakers reject this approach on the grounds that citizens would still “tune in” to other types of programming first, it would confirm the fundamental elitism that some of us have long suspected truly animates most “public interest” regulatory efforts.

V.    Conclusion: Regulate Up or Deregulate Down?

In light of the considerations addressed above, we must ask: To achieve regulatory parity, should we regulate up or deregulate down? To the extent that technological convergence leads to policy convergence, it should be done in the latter direction. In a world in which scarcity has been overthrown by abundance, we should strike the balance in favor of greater media freedom and stronger First Amendment protections for all speech however it is delivered. [72]

It is vital that the outmoded public interest rationales undergirding the broadcast regulatory regime be discarded, not only to spare broadcasters from more unfair, asymmetrical regulatory restrictions, but also to ensure that this contorted vision of the First Amendment is not extended to other media platforms.[73] While some policymakers and media critics propose extending the broadcast regulatory regime to cover new media outlets and digital technologies,^[74] if America is to have a consistent First Amendment in the Information Age, such efforts should be halted and the public interest regulatory regime should be relegated to the ash heap of history.

There are better ways for the Commission and Congress to accomplish “public interest” goals other than by regulating as if it’s still 1934.

[2] Glen O. Robinson, The Federal Communications Act: An Essay on Origins and Regulatory Purpose, A Legislative History of the Communications Act of 1934 3, 14 (Max D. Paglin ed., 1989). Likewise, Lawrence J. White has noted that, “The ‘public interest’ is a vague, ill-defined concept. Under the ‘public interest’ banner the Congress and the FCC have established far too many protectionist, anticompetitive, anti-innovative, inflexible, output-limiting regulatory regimes and have unnecessarily infringed on the First Amendment rights of broadcasters.” See Lawrence J. White, Spectrum for Sale, The Milken Inst. Rev. (June 2001) at 38. See also William T. Mayton, The Illegitimacy of the Public Interest Standard at the FCC, 38 Emory L. J. 715, 716 (1989).

[3] Ronald H. Coase, The Federal Communications Commission, 2 J. L. & Econ. 1, 8–9 (1959). Even supporters of broadcast regulation such as Paul Taylor and Norman Ornstein admit that, “neither in the 1927 [Radio] Act nor in the 1934 [Communications] Act, nor subsequently, did Congress define clearly what actions by broadcasters would represent managing their stations in the public interest.” Paul Taylor & Norman Ornstein, New America Foundation, A Broadcast Spectrum Fee for Campaign Finance Reform, Spectrum Series Working Paper No. 4, (2002) at 6.

[4] Ford Rowan, Broadcast Fairness (Longham, 1984), p. 39.

[5] See Adam Thierer & Berin Szoka, The Progress & Freedom Foundation, What Unites Advocates of Speech Controls & Privacy Regulation?, Progress on Point 16.19, Aug. 11, 2009, www.pff.org/issues-pubs/pops/2009/pop16.19-unites-speech-and-privacy-reg-advocates.pdf. On occasion, even public interest regulatory advocates have admitted this. “One of the dangers in evaluating the media in a public interest framework is that it can easily take on an elitist tone.” David Croteau and William Hoynes, The Business of Media: Corporate Media and the Public Interest (2001) at 151.

[6] Benjamin M. Compaine, The Myths of Encroaching Global Media Ownership, Open Democracy.net, Nov. 6, 2001, at 5, www.opendemocracy.net/content/articles/PDF/87.pdf

[7] See Harry Kalven, Jr., Broadcasting, Public Policy and the First Amendment, J. L. & Econ. 15, 19 (1967) (“The mandate to grant licenses that serve the public [interest]… does not constitute the FCC the moral proctor of the public or the den mother of the audience.”)

[8] Adam Thierer, The Progress & Freedom Foundation, We Are Living in the Golden Age of Children’s Programming, Progress Snapshot 5.6, July 2009, www.pff.org/issues-pubs/ps/2009/pdf/ps5.6-childrens-television-golden-age.pdf.

[9] Adam Thierer, The Progress & Freedom Foundation, Parental Controls and Online Child Protection: A Survey of Tools and Methods, Version 4.0 (2008) (“PFF Parental Controls Report”), www.pff.org/parentalcontrols.

[10] Comments of The Progress & Freedom Foundation and the Electronic Frontier Foundation In the Matter of Empowering Parents and Protecting Children in an Evolving Media Landscape, Federal Communications Commission, MB Docket No. 09-194, Feb 24, 2010, www.pff.org/issues-pubs/filings/2010/2010-02-24-PFF-EFF_Response_to_FCC_Empowering_Parents_Protecting_Children_NOI_MB_09-194.pdf; Adam Thierer, The Progress & Freedom Foundation, Comments in the Matter of Implementation of the Child Safe Viewing Act; Examination of Parental Control Technologies for Video or Audio Programming, Federal Communications Commission, MB Docket No. 09-26, April 15, 2009, www.pff.org/issues-pubs/filings/2009/041509-%5BFCC-FILING%5D-Adam-Thierer-PFF-re-FCC-Child-Safe-Viewing-Act-NOI-%28MB-09-26%29.pdf.

[11] The number of channels available on multichannel video distribution platforms skyrocketed from just 70 in 1990 to 565 in 2006, the last year for which the FCC has released data. Federal Communications Commission, Thirteenth Annual Video Competition Report, MB Docket No. 06-189, Nov. 27, 2007, http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-07-206A1.pdf.

[12] For an up-to-date list, see National Cable & Telecommunications Association, Cable Networks, www.ncta.com/Organizations.aspx?type=orgtyp2&contentId=2907, or Wikipedia, List of United States Cable and Satellite Television Networks,  http://en.wikipedia.org/wiki/List_of_United_States_cable_and_satellite_television_networks.

[13] All C-SPAN data confirmed by Peter Kiley, Vice President, C-SPAN Networks. Also see: Marking 30 Years. Covering Washington Like No Other, www.c-span.org/30Years/default.aspx.

[14] www.c-spanvideo.org/videoLibrary

[15] Ellen P. Goodman, “Proactive Media Policy in an Age of Content Abundance,” in Philip M. Napoli, ed., Media Diversity and Localism: Meaning and Metrics (2007) at 370, 374.  And there is no reason to believe this situation has ever been different or will ever change. Writing in 1922, famed journalist Walter Lippmann noted that, “it is possible to make a rough estimate only of the amount of attention people give each day to informing themselves about public affairs,” but “the time each day is small when any of us is directly exposed to information from our unseen environment.” Walter Lippmann, Public Opinion (1922), p. 53, 57.

[16] Id., at 374.

[17] Among the expanded public interest responsibilities regulatory advocates promote: Controls on speech (indecent or “excessively violent” content); expanding coverage of political campaigns, debates and developments; free (or lower-cost) campaign ad time; expanded “educational” or cultural programming (especially aimed at children); and expanded coverage of community affairs and public service announcements.

[18] See Randolph J. May, The Public Interest Standard: Is It Too Indeterminate to Be Constitutional? 53 Fed. Comm. L. Jour. (May 2001) at 427-68, www.law.indiana.edu/fclj/pubs/v53/no3/may.pdf.

[19] Jonathan Emord, Freedom, Technology and the First Amendment (1991).

[20] Miami Herald v. Tornillo, 418 U.S. 241(1974).

[21] Even FCC officials have acknowledged this. See John W. Berresford, Federal Communications Commission, The Scarcity Rationale for Regulating Traditional Broadcasting: An Idea Whose Time Has Passed, FCC Media Bureau Staff Research Paper No. 2005-2, (March 2005) www.fcc.gov/ownership/materials/already-released/scarcity030005.pdf. Berresford refers to the scarcity rationale as “outmoded,” “based on fundamental misunderstandings of physics and economics,” and “no longer valid.”

[22] See Adam Thierer and Grant Eskelsen, The Progress & Freedom Foundation, Media Metrics: The True State of the Modern Media Marketplace (Summer 2008), www.pff.org/mediametrics; Adam Thierer, The Media Cornucopia, 17 City Journal 2 (Spring 2007) at 84-89, www.city-journal.org/html/17_2_media.html.

[23] See Benjamin M. Compaine, The Media Monopoly Myth: How New Competition is Expanding Our Sources of Information and Entertainment, New Millennium Research Council (2005) www.newmillenniumresearch.org/archive/Final_Compaine_Paper_050205.pdf.

[24] Reno v. American Civil Liberties Union, 521 US 844, 874 (1997); American Civil Liberties Union v. Gonzales, 478 F.Supp.2d 775, 795 (E.D.Pa. 2007).

[25] See, e.g., Video Software Dealers Association v. Schwarzenegger, 556 F.3d 950, 965-967 (9th Cir. 2009); Entertainment Software Ass’n v. Blagojevich, 469 F.3d 641, 652 (7th Cir. 2006); Interactive Digital Software Association, et. al. v. St. Louis County, et. al., 329 F.3d 954 (8 Cir. 2003); American Amusement Machine Association, et al. v. Kendrick, et al., 244 F.3d 572 (7th Cir. 2001); Entertainment Software Ass’n v. Granholm, 426 F Supp 2d 646 (E.D. Mich. 2006); Video Software Dealers Association, et. al. v. Maleng, et. al., 325 F. Supp.2d 1180 (W.D. Wa. 2004).  See generally Adam Thierer, The Progress & Freedom Foundation, Fact and Fiction in the Debate Over Video Game Regulation, Progress on Point 13.7, March 2006, at 13-18 www.pff.org/issues-pubs/pops/pop13.7videogames.pdf (discussing cases striking down state video game laws); Henry Cohen, Constitutionality of Proposals to Prohibit the Sale or Rental to Minors of Video Games with Violent or Sexual Content or Strong Language, Congressional Research Service, U.S. Library of Congress (Jan. 12, 2006), http://digital.library.unt.edu/ark:/67531/metacrs9144/m1/1/high_res_d/.

[26] Adam Thierer, Why Regulate Broadcasting : Toward a Consistent First Amendment Standard for the Information Age, Catholic University Law School, 15 CommLaw Conspectus (Summer 2007) at 431-482; http://commlaw.cua.edu/articles/v15/15_2/Thierer.pdf. Randy May as referred to these artificial distinctions as “techno-functional constructs.” Randolph J. May, Charting a New Constitutional Jurisprudence for the Digital Age, Engage (Oct. 2008) at 109.

[27] Henry Jenkins, founder and director of the MIT Comparative Media Studies Program and author of Convergence Culture: Where Old and New Media Collide, defines convergence as “the flow of content across multiple media platforms, the cooperation between multiple media industries, and the migratory behavior of media audiences who will go almost anywhere in search of the kinds of entertainment experiences they want.” Henry Jenkins, Convergence Culture: Where Old and New Media Collide (2006) at 2.

[28] Nicholas Negroponte, Being Digital (1995).

[29] Royal Pingdom, Internet 2009 in Numbers, Jan. 22, 2010, http://royal.pingdom.com/2010/01/22/internet-2009-in-numbers.

[30] Id.

[31] Id.

[32] Gavin O’Malley, Comcast Taps Hispanic Web Portal, MediaPost News, Online Media Daily, March 8, 2006, www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=40714

[33] Royal Pingdom, supra 29.

[34] David Sifry, The State of the Live Web, April 2007, www.sifry.com/alerts/archives/000493.html

[35] comScore, The 2009 U.S. Digital Year in Review – A Recap of the Year in Digital Marketing 10, Feb. 2010, http://www.comscore.com/Press_Events/Press_Releases/2010/2/comScore_Releases_2009_U.S._Digital_Year_in_Review.

[36] Id.

[37] Id. at 12.

[38] Ryan Junee, Zoinks! 20 Hours of Video Uploaded Every Minute!, Broadcasting Ourselves: The Official YouTube Blog, May 20, 2009, http://youtube-global.blogspot.com/2009/05/zoinks-20-hours-of-video-uploaded-every_20.html

[39] Royal Pingdom, supra 29.

[40] Royal Pingdom, supra 29.

[41] Apple, 140,000 apps at your fingertips. From day one., www.apple.com/ipad/app-store.

[42] Press Release, Apple, Apple’s App Store Downloads Top Three Billion (Jan. 5, 2010), www.apple.com/pr/library/2010/01/05appstore.html.

[43] Press Release, Apple, iTunes Store Tops 10 Billion Songs Sold (Feb. 25, 2010), www.apple.com/pr/library/2010/02/25itunes.html.

[44] Facebook, Statistics, www.facebook.com/press/info.php?statistics (last accessed Mar. 2, 2010).

[45] Katalaveno, Edit growth measured in time between every 10,000,000^th edit, en.wikipedia.org/wiki/User:Katalaveno/TBE (last accessed Mar. 2, 2010).

[46] Twitter Blog, Measuring Tweets, Feb. 22, 2010, http://blog.twitter.com/2010/02/measuring-tweets.html.

[47] Royal Pingdom, supra 29.

[48] Statistics derived from various sources, but all can be found in Adam Thierer and Grant Eskelsen, The Progress & Freedom Foundation, Media Metrics: The True State of the Modern Media Marketplace (Summer 2008), www.pff.org/mediametrics.

[49] Federal Communications Commission, Thirteenth Annual Video Competition Report, MB Docket No. 06-189, Nov. 27, 2007, http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-07-206A1.pdf.

[50] Central Intelligence Agency, The World Fact Book, United States, www.cia.gov/library/publications/the-world-factbook/geos/us.html (data is from 2006).

[51] Id.

[52] Magazine Publishers of America, Magazines: The Medium of Action, A Comprehensive Guide and Handbook 2009/10, at 8, www.magazine.org/ASSETS/088C8564EB9E4E978A69B183881AEF58/MPA-Handbook-2009.pdf.

[53] Bowker, Bowker Reports U.S. Book Production Flat in 2007, May 28, 2008, www.bowker.com/index.php/press-releases/526.

[54] “Advertising is the mother’s milk of all the mass media,” Wall Street Journal technology columnist Walt Mossberg has noted. Walter Mossberg, Now You See ‘Em…, SmartMoney.com, June 15, 2000, available at http://web.archive.org/web/20061124235126/http://www.smartmoney.com/mossberg/index.cfm?story=20000615; And Harold L. Vogel, author of Entertainment Industry Economics, the definitive textbook for media market analysts, has noted, “Advertising is the key common ingredient in the tactics and strategies of all entertainment and media company business models. Indeed, it might further be said that advertising has substantively subsidized the production and delivery of news and entertainment throughout the last century.” Harold L. Vogel, Entertainment Industry Economics (Cambridge University Press, 7^th Edition, 2007) at 46.

[55] Adam Thierer & Berin Szoka, The Hidden Benefactor: How Advertising Informs, Educates & Benefits Consumers, Feb. 22, 2010, www.pff.org/issues-pubs/ps/2010/ps6.5-the-hidden-benefactor.html; Berin Szoka & Adam Thierer, Targeted Online Advertising: What’s the Harm & Where Are We Heading?, Progress on Point 16.2, April 2009, www.pff.org/issues-pubs/pops/2009/pop16.2targetonlinead.pdf; Berin Szoka & Adam Thierer, Behavioral Advertising Industry Practices Hearing: Some Issues that Need to be Discussed, PFF Blog, June 18, 2009, http://blog.pff.org/archives/2009/06/behavioral_advertising_industry_practices_hearing.html

[56] For example, Robert McChesney and John Nichols advocate a “Citizenship News Voucher” that would give every American adult a $200 voucher to donate money to the non-profit news medium of their choice. Of course, a number of restrictions would apply to eligible entities, including a ban on accepting advertising as a condition of receiving support from the program. Robert W. McChesney & John Nichols, The Death and Life of American Journalism (2010) at 201-6.

[57] For a recent debate on the question of broadcast spectrum taxes, see: Resolved, Broadcasters Should be Charged a Spectrum Fee to Finance Programming in the Public Interest, Pro: Norm Ornstein, Con: Adam Thierer, in Richard J. Ellis and Michael Nelson, Debating Reform: Conflicting Perspectives on How to Fix the American Political System (2010) at 53-69. Also see McChesney & Nichols, supra 56 at 209-10.

[58] For example, Free Press calls for “government incentives to encourage local ownership and media divestiture.” They want to prevent private media operators from attaining greater scale at the exact time they probably need to do so. Instead, they would subsidize those media entities who went non-commercial and disaggregated to become more atomistic. Comments of Free Press In the Matter of News Media Workshops: From Town Crier to Bloggers: How Will Journalism Survive the Internet Age? Federal Trade Commission, Project No. P091200, Nov. 6, 2009, at 21, www.ftc.gov/os/comments/newsmediaworkshop/544505-00027.pdf.

[59] Free Press advocates channeling more money to public media by affixing “a small tax” on private commercial advertising. Comments of Free Press In the Matter of News Media Workshops: From Town Crier to Bloggers: How Will Journalism Survive the Internet Age? Federal Trade Commission, Project No. P091200, Nov. 6, 2009, at 18, www.ftc.gov/os/comments/newsmediaworkshop/544505-00027.pdf.

[60] McChesney & Nichols, supra 56 at 210-11. They advocate a 5% tax on consumer electronics and a 3% tax on monthly cell phone bills to channel money into a massive new “public works” program for the press.

[61] www.onguardonline.gov/about-us/overview.aspx

[62] www.onguardonline.gov/default.aspx

[63] www.onguardonline.gov/pdf/tec04.pdf

[64] www.kidzui.com

[65] www.glubble.com

[66] www.buddybrowser.com

[67] http://kidrocket.org

[68] www.kidoz.net

[69] www.noodlenet.com

[70] www.hoopah.com

[71] www.peanutbuttersoftware.com

[72] Brian C. Anderson & Adam D. Thierer, A Manifesto for Media Freedom (2008).

[73] See Adam Thierer, Why Regulate Broadcasting : Toward a Consistent First Amendment Standard for the Information Age, Catholic University Law School, 15 CommLaw Conspectus (Summer 2007) at 431-482; http://commlaw.cua.edu/articles/v15/15_2/Thierer.pdf; Adam Thierer, FCC v. Fox and the Future of the First Amendment in the Information Age, Engage (Feb. 2009) www.fed-soc.org/doclib/20090216_ThiererEngage101.pdf.

[74] See Adam Thierer, The Progress & Freedom Foundation, Thinking Seriously about Cable and Satellite Censorship: An Informal Analysis of S. 616, The Rockefeller-Hutchison Bill (2005) www.pff.org/issues-pubs/pops/pop12.6CableCensorship.pdf; Robert Corn-Revere, The Progress & Freedom Foundation, Can Broadcast Indecency Regulations Be Extended to Cable Television and Satellite Radio? (2005) www.pff.org/issues-pubs/pops/pop12.8indecency.pdf.

Adam Thierer (PFF) Remarks at FCC Hearing on Public Interest in Digital Era (3-4-10) http://d1.scribdassets.com/ScribdViewer.swf

Every Tuesday, Washington, DC’s local NPR station (88.5 WAMU) carries a “Tech Tuesdays” program as a regular part of The Kojo Nnamdi Show.  This week’s show, which was guest hosted by Marc Fisher of the Washington Post, was on “Regulating the World Wide Web: A View from Abroad.” It was a wide-ranging and very interesting discussion about the future of Internet governance and regulation, featuring:

• Evgeny Morozov: Yahoo! Fellow at the Institute for the Study of Diplomacy at Georgetown University; Fellow, Open Society Institute; and author “Net Effect” blog on ForeignPolicy.com
• John Morris: General Counsel, Director of the Internet Standards, Technology and Policy Project, Center for Democracy and Technology
• Olivier Tesquet: Reporter, Slate.fr (France)

Listen here. It’s worth your time.

by Adam Thierer & Berin Szoka, Progress Snaphot 6.1

Stephanie Clifford of the  New York Times posted a very interesting article this week summarizing a recent “on-the-record chat” the Times staff had with Federal Trade Commission (FTC) chairman Jon Leibowitz and FTC Bureau of Consumer Protection chief David Vladeck.  The interview [discussed by Braden here] is profoundly important in that it reveals an alarming disconnect regarding the relationship between “privacy” regulation and the future of media, which were the subjects of their discussion with Times staff.  Namely, Leibowitz and Vladeck apparently fail to appreciate how the delicate balance between commercial advertising and journalism is at risk precisely because of the sort of regulations they apparently are ready to adopt.  Because the value of online advertising depends on data about its effectiveness and consumers’ likely interests, and because advertising is indispensable to funding media, what’s ultimately at stake here is nothing short of the future of press freedom.

The “Day of Reckoning” Is Upon Us

Leibowitz and Vladeck spend the first half of The Times interview wringing their hands about “privacy policies,” the declarations made by websites and advertising networks about their data collection and use practices (for which the FTC can and must hold them accountable).  But the two feel that privacy policies don’t adequately inform consumers.  Chairman Leibowitz claims that online companies “haven’t given consumers effective notice, so they can make effective choices.”  And Mr. Vladeck states that advise-and-consent models “depended on the fiction that people were meaningfully giving consent.” But he and the FTC seem ready to abandon the notice and choice model because the “literature is clear” that few people read privacy policies, Vladeck told the Times.  He and Leibowitz continue:

“Philosophically, we wonder if we’re moving to a post-disclosure era and what that would look like,” Mr. Vladeck said. “What’s the substitute for it?” He said the commission was still looking into the issue, but it hoped to have an answer by June or July, when it plans to publish a report on the subject. Mr. Leibowitz gave a hint as to what might be included: “I have a sense, and it’s still amorphous, that we might head toward opt-in,” Mr. Leibowitz said.

This clearly foreshadows the regulatory endgame we have long suspected was coming.  When the FTC released its “Self-Regulatory Principles for Online Behavioral Advertising” eleven months ago, we asked: “What’s the Harm & Where Are We Heading?”  Their answers to both questions have become clearer with each new calculated comment—all apparently intended to slowly “turn up the heat” on the advertising industry so that the proverbial frog will stay in the pot until the water finally boils.  Leibowitz’s FTC has simply dodged the “harm” question with a four-part strategy:

1. Cobble together a “record” full of sympathy-evoking anecdotes submitted by advocates of regulation in comments and the FTC’s ongoing “Exploring Privacy” Roundtables;
2. Let the most extreme Chicken Littles fulminate about the grand conspiracy of “neuromarketing manipulation” and the like (and sometimes even shout down FTC staff in panel discussions) in order to redefine the “reasonable center” of the debate;
3. Define-down “harm” as purely a matter of “consumer expectations” or consumers’ “dignity interests” (whatever that vague and infinitely elastic term means); and
4. Attack the effectiveness of “consent” itself by suggesting that consumers cannot be trusted to understand privacy policies or be expected to make any effort to protect their own privacy.

Conveniently, this strategy leads right back to the “day of reckoning” Chairman Leibowitz threatened was coming last February: We are heading precisely where he told us we would be—to full-on, opt-in regulation.  The writing on the wall becomes more apparent every day: Leibowitz set out to bring online advertising to heel even before becoming Chairman, and his Commission is reprising almost precisely the same approach that led to the passage of the Children’s Online Privacy Protection Act (COPPA) of 1998: building a case for new authority, dismissing industry self-regulation as ineffective, and finally presenting a report to Congress intended to produce a rapid legislative response.  After the FTC presented its report on the need for regulation in congressional testimony in June 1998, it took Congress just four months to pass COPPA—and much of that time was consumed by the summer recess.  In short, Leibowitz is mounting a carefully choreographed campaign for increased regulation.

The only real question is whether Leibowitz will somehow try to use the FTC’s existing authority over “unfair or deceptive” trade practices or wait for expanded authority from Congress.  While most observers typically assume that such expanded authority would come in the form of a privacy-specific bill—be it a broad “baseline” privacy bill or one specifically focused on online data collection for advertising purposes—the authority Leibowitz yearns for could just as easily come in the form of increased rulemaking authority as part of a broader bill that allows the FTC to preemptively regulate practices that are not deceptive but merely deemed “unfair.”

This would take the agency “ Back to the Future”—to the late 1970s, when the agency reached the height of its efforts to regulate purely on “unfairness” grounds by trying to ban advertising to children.  The agency’s behavior earned it the moniker “National Nanny” from the Washington Post, hardly a bastion of regulatory skepticism.[1] That outpouring of popular resentment caused a heavily Democratic Congress to cut-off the Democratic-led agency’s regular funding and prohibit it from regulating advertising merely on the grounds of “unfairness.”  In essence, they told the agency to “go back to its knitting” and focus on protecting consumers from demonstrated harms.^[2] Duly chastened (and actually shut down for several days), the FTC formulated a meaningful legal standard for “unfairness,” which Congress codified in 1994: for a practice to be unfair, the injury it causes must be (1) substantial, (2) without offsetting benefits, and (3) one that consumers cannot reasonably avoid.

Under this statutory standard, as FTC Commissioner Thomas Rosch has argued, the commission must carefully consider:

[the] legitimate pro-consumer and pro-competitive benefits that result from [targeted advertising]. Absent hard data weighing these benefits against the limited “invasion of privacy interests” involved, it would seem difficult to conclude that treating that practice as an actionable violation of the “unfairness” prong of Section 5 will pass muster.[3]

So Leibowitz and Vladeck either need to get serious about weighing the costs and benefits of targeted advertising—or, in the absence of such actually measuring these trade-offs, get Congress to give them the authority to regulate.  But one thing is clear from their past statements: they are in a hurry to do  something. As Vladeck told The Times last August, “There is a sense of urgency around here… Consumers, I don’t think are sufficiently protected under the current regime.”  Apparently, the case is closed in their minds.

“Left Hand, Meet Right Hand”

The second half of the  Times interview concerns the future of news. Chairman Leibowitz is not optimistic:

“There are some areas where you clearly see positive creative destruction,” Mr. Leibowitz said, giving the example of travel agents who were replaced by Orbitz and other online-booking systems. The news, he said, was not one of those. “When you’re dealing with something as critical as news is to a democracy, you need to ensure, certainly, that it’s independent, but also that it’s vibrant going forward,” he said. Areas like investigative reporting, foreign and domestic bureaus, and state-house reporting, he said, would likely falter under blog operations because of “economies of scale.”

He said he wasn’t sure what the solution was, but threw out a few ideas discussed at the conference: maybe special tax treatment for newspapers, a Corporation for Public Broadcasting-like fund, or for the newspaper industry to charge fees for the re-use of its content, similar to the model that the American Society of Composers, Authors and Publishers uses. [emphasis added]

Mr. Chairman, with all due respect, haven’t you forgotten about the solution that has powered private media for a few centuries in this country?  You know— advertising!  Indeed, what’s stunning about these comments is the complete disconnect with what Leibowitz and Vladeck said earlier in the interview.  It certainly may be the case that they said more on the subject than what The Times has reported, but given their escalating rhetoric, it seems likely that significantly increased FTC regulation is on the horizon.  And, yet, as Chairman Leibowitz marches us into this brave new world of regulating Internet media through their key funding source, he and Mr. Vladeck seem to have little appreciation of the vital role played by advertising in sustaining a truly free and vibrant press.

An Attack on Advertising Is an Attack on Media Itself

Let’s step back and revisit Media Economics 101.  Almost every serious scholar in the field acknowledges this truism: Advertising cross-subsidizes media platforms and the creation of valuable information—especially news.  “Advertising is the mother’s milk of all the mass media,”  Wall Street Journal technology columnist Walt Mossberg has noted.  Similarly, Harold L. Vogel, author of Entertainment Industry Economics, the leading text in the field, has noted, “Advertising is the key common ingredient in the tactics and strategies of all entertainment and media company business models.  Indeed, it might further be said that advertising has substantively subsidized the production and delivery of news and entertainment throughout the last century.”[4] Mossberg agrees and notes, “Without ads, most editorial products and other programming would be either unavailable or prohibitively expensive.”

The reason for the indispensability of advertising is simple: Information (including news and other forms of “content”) has “public good” characteristics that make it is very difficult (and occasionally impossible) for information-publishers to recoup their investments.  Simply put, they quite literally lack pricing power: Whatever they charge, someone else will charge less for a close substitute, inevitably leading to “free” distribution of the content, even though the content is anything but free to produce.  Advertising is the one business model that has traditionally saved the day by rewarding publishers for attracting the attention of an audience.

Which raises another under-appreciated point: Private advertising promotes press independence.  “Newspapers, magazines, radio, television, and many websites all receive their primary income from advertising,” notes William F. Arens, author of  Contemporary Advertising, another leading textbook in the field. “This facilitates freedom of the press and promotes more complete information” he concludes.[5] Why?  Because, contrary to what some critics claim, advertising and marketing help keep private media providers independent of the need for taxpayer subsidies or private patrons.  This begs an even more profound question: If not advertising, then what else?

A “Public Option” for the Press?

What’s most troubling about Chairman Leibowitz’s comments to the Times is that he has apparently found his alternative to advertising: a “public option” for the press! He mentions special tax treatment for newspapers or a new CPB-like fund (don’t we already have one?) as two possibilities.  That certainly will be music to the ears of radical, pro-regulatory activist groups like the ironically-named “Free Press,” which wants to see a massive “public works” program for the media sector.

Free Press recently filed comments with the FTC in the agency’s recent workshop, “Can Journalism Survive the Internet Age?” and proposed a far-reaching industrial policy for “saving the news.”  They call for over $50 billion in subsidies for the Corporation for Public Broadcasting and other bureaucracies, a “journalism jobs program” for that would be part of AmeriCorps, a variety of new tax incentives for struggling media operations or individuals who support favored institutions, and an assortment of government incentives to encourage local ownership and media divestiture (by handing over control to smaller operators or minority-owned groups).  Ironically, “Free Press” has also floated the concept of “a small tax on advertising” as one way to pay for a press bailout.

The organization’s founder Robert W. McChesney, the prolific neo-Marxist media scholar, penned an essay with John Nichols of The Nation last year, claiming that saving journalism essentially requires that media become an appendage of the State.  Although advertising has supported journalism as a “public good” for centuries, the only way they can conceive to provide a public good is to socialize its means of production.  Thus, journalism, like education and national defense, requires constant government oversight and support: “A moment has arrived at which we must recognize the need to invest tax dollars to create and maintain news gathering, reporting and writing with the purpose of informing all our citizens.”  They ask us to consider the $60 billion in government spending they propose as a “free press ‘infrastructure project,’” which would “keep the press system alive.”

Some in Congress seem willing to listen.  The Senate has already held hearings about the future of journalism.  And Senator Benjamin L. Cardin (D-MD) recently introduced what he has called the “Newspaper Revitalization Act,” which would allow newspapers to become nonprofit organizations in an effort to help them stay afloat.  Importantly, however, the bill would also disallow political endorsements on newspaper editorial pages—which, like campaign finance restrictions, would be a boon for incumbent politicians.  That bill should serve as fair warning to journalists about the sort of strings lawmakers will attach to press-welfare efforts going forward.  What other “golden shackles” might come with media subsidies?

To be clear, Chairman Leibowitz hasn’t called for a complete press takeover along the lines of the Free Press plan.  Yet, he hasn’t answered a key question in this debate: Who pays for news?  He appears ready to endorse a bold new regulatory scheme for the Internet and online media that, in the name of “protecting privacy” would put at risk the one traditionally successful method of supporting private media operations—advertising.  As the Pew Research Center’s Project for Excellence in Journalism noted in its latest State of the News Media report, “The problem facing American journalism is not fundamentally an audience problem or a credibility problem.  It is a revenue problem—the decoupling… of advertising from news.”  There’s probably no way policymakers can stop this process, nor should they try.  But they shouldn’t be creating new obstacles to the survival of traditional media creators, either.

Unfortunately, that’s exactly what Chairman Leibowitz’s new regulatory scheme would do.  The revenue “delta” between “smart” advertising (tailored to consumers’ likely interests and measured for effectiveness in producing clicks, purchases, etc.) and “dumb advertising” (based purely on surrounding keywords or demographics of users presumed to visit the site) is difficult to measure but potentially enormous—even 10 times as great for some sites.[6] The difference between opt-in and opt-out could be nearly as dramatic, because it’s difficult to get consumers to opt-in for anything, especially for small players—which means that opt-in regulation could, perversely, force consolidation in the online advertising and content markets.  If the FTC cares about its statutory responsibility to safeguard competition, they should take this dynamic seriously and be hyper-cautious about heavy-handed mandates that could derail smarter advertising.

Finally, to be fair, in his interview, the Chairman also suggests the newspaper industry might want to find new way “to charge fees for the re-use of its content.”  We’re certainly not opposed to the notion and think that, if it could somehow be made to work (especially by removing antitrust obstacles), it could part of a diverse revenue mix for digital journalism.  But, there’s the rub.  Micropayments inevitably face the problem of “mental transaction costs”  that likely swamp the perceived value of most content and, like pay-walls, have generally worked only in media environments characterized by a scarcity of providers and a uniqueness of a sufficiently valuable product.  These cold, hard economic realities are why advertising remains indispensable.

The Principled Alternative to Regulation

Convinced that privacy policies simply don’t work, Leibowitz and Vladeck are asking what a “post-disclosure era” would look like.  We appreciate the continued sensitivities expressed by certain groups and individuals about online privacy and data use more generally.  But there is another way forward.  We have proposed the following “5-E” layered approach to concerns about online privacy, focusing on restraining government access to data as a clear harm, rather than crippling the private sector uses of data that directly benefit consumers:

1. Erect a higher “Wall of Separation between Web and State” by increasing Americans’ protection from government access to their personal data—thus bringing the Fourth Amendment into the Digital Age.
2. Educate users about privacy risks and data management in general as well as specific practices and policies for safer computing.
3. Empower users to implement their privacy preferences in specific contexts as easily as possible.
4. Enhance self-regulation by industry sectors and companies to integrate with user education and empowerment.
5. Enforce existing laws against unfair and deceptive trade practices as well as state privacy tort laws.

Such a layered approach would not only be a “less restrictive” alternative to top-down, one-size-fits-all government regulation, but also potentially more effective in key respects than government data use/collection mandates.  In an ideal world, adults would be fully empowered to tailor privacy decisions, like speech decisions, to their own values and preferences (“household standards”).  Consumers would have (1) the information necessary to make informed decisions and (2) the tools and methods necessary to act upon that information. Importantly, those tools and methods would give them the ability to block the things they don’t like—annoying ads or the collection of data about them, as well as objectionable content—while also helping them find the information and content they desire.

But of course, the devil’s in the details.  Leibowitz and Vladeck would set the bar so high as to what constitutes “effective” consumer choice that current privacy policies necessarily fail their test—if only because most users don’t care enough to make the “right” privacy choices.  Privacy policies, even if read by relatively few consumers, nonetheless allow privacy advocates, journalists and watchdog-bloggers to scrutinize what companies say they’re doing—promises to which the FTC should hold companies stringently.  That’s clearly not good enough for Leibowitz and Vladeck, who want to give up on “notice and choice” and move on to “opt-in” mandates.  But why not first try to make “notice” more effective?  The advertising industry is currently developing standardized interfaces that could communicate key information about privacy practices in a single icon, label or other easily-digested “consumer touch point.”

More radically, why focus on tinkering with consumer interfaces, when standardized data disclosure formats like the Protocol for Privacy Preferences (P3P) could distill legalistic privacy policies into “machine-readable” code?  Such disclosures could provide a powerful form of “notice” that the ordinary consumer could “use”: simply setting their own privacy preferences in a browser tool that automatically implements those preferences by blocking tracking that users object to.  Such a privacy disclosure format could also allow the FTC to automate enforcement of its existing authority to punish unfair or deceptive trade practices.

Conclusion

And so we return to the question the FTC asked in its recent workshop, “Can Journalism Survive the Internet Age?”  Answer: Not if the FTC kills the golden goose that lays the golden eggs through onerous advertising regulations and data controls in the name of “privacy.”  Chairman Leibowitz and Bureau Chief Vladeck shouldn’t foreclose the possibility that advertising can play a central role in the future of a free press in the Digital Age—just as it has done historically in the United States.  Indeed, they would be wise to remember that advertising has always been with us.  As the Supreme Court noted in its 1996 decision, 44 Liquormart, Inc. v. Rhode Island.

Advertising has been a part of our culture throughout our history. Even in colonial days, the public relied on “commercial speech” for vital information about the market. Early newspapers displayed advertisements for goods and services on their front pages, and town criers called out prices in public squares. Indeed, commercial messages played such a central role in public life prior to the founding that Benjamin Franklin authored his early defense of a free press in support of his decision to print, of all things, an advertisement for voyages to Barbados.[7]

Of course, for advertising to continue to play the role as sustainer of the press, it must be allowed to evolve.  Media operators—large and small alike—must be allowed to craft new strategies, some of which may require data collection and marketing practices that will make some privacy-sensitive users uncomfortable, but will also ensure that the goose keeps on laying golden eggs for them and everyone else.

While Chairman Leibowitz may decry the creative destruction at work in the news sector and information industries today, that shakeup will continue and, no doubt, be painful for incumbent players.  Advertising alone may not “save the day” for media as it has in the past, but it will likely remain essential to sustaining private media platforms and providers going forward— if federal policymakers allow it.  The alternative—massive government intervention into the news and media sectors—is too horrifying to think about.

[1] Washington Post, March 1, 1978.

[2] Congress terminated the FTC’s efforts to prohibit advertising to children, and barred the agency from issuing any advertising regulation predicated solely on unfairness for three years.  FTC Improvements Act, Pub. L. No. 96-252, § 11 (May 1980).  See generally J. Howard Beales, Director of the Bureau of Consumer Protection, Federal Trade Commission, The FTC’s Use of Unfairness Authority: Its Rise, Fall, and Resurrection, www.ftc.gov/speeches/beales/unfair0603.shtm.

[3] Thomas Rosch, Some Reflections on the Future of the Internet: Net Neutrality, Online Behavioral Advertising, and Health Information Technology, Remarks at U.S. Chamber of Commerce Telecommunications & E-Commerce Committee Fall Meeting, October 26, 2009, 13, www.ftc.gov/speeches/rosch/091026chamber.pdf.

[4] Harold L. Vogel, Entertainment Industry Economics (Cambridge, MA: Cambridge University Press, 7th Edition, 2007), at 46.

[5] William F. Arens, Contemporary Advertising (McGraw-Hill Irwin, 10^th Ed., 2006) at 50.

[6] See Berin Szoka & Mark Adams, The Benefits of Online Advertising & Costs of Privacy Regulation, PFF Working Paper, Nov. 8, 2009, www.scribd.com/doc/22445754/Benefits-of-Online-Advertising-Paper.

[7] 517 U.S. 484, 495 (1996), http://www.law.cornell.edu/supct/html/94-1140.ZO.html

______________________________

Related PFF Publications

• Privacy Trade-Offs: How Further Regulation Could Diminish Consumer Choice, Raise Prices, Quash Digital Innovation & Curtail Free Speech, Berin Szoka, Comments to the Federal Trade Commission “Exploring Privacy” Roundtable, November 10, 2009.
• Online Advertising & User Privacy: Principles to Guide the Debate, Berin Szoka & Adam Thierer, Progress Snapshot 4.19, Sept. 2008.
• Targeted Online Advertising: What’s the Harm & Where Are We Heading?, Berin Szoka & Adam Thierer, Progress on Point 16.2, April 2009.
• Privacy Polls v. Real-World Trade-Offs, Berin Szoka, Progress Snapshot 5.10, Oct. 2009.
• The Benefits of Online Advertising & Costs of Privacy Regulation, Berin Szoka & Mark Adams, PFF Working Paper, Nov. 8, 2009.
• Benefits of Online Advertising, Berin Szoka, Mark Adams, Howard Beales, Thomas Lenard & Jules Polonetsky, PFF Capitol Briefing, July 2009.
• Public Option for Press Should Get the Red Pen, Adam Thierer, The Daily Caller, Jan. 12, 2010.

It really is amazing how much the audio marketplace has evolved over the past decade. I’ve written about the growing “competition for our ears” here before, but over at the Radio Survivor blog, there’s an outstanding collection of essays about “The Decade’s Most Important Radio Trends” by several long-time industry experts. Dennis Haarsager of National Public Radio has a nice listing of all the entries over on his blog, which I have reproduced down below.

It just blows my mind to think that just 10 years ago I didn’t have satellite radio (now have 3 subscriptions); I didn’t have Pandora (my 8 different personalized channels are playing in the background on my computer non-stop); I had never heard a podcast (and now subscribe to several and have hosted one here on occasion); I didn’t have an MP3 player and had never burned any of my music (now have 3 players and my entire 25-year collection of CDs on all 3 devices); and I had never spent any time listening to music online (and now am quite in love with Lala and LastFM). Meanwhile, I am still listening to the old fashion radio quite a bit, including on a new HD Radio player in my house.  You gotta love choice like that!

Anyway, read these essays for a fuller investigation into the state of the audio marketplace. I don’t agree with everything said in each of the entries but still recommend you check out the entire series:

#1 (Paul Riismandel):  The birth and troubled childhood of satellite radio.

#2 (Jennifer Waits):  The growth of internet radio.

#3 (Waits):  iPod and iTunes lure listeners away from terrestrial radio.

#4 (Riismandel): Podcasting.

#5 (Matthew Lasar):  The age of Pandora.

#6 (Riismandel):  HD Radio launches, but who listens, who cares?

#7 (Lasar):  Internet radio’s Day of Silence.

#8 (Lasar):  The Great Fairness Doctrine Panic.

#9 (Riismandel):  The FCC authorizes Low-Power FM.

#10 (Riismandel):  Clear Channel goes private equity.

#11 (Waits):  Cash-strapped schools turn back on college radio.

#12 (Lasar):  National Public Radio keeps growing.

#13 (Waits):  College radio tightens its playlist.

#14 (Lasar):  Pacifica Radio democratizes itself.

I’ve just released a new PFF white paper looking at the hysteria that has often accompanied major media mergers and then taking a look at the marketplace reality years after the fact.  Here‘s the PDF, but I have also pasted the entire thing down below.

_____________________________

A Brief History of Media Merger Hysteria: From AOL-Time Warner to Comcast-NBC

by Adam Thierer

Although the pending union of Comcast and NBC Universal has not yet made it to the altar, Chicken Little-esque wails about the marriage have already begun in earnest. For example, the pro-regulatory media organization Free Press has already set up a website to complain about the deal.[1] And Jeff Chester, executive director of the Center for Digital Democracy, has called it “an unholy marriage.”[2] The fever only promises to spread once the deal is formally announced, and a lengthy fight over the deal is expected at the Federal Communications Commission (FCC) and whichever antitrust agency reviews the deal.[3]

But reality tends to play out somewhat less dramatically than the script penned by the media worrywarts. It’s worth looking back at some of the more prominent examples of media merger hysteria in recent years to understand why such panic is unwarranted, and why a deal between Comcast and NBC Universal is unlikely to lead to the sort of problems that the pessimists suggest.[4]

AOL-Time Warner: From the “New Totalitarianism” to Digital Divorce Court in Less Than a Decade

When the mega-merger between media giant Time Warner and Internet superstar AOL was announced in early 2000, the marriage was greeted with a cacophony of righteous indignation and apocalyptic predictions.  When referring to the dangers of the deal, syndicated columnist Norman Solomon, a longtime associate of the media watch group Fairness & Accuracy In Reporting, summoned the ghost of Aldous Huxley when he and referred to the transaction in terms of “servitude,” “ministries of propaganda,” and “new totalitarianisms.”[5] Similarly, USC Professor of Communications Robert Scheer wondered if the merger represented “Big Brother” and claimed, “Diversity is out, niches are gone, it’s Skippy peanut butter time. AOL is the Levitown of the Internet, mom and apple pie, ‘50s boredom, conformity and dullness as a virtue: A Net nanny reigning in potentially restless souls.”[6]

Such pessimistic predictions proved wildly overblown. To say that the merger failed to create the sort of synergies (and profits) that were originally hoped for would be an epic understatement.[7] The titles of two popular books about the deal summed up the firm’s troubles: One was entitled Fools Rush In (by Nina Munk) and the other, There Must Be a Pony in Here Somewhere (by Kara Swisher and Lisa Dickey).[8]

The numbers were mind-boggling. By April 2002, just two years after the deal was struck, AOL-Time Warner had already reported a staggering $54 billion loss.^[9] By January 2003, losses had grown to $99 billion.^[10] By September 2003, Time Warner decided to drop AOL from its name altogether and the deal continued to slowly unravel from there.^[11] In a 2006 interview with the Wall Street Journal, Time Warner President Jeffrey Bewkes famously declared the death of “synergy” and went so far as to call synergy “bullsh*t”!^[12] In early 2008, Time Warner decided to shed AOL’s dial-up service^[13] and now is set to spin off AOL entirely.[14] Looking back at the deal, Fortune magazine senior editor at large Allan Sloan called it the “turkey of the decade”:

The day the deal was announced, Jan. 10, 2000, Time Warner closed at the equivalent of $184.50 a share. After almost 10 years of travail, the $184.50 has shrunk to about $42.25, consisting of one Time Warner share and a quarter of a Time Warner Cable share. The 77 percent decline is triple the decline in the Standard & Poor’s 500-stock index over the same period.[15]

And the Time Warner-AOL split wasn’t the end of this messy divorce process. In 2008, Time Warner Cable and Time Warner Entertainment decided to split.^[16] Time Warner has even spun off some of its oldest properties. In 2006, it announced that it was putting 18 of the 50 magazines in its Time magazine division up for sale.^[17]

As is always the case, these divestitures and down-sizing efforts garnered little attention compared with the hullaballoo and hysteria that accompanied the announcement of the deal back in 2000.^[18]

News Corp/DirecTV: Murdoch’s “Digital Death Star” Blows Up

No media industry personality attracts more attention (or angst) than News Corp. Chairman and CEO Rupert Murdoch. The popular leftist blog The Daily Kos has likened him to “a fascist Hitler antichrist.”[19] And CNN founder Ted Turner once compared the popularity of the News Corp.’s Fox News Channel to the rise of Adolf Hitler prior to World War II.^[20] Alternatively, Murdoch has been accused of being a Marxist.[21] Meanwhile, Karl Frisch, a Senior Fellow at Media Matters for America, speaks of Murdoch’s “evil empire”^[22] and a recent MSNBC poll has asked people to vote on the question: “Is Rupert Murdoch evil?”[23] In 2003, when asked by talk show host Chris Matthews, “Would you break up [News Corp.-owned] Fox?” then Democratic presidential candidate Howard Dean answered, “On ideological grounds, absolutely yes.”^[24] And in their book Our Media, Not Theirs, John Nichols and Robert McChesney took the Murdoch-as-evil-overlord storyline to its logical extreme when they suggested Hollywood was on to something by scripting a media tycoon like Murdoch as the bad guy in a James Bond movie: “No wonder conspiracy theories are so popular in America; no wonder, when the makers of James Bond movies look for believable villains these days, they eschew Eurotrash bad guys for more credibly threatening villains such as the Rupert Murdoch-like media baron of 1997’s Tomorrow Never Dies.”^[25]

These Murdochian fears came to a head in 2003 when News Corp. announced it was pursuing a takeover of satellite television operator DirecTV.  Paranoid predictions of a pending media apocalypse followed.  A group of regulatory activists filed joint comments to the FCC claiming that if News Corp. and DirecTV were allowed to merge, “the result will be unprecedented concentration within all aspects of the television marketplace, as well as increased prices for consumers of cable and satellite television.”[26] Similarly, then-FCC Commissioner Jonathan Adelstein worried that the deal would “result in unprecedented control over local and national media properties in one global media empire. Its shockwaves will undoubtedly recast our entire media landscape.” He continued; “With this unprecedented combination, News Corp. could be in a position to raise programming prices for consumers, harm competition in video programming and distribution markets nationwide, and decrease the diversity of media voices.”[27]

Not to be outdone, full-time media fussbudget Jeff Chester predicted that Murdoch would use this “Digital Death Star” as the base of a nefarious scheme to conquer the media universe:

Murdoch will use DirecTV as a ‘death star’ to force his programming on cable companies by threatening a price war unless they give Fox favorable access. Since News Corp will control cable TV’s principal multichannel competitor, it will easily create new channels—unlike anyone else in the TV business.  Rather than engage in open combat and competition, cable powerbrokers such as Comcast and AOL-Time Warner will likely accommodate Murdoch and add his new channels to their own services. Imagine Fox News on steroids. Worse, with DirecTV’s capacity to ‘spotbeam’ channels to serve distinct communities, localized versions of Fox programs could be available in major cities across the nation.[28]

Imagine the horror of new, “spotbeamed” local media competition!  However, unlike the destruction of the planet Alderaan by the Death Star in Star Wars,[29] no one was harmed in the making of the News Corp-DirecTV marriage.  Indeed, the rebels would get the best of Darth Murdoch since his “Digital Death Star” was abandoned just three years after construction.  In December 2006, News Corp. decided to divest the company to Liberty Media Corporation in an effort to win back more controlling News Corp. stock.^[30]

Ironically, many of the same groups that had vociferously protested the original News Corp-DirecTV deal again found reason to complain when the deal was being undone! The FCC’s failure to implement various restrictions as part of the license transfer, they claimed, would “result in continuing control by News Corp. over content distribution, harming competition in both the programming and distribution markets, reducing consumer choice and raising cable prices.”^[31] Unsurprisingly, little mention was made of the previous round of pessimistic predictions or whether there had ever been any merit to the lugubrious lamentations of the media critics.

Sirius-XM: “Merger to Monopoly” or Prelude to Bankruptcy?

Some of the most entertaining and wrong-headed predictions about the future of the media marketplace often come from media moguls themselves. For example, back in 2003, when he was still President and Chief Operating Officer of Viacom, Mel Karmazin said in reference to Microsoft, AOL Time Warner, and Comcast: “I can’t imagine being a competitor with any of these guys.”[32] Just six years later, however, plenty of others are competing with those companies. Microsoft finds itself in a heated war with Google on all fronts, AOL-Time Warner has fallen apart, and Comcast is squaring off against telco (e.g., Verizon’s FiOS and AT&T U-Verse) and online video competitors (e.g., YouTube, Hulu) that were unfathomable in 2003—not to mention the traditional satellite TV competitors they still face. Meanwhile, Karmazin abandoned Viacom and is now struggling to find a way to make subscription-based satellite radio survive the ongoing digital music bloodbath caused by the rise of online music services and a little thing called the iPod.

Of course, hysteria ran rampant when Sirius and XM were merging, too.  Critics called it a “merger to monopoly” and predicted a variety of coming calamities.[33] National Association of Broadcasters Vice President Dennis Wharton described the merger as a “monopoly platform for offensive programming” that would be “anti-consumer.”^[34] Mr. Wharton later remarked that the merged firms “will raise prices, won’t improve their technology and will limit their offerings.”^[35] A coalition of six non-profits claimed that the merger was “perhaps the worst offense against the basic principle that competition is the consumer’s best friend” and, if approved, “a tsunami of mergers could ripple through the digital space at the worst possible moment.”^[36] They predicted that “once the competition is eliminated, prices will rise over time,” “innovation will slow to the pace preferred by the monopolist and consumers will be much worse off in the long run.”^[37] Another coalition argued that the new company would “abuse consumers, artists and other input suppliers in the satellite radio market.”[38]

In the end, the merger took an astonishing 500-plus days for the FCC to finally approve[39] and was conditioned with a lengthy set of “voluntary concessions” to supposedly rectify these potential harms—including pricing constraints that could limit the firm’s ability to cover costs and pay down debt over time.

Unsurprisingly, things haven’t turned out so well for Sirius XM. When the merger was finally approved by the FCC in August 2008, Commissioner Copps dissented vigorously on various grounds but specifically insisted that, “We must assume that the marketplace can support two financially viable competitors.”[40] Unfortunately for Commissioner Copps—as well as Sirius XM—it’s not even clear that the market can sustain one satellite radio provider. The company’s stock went into freefall following completion of the deal and, at one point, its stock fell below 10 cents per share. The company flirted with bankruptcy in February of this year as “satellite radio failed to win over many younger listeners, and competition from other sources slowed subscriber growth.”[41] In March 2009, Karmazin orchestrated a cash-for-stock swap with Liberty Media to get a $530 million lifeline and avoid bankruptcy.[42] But even with the cash infusion Sirius XM faces an uncertain future with stiff competition.[43] “Sirius is girding for slower growth than in the past,” notes Olga Kharif of Business Week, “and analysts remain concerned about the company’s ability to control costs.”[44] Former stockbroker and RealMoney.com contributor Tim Melvin predicts the overleveraged company “will disappear from the landscape. The subscribers will go to another tech or entertainment company in bankruptcy proceedings. Subscription radio just does not have that much appeal to most people.”[45]

Whether Melvin’s dour forecast for satellite radio proves accurate remains to be seen. What’s clear, however, is that the fears bandied about by critics when the Sirius-XM deal was pending have not come to pass.

Murdoch’s Wall Street Journal Quest

In 2007, Rupert Murdoch announced his desire to purchase The Wall Street Journal.  Once again, a great deal of hand-wringing ensued. “This takeover is bad news for anyone who cares about quality journalism and a healthy democracy,” argued Robert McChesney. “Giving any single company—let alone one controlled by Rupert Murdoch—this much media power is unconscionable.”[46] And FCC Commissioner Copps warned that “It will create a single company with enormous influence over politics, art and culture across the nation and especially in the New York metropolitan area.”[47]

Today, however, the Journal keeps humming along and continues to produce some of the finest journalism on the planet. Meanwhile, “politics, art and culture” seem largely unaffected by the deal—either in New York or the nation.

And the deal certainly hasn’t made Murdoch or News Corp. any richer. “His purchase of The Wall Street Journal is widely seen as one of the worst moves of his career,” notes Michael Wolff of Vanity Fair.[48] News Corp. has already taken a whopping $3 billion write-down on the deal.  Considering the $5 billion price tag Murdoch paid two years ago, one wonders if he’ll hold on to this property any longer than he did DirecTV.

Comcast-NBC Universal: Debunking the Fears Preemptively

No doubt we’ll soon be hearing many of these same apocalyptic predictions about the Comcast-NBC deal. Free Press has said the new entity “will have an incentive to prioritize NBC shows over other local and independent voices and programs, making it even harder to find alternatives on the cable dial.”[49] And Free Press Executive Director Josh Silver has called for the Obama Administration to block the deal saying “it would further starve Americans of [media] diversity.”[50] Even competitors are complaining. Liberty Media Corp. Chairman John Malone, which owns DirecTV, has suggested that they might push the government to reject the deal.[51] Many other rivals will likely join that bandwagon.

These critics will likely raise vertical integration fears and claim that Comcast will act as a “gatekeeper” by limiting the ability of independent voices to get a slot on cable distribution systems, or by withholding NBC-Universal content from other platforms and providers. But there’s little historical evidence that suggests this will be a problem. As the adjoining exhibit illustrates, the overall number of video programming channels available in America has skyrocketed, from just 70 channels in 1990 to 565 channels in 2006, the last year for which the FCC has made data available.

More importantly—and despite claims to the contrary—vertical integration in the video marketplace has plummeted over the past two decades. While many more cable and satellite networks are available today than ever before, the greatest share of the growth in the multichannel video marketplace has come from independently owned video networks. Since 1990, the number of cable-owned or affiliated channels has increased slightly, but it pales in comparison with the growth of independently owned and operated video networks. In real terms, therefore, the percentage of the overall video marketplace controlled (i.e., owned and operated) by cable companies has plummeted—from 50% in 1990 to just 14.9% in 2006. Moreover, in the wake of the Time Warner Cable and Time Warner Entertainment divorce, vertical integration in the cable sector has probably fallen into the single digits. Even if the merger of Comcast and NBC-Universal results in slight increase in industry vertical integration, it almost certainly will not surpass 20 percent.  Consequently, as far as vertically integrated industries go, it is impossible to conclude that this market could be characterized as being controlled by “gatekeepers.”

It is difficult to imagine that Comcast would buck these trends and begin restricting independent options on its systems or withhold its content from others.  Video distributors don’t make money by restricting choice. Consumers would flock to alternative video providers and media services if Comcast played such games. The great thing about the modern media marketplace is that there is always another place for consumers to turn to find something they want.[52] Sports programming could be an exception to the rule, and is the one issue that Comcast may need to bargain over with FCC regulators or antitrust officials since they own regional sports networks that other video distributors want access to.^[53] But traditional concerns about access to over-the-air broadcast signals (namely, the NBC local broadcast television properties) shouldn’t be as much of an issue today as it was the past.  Frankly, local broadcasters need all the eyeballs they can get these days. Thus, it’s unlikely that Comcast would try to withhold those stations from other video distributors, especially since a great deal of NBC programming is already available through other means. And intense competition exists for some of the most important news and informational services that NBC offers, such as local news, weather, and traffic.

Overall, therefore, it’s hard to see the case for the FCC rejecting the deal. Regulators need to be forward-looking about what is driving this deal.  This deal isn’t about protecting old markets but instead about building new ones. “The real motivation behind this deal,” argues Mike Berkley, former CEO of SplashCast Media, “is survival.”

Comcast understands that the price point for distributing TV into homes is going to fall dramatically in the coming years. Comcast’s 3 distribution products, Voice – TV – Internet, are collapsing into just one, single product: Internet. This poses a huge threat to Comcast’s top line. As such, Comcast is hedging through diversification into content, moving up the media value chain. Comcast will be looking to replace lost revenue in distribution with revenue from content (advertising, subscriptions, etc).[54]

Similarly, Wall Street Journal business columnist Holman Jenkins points out that Comcast is scrambling to find a way to rework their business model as the era of set-top box-delivered video slowly gives way to a world of ubiquitously available online video:

This would be a merger, after all, of two businesses that seem headed toward some combination of the fates of newspapers, music CDs and the old wireline telephone business. Customers want the product for free. Comcast’s lifeblood, the $100-a-month cable bill and the $50-a-month broadband bill, increasingly look like duplicative expenses. And so on. True, the number of households that have actually dropped their cable subscriptions in favor of subsisting on TV streamed or downloaded from the Internet is not yet large. But for the Roberts family and its Comcast property, their worst fears lurk just around the corner—being reduced to a “dumb pipe,” subject to commodity pricing while somebody else (Google) makes all the money. Yet an escape route is vexingly hard to envision. Time Warner and Comcast have been talking up plans to make their respective cable lineups available by computer—as long as you keep paying your cable bill. This is a stopgap, especially appealing to anyone who owns two homes but wants to pay only one cable bill. Never mind, too, that hundreds of shows are already available online for free, via Web sites operated by none other than Comcast and the TV networks themselves.[55]

In light of such technological upheaval and marketplace uncertainty, it’s important that regulators proceed cautiously when reviewing this deal or future deals.

Conclusion: Let Markets Evolve

The point here is not that media mergers are inherently good or always make sense. Indeed, as the examples discussed above illustrate, mergers sometimes prove to be huge blunders.[56] But the hysteria sometimes heard before media mergers are consummated rarely bears any relationship to reality once the deals move forward. Media markets are extremely dynamic and prone to disruptive change and technological leap-frogging. Mergers are often one response to that turbulence.

But mergers are no panacea, and they often fail to produce the “synergies” hoped for. A 2004 survey by McKinsey & Co. found that “Nearly 70 percent of the mergers in our database failed to achieve the revenue synergies estimated by the acquirer’s management.”[57] Perhaps, therefore, the best argument for blocking media mergers is not their potentially pernicious effect on markets or consumers, but rather to save the merging firms (and their stockholders) from a miserable marriage!

On the other hand, experimenting with alternative business models and ownership structures is an important part of any dynamic market, because markets are not static but represent and ongoing processes of entrepreneurial “discovery.”[58] Thus, policymakers would be wise to avoid micro-managing mergers and instead let things run their course.  Sometimes collaboration makes a great deal of sense, especially when the significant costs of providing a media service becomes impossible absent a partnership. Indeed, federal officials and agencies are currently exploring how (or whether) journalism can survive an era of seeming perpetual media upheaval.[59] Healthy media companies certainly must be part of the answer and new ownership arrangements might be part of the solution.

Given how difficult it is to predict the future course of events in this chaotic sector, humility—not hubris—is the sensible disposition when it comes to media merger policy. At a minimum, policymakers should insist that ongoing debates are governed by facts instead of fanaticism, because, if the past decade is any guide, discussions about media mergers have been more often rooted in hyperbolic rhetoric and unsubstantiated hysteria.

[1] www.freepress.net/comcast

[2] Quoted in Cecilia Kang, Public Interest Groups Rail against a Comcast and NBC Merger, Washington Post, Post Tech Blog, Nov. 9, 2009, http://voices.washingtonpost.com/posttech/2009/11/for_example_were_advancing_tv.html

[3] “For regulators, a deal like this is a gift; an occasion to impose their will upon needy companies that would otherwise be outside their regulatory reach.” Craig Moffett, Bernstein Research, Comcast: Snatching Defeat from the Jaws of Victory? Oct. 23, 2009, at 14.

[4] Cecilia Kang, A New Kind of Company, A New Kind of Challenge for Feds, Washington Post, Nov. 26, 2009, at 1, www.washingtonpost.com/wp-dyn/content/article/2009/11/26/AR2009112602500.html

[5] Norman Soloman, AOL Time Warner: Calling The Faithful To Their Knees, Jan. 2000, www.fair.org/media-beat/000113.html

[6] Robert Scheer, Confessions of an E-Columnist, Jan. 14, 2000, Online Journalism Review, www.ojr.org/ojr/workplace/1017966109.php

[7] Looking back at the deal almost ten years later, AOL co-founder Steve Case said, “The synergy we hoped to have, the combination of two members of digital media, didn’t happen as we had planned.” Quoted in Thomas Heath, The Rising Titans of ’98: Where Are They Now?, Washington Post, Nov. 30, 2009, www.washingtonpost.com/wp-dyn/content/article/2009/11/29/AR2009112902385.html?sub=AR

[8] Nina Munk, Fools Rush In: Steve Case, Jerry Levin, and the Unmaking of AOL Time Warner (New York: Harper Business, 2004); Kara Swisher and Lisa Dickey, There Must Be a Pony in Here Somewhere: The AOL Time Warner Debacle and the Quest for a Digital Future (New York: Crown Business, 2003).

[9] Frank Pellegrini, What AOL Time Warner’s $54 Billion Loss Means, April 25, 2002, Time Online, www.time.com/time/business/article/0,8599,233436,00.html

[10] Jim Hu, AOL Loses Ted Turner and $99 billion, CNet News.com, Jan. 30, 2004, http://news.cnet.com/AOL-loses-Ted-Turner-and-99-billion/2100-1023_3-982648.html

[11] Jim Hu, AOL Time Warner Drops AOL from Name, CNet News.com, Sept. 18, 2003, http://news.cnet.com/AOL-Time-Warner-drops-AOL-from-name/2100-1025_3-5078688.html

[12] Matthew Karnitschnig, After Years of Pushing Synergy, Time Warner Inc. Says Enough, Wall Street Journal, June 2, 2006, http://online.wsj.com/article/SB114921801650969574.html

[13] Geraldine Fabrikant, Time Warner Plans to Split Off AOL’s Dial-Up Service, New York Times, Feb. 7, 2008, www.nytimes.com/2008/02/07/business/07warner.html?_r=1&adxnnl=1&oref=slogin&adxnnlx=1209654030-ZpEGB/n3jS5TGHX63DONHg

[14] John Letzing, AOL, On The Verge Of Independence, Weighs On Parent, Wall Street Journal, Nov. 4, 2009, http://online.wsj.com/article/BT-CO-20091104-718782.html

[15] Allan Sloan, ‘Cash for . . .’ and the Year’s Other Clunkers, Washington Post, Nov. 17, 2009, www.washingtonpost.com/wp-dyn/content/article/2009/11/16/AR2009111603775.html

[16] Tim Arango, Time Warner Spinning Off Cable Unit, New York Times, April 30, 2008, www.nytimes.com/2008/04/30/business/30warner-web.html?ref=technology

[17] Carolyn Pritchard, Time Inc. to Sell 18 Magazine Titles, MarketWatch, Sept. 12, 2006,  www.marketwatch.com/News/Story/Story.aspx?guid=%7B94967C37%2D9B4A%2D4C1A%2D8AC0%2D64904C1267A1%7D&dist=rss&siteid=mktw&rss=1

[18] “Break-ups and divestitures do not generally get front-page treatment,” notes Ben Compaine, author of Who Owns the Media?  See Ben Compaine, Domination Fantasies, Reason, Jan. 2004, p. 28, www.reason.com/news/show/29001.html

[19] www.dailykos.com/story/2009/9/7/778254/-Rupert-Murdoch-is-a-Fascist-Hitler-Antichrist

[20] Jim Finkle, Turner Compares Fox’s Popularity to Hitler, Broadcasting & Cable, Jan. 25, 2005, www.broadcastingcable.com/CA499014.html

[21] Ian Douglas, Rupert Murdoch is a Marxist, Telegraph.Co.UK, Nov. 9, 2009,  http://blogs.telegraph.co.uk/technology/iandouglas/100004169/rupert-murdoch-is-a-marxist

[22] Karl Frisch, Fox Nation: The Seedy Underbelly of Rupert Murdoch’s Evil Empire? MediaMatters.org, June 2, 2009, http://mediamatters.org/columns/200906020036

[23] www.msnbc.msn.com/id/19817142/

[24] Dean Vows to ‘Break Up Giant Media Enterprises,’ The Drudge Report, Dec. 2, 2003, www.drudgereport.com/dean1.htm; Bill McConnell, Dean Threatens to Break Up Media Giants, Broadcasting & Cable, Dec. 3, 2003, www.broadcastingcable.com/index.asp?layout=articlePrint&articleID=CA339546.

[25] John Nichols and Robert W. McChesney, Our Media, Not Theirs: The Democratic Struggle against Corporate Media (New York: Seven Stories Press, 2002) at 31.

[26] Consumers Union, Consumer Federation of America, Center for Digital Democracy, and Media Access Project, Comments In the Matter of News Corporation/Fox Entertainment Group Merger with Hughes Electronics Corporation/DirecTV, MB Docket No. 03-124, July 1, 2003, www.consumersunion.org/pdf/0701-DirecTV.pdf

[27] Dissenting Statement of Commissioner Jonathan S. Adelstein, Re:  General Motors Corporation and Hughes Electronics Corporation, Transferors, and The News Corporation Limited, Transferee, MB Docket No. 03-124, Jan. 14, 2004, http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-03-330A6.doc

[28] Jeff Chester, Rupert Murdoch’s Digital Death Star, AlterNet, May 20, 2003, www.alternet.org/story/15949

[29] Destruction of Alderaan, Wookieepedia: The Star Wars Wiki, http://starwars.wikia.com/wiki/Destruction_of_Alderaan

[30] News Corporation and Liberty Media Corporation Sign Share Exchange Agreement, News Corp Press Release, Dec. 22, 2006, www.newscorp.com/news/news_322.html.  A frustrated Murdoch referred to DirecTV as a “turd bird” just before he sold it off. See Jill Goldsmith, Murdoch Looks to Release Bird, Variety, Sept. 14, 2006, www.variety.com/article/VR1117950090.html?categoryid=1236&cs=1

[31] Consumers Union, Consumer Federation of America, Free Press, and Media Access Project, Comments In the Matter of Authority to Transfer Control of DirecTV, MB Docket No. 07-18, March 23, 2007, www.mediaaccess.org/file_download/177

[32] Richard Linnett, Media Rivals Backslap at Cable Conference, AdAge.com, June 10, 2003.

[33] Dissenting Statement of Commissioner Michael J. Copps, Applications for Consent to the Transfer of Control of Licenses, XM Satellite Radio Holdings Inc., Transferor, to Sirius Satellite Radio Inc., Transferee, MB Docket No. 07-57, Aug. 5, 2008, http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-08-178A3.pdf

[34] Dennis Wharton, National Association of Broadcasters, NAB Statement in Response to Sirius/XM Proposed Merger, Feb. 19, 2007, www.nab.org/AM/Template.cfm?Section=Search&template=/CM/HTMLDisplay.cfm&ContentID=8258.

[35] Peter Whoriskey and Kim Hart, Justice Dept. Approves XM-Sirius Radio Merger, The Washington Post, Mar. 25, 2008, www.washingtonpost.com/wp-dyn/content/article/2008/03/24/AR2008032401645.html.

[36] The XM-Sirius Merger: Monopoly or Competition from New Technologies: Hearing Before the Senate Committee on the Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights, 3 & 6 (March 20, 2007) (statement of Common Cause et. al), www.hearusnow.org/fileadmin/sitecontent/2007_-_0320_Public_Interest_GroupsStatement-_Senate_Judiciary.pdf

[37] Id. at 6.

[38] Common Cause, Consumer Federation of America, Consumers Union, Free Press, Comments in the Matter of Consolidated Application for Authority To Transfer Control of XM Radio Inc. and Sirius Satellite Radio Inc., MB Docket No. 07-57July 9, 2007, at 1, www.hearusnow.org/fileadmin/sitecontent/xm-sirius_comments.pdf

[39] James Gattuso, Day 505: The XM-Sirius Circus Is Finally Over, Technology Liberation Front Blog, Aug. 7, 2008, http://techliberation.com/2008/08/07/day-505-the-xm-sirius-circus-is-finally-over

[40] Dissenting Statement of Commissioner Michael J. Copps, Applications for Consent to the Transfer of Control of Licenses, XM Satellite Radio Holdings Inc., Transferor, to Sirius Satellite Radio Inc., Transferee, MB Docket No. 07-57, Aug. 5, 2008, http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-08-178A3.pdf

[41] Andrew Ross Sorkin & Zachery Kouwe, Sirius XM Prepares for Possible Bankruptcy, New York Times, Feb. 10, 2009,  www.nytimes.com/2009/02/11/technology/companies/11radio.html

[42] Jon Birger, Mel Karmazin Fights to Rescue Sirius, Fortune.com, March 16, 2009, http://money.cnn.com/2009/03/13/technology/birger_sirius.fortune/index.htm

[43] Former stockbroker and RealMoney.com contributor Tim Melvin worries about the “significant competition for the company going forward” He notes:

Most of the younger people I know have iPod docks in their vehicles for listening to music. Smartphones are bringing music and podcasts to mobile consumers. E-reading machines have wireless connections that can eventually deliver content on a subscription or pay-per-use basis. I really do not need the sports channels from Sirius if I can watch and listen to the games I want on my phone. As time goes by, satellite radio will be viewed as a stepping-stone technology that was replaced by smartphones and other portable media devices.

Tim Melvin, Sirius’ Hopes Keep Slipping Away, The Street.com, Nov. 10, 2009, www.thestreet.com/story/10624757/1/sirius-hopes-keep-slipping-away.html?cm_ven=GOOGLEFI

[44] Olga Kharif, Sirius XM: The Good and Bad Earnings News, Business Week, Nov. 5, 2009, www.businessweek.com/technology/content/nov2009/tc2009115_002716.htm

[45] Melvin, supra 39.

[46] Robert McChesney, Murdoch’s Deal for the Journal: Yet Another Blow for Journalism, Free Press Press Release, July 30, 2007, www.freepress.net/release/260

[47] Michael Copps, Letter to FCC Chairman Kevin Martin, Oct. 25, 2007, http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-277576A1.pdf

[48] Michael Wolff, Rupert to Internet: It’s War! Vanity Fair, Nov. 2009, at 112.

[49] www.freepress.net/comcast

[50] Josh Silver, Too Big to Block? Why Obama Must Stop the Comcast-NBC Merger, Huffington Post, Nov. 13, 2009, www.huffingtonpost.com/josh-silver/too-big-to-block-why-obam_b_356826.html

[51] www.forbes.com/feeds/afx/2009/11/19/afx7143505.html

[52] Adam Thierer and Grant Eskelsen, The Progress & Freedom Foundation, Media Metrics: The True State of the Modern Media Marketplace, Summer 2008, www.pff.org/mediametrics

[53] However, experience with regulation of sports programming suggests that FCC meddling has had negative unintended consequences.  See W. Kenneth Ferree, Competition in the Sports Programming Marketplace, Testimony before the Subcommittee on Telecommunications and the Internet, House Committee on Energy and Commerce, March 5, 2008, www.pff.org/issues-pubs/testimony/2008/030508ferreetestimony.pdf; Barbara Esbin, Unable to Watch the Big Game? Testimony before the National Conference of State Legislatures Communications, Financial Services and Interstate Commerce Committee, Apr. 25, 2008, www.pff.org/issues-pubs/testimony/2008/080425esbinNCSLpresentation.pdf

[54] Mike Berkley, The Comcast-NBC Deal is a Defensive Move by Comcast. It’s about Survival, TV News Stream, Nov. 16, 2009, http://tvnewsstream.com/the-comcast-nbc-deal-is-a-defensive-move-by-c

[55] Holman Jenkins, The Economics of Jay Leno, Wall Street Journal, Nov. 18, 2009, at A17, http://online.wsj.com/article/SB10001424052748704431804574541684183772504.html

[56] Chris O’Brien, Beware the Hype Around Mergers, MercuryNews.com, Nov. 12, 2009, www.mercurynews.com/chris-obrien/ci_13756963?nclick_check=1

[57] Scott A. Christofferson, Robert S. McNish & Diane L. Sias, Where Mergers Go Wrong, McKinsey on Finance, Winter 2004, at 2, http://westportcapital.com/library/McKinsey_Where_Mergers_Go_Wrong.pdf.  The authors noted that, “acquirers face an obvious challenge in coping with an acute lack of reliable information. They typically have little actual data about the target company, limited access to its managers, suppliers, channel partners, and customers, and insufficient experience to guide synergy estimation and benchmarks.”

[58] See, e.g., Israel M. Kirzner, Competition, Regulation, and the Market Process: An “Austrian” Perspective, Cato Institute Policy Analysis No. 18, 1982, www.cato.org/pubs/pas/pa018.html

[59] For example, congressional hearings have been held on this topic and the Federal Trade Commission is holding a workshop on December 1^st and 2^nd asking, “Will Journalism Survive the Internet Age?” www.ftc.gov/opp/workshops/news/index.shtml

What Unites Advocates of Speech Controls & Privacy Regulation? [pdf]

by Adam Thierer & Berin Szoka The Progress & Freedom Foundation, Progress on Point No. 16.19

Anyone who has spent time following debates about speech and privacy regulation comes to recognize the striking parallels between these two policy arenas. In this paper we will highlight the common rhetoric, proposals, and tactics that unite these regulatory movements. Moreover, we will argue that, at root, what often animates calls for regulation of both speech and privacy are two remarkably elitist beliefs:

1. People are too ignorant (or simply too busy) to be trusted to make wise decisions for themselves (or their children); and/or,
2. All or most people share essentially the same values or concerns and, therefore, “community standards” should trump household (or individual) standards.

While our use of the term “elitism” may unduly offend some understandably sensitive to populist demagoguery, our aim here is not to launch a broadside against elitism as Time magazine culture critic William H. Henry once defined it: “The willingness to assert unyieldingly that one idea, contribution or attainment is better than another.”^[1] Rather, our aim here is to critique that elitism which rises to the level of political condescension and legal sanction. We attack not so much the beliefs of some leaders, activists, or intellectuals that they have a better idea of what it in the public’s best interest than the public itself does, but rather the imposition of those beliefs through coercive, top-down mandates.

That sort of elitism—elitism enforced by law—is often the objective of speech and privacy regulatory advocates. Our goal is to identify the common themes that unite these regulatory movements, explain why such political elitism is unwarranted, and make it clear how it threatens individual liberty as well as the future of free and open Internet. As an alternative to this elitist vision, we advocate an empowerment agenda: fostering an environment in which users have the tools and information they need to make decisions for themselves and their families.

I. The Elitism of Speech Regulation

First, consider how those two elitist beliefs identified above are on display when lawmakers or regulatory advocates make efforts to control speech or content.^[2] Calls to regulate free speech are often premised on the belief that something must be done to “protect The Children.”^[3] Personal and parental responsibility ^[4] are regarded as inadequate safeguards ^[5] since some parents will inevitably fall down on the job by not adequately shielding their children’s eyes and ears from potentially objectionable (or supposedly harmful) speech. Therefore, government must regulate content that is indecent, profane, excessively violent, and so on. The definition of those things is then left to unelected bureaucrats and judges to make on our behalf.

But it’s not just about “The Children.” Some regulatory advocates believe that even the choices made by consenting adults must be disregarded because some people fail to understand the supposedly destructive nature of the speech they are consuming. Government must act to protect people from making what some regulatory advocates regard as destructive or even immoral choices that could bring harm to them or their loved ones.

In sum, regulatory advocates are essentially saying that people cannot be trusted or left to their own devices and, therefore, government must intervene and establish a baseline “community standard” on behalf of the entire citizenry to tell them what‘s best for them.^[6] Even if those citizens have tools and information at their disposal to make sensible decisions about objectionable content, that’s not good enough because they might not do the job properly. Government must do it for them!

II. The Elitism of Privacy Regulation

This same mentality motivates calls for privacy regulations. Those who call for government interventions to “protect privacy” often claim that people too willingly surrender personal information about themselves and that they don’t understand the adverse consequences of those actions.^[7] Alternatively, regulatory advocates claim that advertising and marketing efforts are inherently “manipulative” and that people do not realize they are being duped into surrendering personal information or into buying products or services they supposedly don’t need.^[8] Of course, those regulatory advocates rarely pause to explain to us how it is that they were not also duped and manipulated by the same things—again revealing their deeply-rooted elitism! (As discussed below, this makes it clear how the psychological phenomenon of “third-person effect hypothesis” is driving much of this debate.)

“Protecting The Children” is also used as a rhetorical cover for regulation here, but not as often in debates over speech controls.^[9] Instead, regulatory advocates mostly focus on adults who are presumed not to know what is in their own best interest—necessitating paternalistic government intervention on their behalf.

III. Intellectual Schizophrenia on Both the Left & Right

What is particularly interesting about all this is the way these two issues expose a sort of intellectual schizophrenia at work on both the Left and Right of the political spectrum. Left-leaning policymakers and intellectuals typically decry censorship efforts (except where “commercial speech,” “hate speech” and “bias” are at issue), but are quick to rally around proposals to layer privacy regulations on the Internet. The opposite is often true of many on the Right of the political spectrum: They typically declare privacy regulations to be paternalistic and antithetical to free enterprise (or perhaps just erosive of efforts to legislate morality),^[10] but in the next breath advocate controls on content they find objectionable.

Few on either side stop to consider the relationship between speech and privacy. In fact, they are but two sides of the same coin. After all, what is your “right to privacy” but a right to stop me from observing you and speaking about you?^[11] “Protecting privacy,” therefore, typically means restricting speech rights in the process. Advocates of privacy regulation often insist that the use, processing and collection of information are “conduct” unprotected by the First Amendment, but in fact, the First Amendment broadly protects the gathering and distribution of information as part of the process of communication (“speech”).^[12] Similarly, attempts to “clean up” speech or “protect The Children,” often require regulations that would betray the privacy of adults by expanding the role of government, and impose serious burdens on businesses and markets—such as age verification mandates ^[13] or extensive data retention requirements.^[14]

IV. Common Tactics & Regulatory Mechanisms

The two movements also share common political tactics and regulatory approaches. Privacy advocates generally favor “opt-in” mandates as the federal “baseline standard” for any website collecting information about users, especially their browsing habits (regardless of whether the information is “personally identifiable”). In other words, the law would create a property right in such “personal information” (ironically, many advocates of this approach criticize or reject intellectual property.) In a similar vein, many advocates of speech controls push for mandatory parental control tools or restrictive default settings.^[15] That is, if government won’t censor speech outright, regulatory advocates want lawmakers to at least (1) require that media, computing and communications devices be shipped to market with parental controls embedded or included (as proposed in Australia and with China’s “Green Dam” filter),^[16] and possibly, (2) that such controls be defaulted to their most restrictive position—forcing users to opt-out of the controls later if they want to consume media rated above a certain threshold.

More sophisticated advocates of speech controls and privacy regulation will likely argue that their paternalism is less elitist or intrusive because they merely want to “nudge” the public into making “better” decisions. Economist Richard Thaler and legal scholar Cass Sunstein (director of President Obama’s Office of Information and Regulatory Affairs, responsible for analyzing most new federal regulations) popularized this approach with their 2008 book Nudge: Improving Decisions about Health, Wealth, and Happiness. Based on behavioral economics studies, they argue that both government and private actors must inevitably make decisions about “choice architecture” and that, by setting defaults, incentives and rules smartly, “choice architects” can and should improve decision-making without blocking, fencing-off or significantly burdening choices.^[17]

In this regard, Sunstein and Thaler’s approach parallels the work of Lawrence Lessig, one of the most influential Internet policy thinkers. Lessig has argued that the “architecture” of “code” (how software is written) “regulates” all online activities and requires government oversight and intervention to keep in check. Otherwise, he warned ominously a decade ago, “Left to itself, cyberspace will become a perfect tool of control.”^[18] Lessig’s hyper-pessimistic predictions have proven unwarranted, however. Far from fostering a world of “perfect control,” code and cyberspace have proven remarkably difficult to regulate, but nonetheless has generally benefited consumers and citizens without centralized direction.^[19] Still, Lessig, Sunstein, and others of this ilk persist in their advocacy of “nudges” of many varieties to impose their will on cyberspace through mandates from above.

But while it might be possible to define “better decisions” and argue that poor choice architecture leads people to choose things they clearly don’t want in contexts like investment decisions and mortgages, how can elites know what other people really want in highly subjective contexts like privacy and speech? Should they rely on opinion polls—the highly subjective results of which depend heavily on “choice architecture” of question-crafting—to guess what the right default should be?^[20] Was the Chinese proposal to mandate deployment of “Green Dam” just a harmless “nudge” because users weren’t barred from uninstalling the filtering software that must accompany their computers (i.e., “opting-out”)? The problem becomes even more difficult where trade-offs among competing values are inevitable. For example, data collection about Internet users raises privacy concerns for some but benefits all, creating more funding for “free” content (i.e., speech) and services users prefer by making more valuable the advertising that supports online publishers. In short, regulations of speech and privacy are likely to be pure paternalism, even when billed as “libertarian paternalism as Thaler and Sunstein label their approach.^[21]

What might be called “regulatory blackmail” is also a time-honored tradition among both advocates of speech controls and privacy regulation. When censorship advocates have previously been impeded by the First Amendment, they have worked behind the scenes with lawmakers or regulatory agencies to use indirect pressure and strong-arming tactics to extract “voluntary concessions” from companies or others.^[22] For example, in 2004, the FCC strong-armed radio giant Clear Channel into agreeing to a “voluntary” consent decree that involved taking Howard Stern off the air.^[23] Similarly, in 2008, XM and Sirius Satellite Radio finally agreed to set aside 4% of their system capacity for use by politically favored racial minorities (a kind of speech control) as a “voluntary condition” of their merger—after the FCC had sat on their application for nearly 16 months.^[24] This race-based preference would have been unconstitutional if the FCC had imposed it directly.^[25] While the FTC has been far less prone to such abuse and actually plays a key role in holding companies to their promises, its current Chairman, Jon Leibowitz, has hung the “regulatory sword of Damocles” over the heads of the online advertising industry, threatening them with a “day of reckoning” if he doesn’t get what he wants from industry self-regulatory efforts.”^[26] The sword could actually fall if the FTC turns self-regulation into the European model of “co-regulation,” where the government steers and industry simply rows.^[27]

V. The Crisis Mentality that Drives Regulation

Speech and privacy regulatory advocates share another trait in common: an affinity for the use of a crisis mentality as a method of spurring political action. In his 1995 book The Vision of the Anointed: Self-Congratulation as a Basis for Social Policy, political philosopher and economist Thomas Sowell formulated a model that he argued drives ideological crusades to expand government power over our lives and economy. “The great ideological crusades of the twentieth-century intellectuals have ranged across the most disparate fields,” noted Sowell. But what they all had in common, he argued, was “their moral exaltation of the anointed above others, who are to have their different views nullified and superseded by the views of the anointed, imposed via the power of government.”^[28] These government-expanding crusades shared several key elements, which Sowell identified as follows:

1. Assertion of a great danger to the whole society, a danger to which the masses of people are oblivious.
2. An urgent need for government action to avert impending catastrophe.
3. A need for government to drastically curtail the dangerous behavior of the many, in response to the prescient conclusions of the few.
4. A disdainful dismissal of arguments to the contrary as either uninformed, irresponsible, or motivated by unworthy purposes.

We see this model at work on a daily basis today with our government’s various efforts to reshape our economy, but the model is equally applicable to debates over speech controls and privacy regulation. In particular, the various “technopanics”^[29] we have witnessed in recent years fit this model. For example, consider how this model plays out in the debate over online social networking:

1. Assertion of a great danger to the whole society [online sexual predators], a danger to which the masses of people are oblivious.
2. An urgent need for government action [such as mandatory online age verification ^[30] or the Deleting Online Predators Act ^[31]] to avert impending catastrophe.
3. A need for government to drastically curtail the dangerous behavior of the many [must stop kids and adults from being online together on same sites], in response to the prescient conclusions of the few [some state Attorneys General].^[32]
4. A disdainful dismissal of arguments to the contrary as either uninformed, irresponsible, or motivated by unworthy purposes [child safety researchers and others are told that their research is meaningless or offbase].^[33]

We also see this model in play in other debates, such as efforts to regulate “excessively violent” video games and television programming.^[34] And consider how this model plays out on the privacy front:

1. Assertion of a great danger to the whole society [amorphous privacy violations], a danger to which the masses of people are oblivious.
2. An urgent need for government action [“baseline federal privacy regulation”] to avert impending catastrophe.
3. A need for government to drastically curtail the dangerous behavior of the many [anyone who shares information online], in response to the prescient conclusions of the few [a handful of privacy advocacy groups].
4. A disdainful dismissal of arguments to the contrary as either uninformed, irresponsible, or motivated by unworthy purposes [any suggestion that privacy concerns are being overblown and that most information-sharing is socially beneficial is dismissed out-of-hand].

Worse yet, regulatory intervention in these cases simply begets more and more intervention to correct the inevitable failures of, or dissatisfaction with, previous interventions.^[35] Thus, the “crisis” cycle never ends.

VI. Third-Person Effect Hypothesis as an Explanation

Something more profound than simple political elitism seems to be at work here, however. A phenomenon psychologists refer to as the “third-person effect hypothesis” can explain many calls for government intervention, especially in the media world.^[36] Simply stated, speech and privacy critics sometimes seem to only see and hear in media or communications what they want to see and hear—or what they don’t want to see or hear. When they encounter perspectives or preferences that are at odds with their own, they are more likely to be concerned about the impact of those things on others throughout society and come to believe that government must “do something” to correct those perspectives. Many people desire regulation because they think it will be good for others, not necessarily for themselves. The regulation they desire has a very specific purpose in mind: “re-tilting” speech or market behavior in their desired direction.

The third-person effect hypothesis was first formulated by W. Phillips Davison in a seminal 1983 article:

In its broadest formulation, this hypothesis predicts that people will tend to overestimate the influence that mass communications have on the attitudes and behavior of others. More specifically, individuals who are members of an audience that is exposed to a persuasive communication (whether or not this communication is intended to be persuasive) will expect the communication to have a greater effect on others than on themselves.^[37]

Davison used this hypothesis to explain how media critics on both the Left and Right seemed to simultaneously find “bias” in the same content or reports when they couldn’t possibly both be correct. In reality, their own personal preferences were biasing their ability to fairly evaluate that content. Davison’s article prompted further research by many other psychologists, social scientists, and public opinion experts to test just how powerful this phenomenon was in explaining calls for censorship and other social phenomena.^[38] In these studies, third-person effect has been shown to be the primary explanation for why many people fear—or even want to ban—various types of speech or expression, including news,^[39] misogynistic rap lyrics,^[40] television violence,^[41] video games,^[42] and pornography.^[43] In each case, the subjects surveyed expressed strong misgivings about allowing others to see or hear too much of the speech or expression in question, but greatly discounted the impact of that speech on themselves. Such studies thus reveal the strong paternalistic instinct behind proposals to regulate speech. As Davison notes:

Insofar as faith and morals are concerned… it is difficult to find a censor who will admit to having been adversely affected by the information whose dissemination is to be prohibited. Even the censor’s friends are usually safe from the pollution. It is the general public that must be protected. Or else, it is youthful members of the general public, or those with impressionable minds.^[44]

It’s easy to see how this same phenomenon is at work in debates about privacy. Regulatory advocates imagine their preferences are “correct” (right for everyone) and that the masses are being duped by external forces beyond their control or comprehension, even though the advocates themselves are somehow immune from the brain-washing and privy to some higher truth that the hoi polloi simply cannot fathom. Again, this is Sowell’s “Vision of the Anointed” at work.

Consider the flare-up in 2004 over the introduction of Gmail, Google’s free email service. At a time when Yahoo! mail (then as now the leading webmail provider) offered customers less than 10 megabytes of email storage, Gmail offered an astounding gigabyte of storage that would grow over time (now over 7 GB). Rather than charging some users for more storage or special features, Google paid for the service by showing advertisements next to each email “contextually” targeted to keywords in that email—a far more profitable form of advertising than “dumb banner” ads previously used by other webmail providers.^[45] Self-appointed (or, to extend Sowell’s framework, “self-anointed”) privacy advocates howled that Google was going to “read users’ email,” and led a crusade to ban such algorithmic contextual targeting.^[46] Thierer responded to these critics by pointing out that the service was purely voluntary and noted:

you don’t speak for me and a lot of other people in this world who will be more than happy to cut this deal with Google. So do us a favor and don’t ask the government to shut down a service just because you don’t like it. Privacy is a subjective condition and your value preferences are not representative of everyone else’s values in our diverse nation. Stop trying to coercively force your values and choices on others. We can decide these things on our own, thank you very much.^[47]

Interestingly, however, the frenzy of hysterical indignation about Gmail was followed by a collective cyber-yawn: Users increasingly understood that algorithms, not humans, were doing the “reading” and that, if they didn’t like it, they didn’t have to use it. Today, nearly 150 million of people around the world use Gmail, and it has a steadily growing share of the webmail market. Even though cyber-consumers have embraced the service, some privacy advocates persist in their effort to shut down Gmail. They appear determined to stop at nothing to impose their will on others—the essence of political elitism—even if that means cutting off free email service for 150 million people!^[48]

A similar debate has played out more recently regarding targeted online advertising in general. Advertising on search engines is, much like Gmail, targeted “contextually” based on search terms entered by users and most advertising on other websites is based on the nature of content on a site or page. But certain data is collected about users as they browse to make that advertising more effective—by measuring its performance, reducing fraud, preventing over-exposure, etc. Some privacy advocates have insisted that industry self-regulation of such practices (even if enforced by the FTC) is inadequate and have called for preemptive regulation. They are even more offended by “behavioral advertising” which allows publishers whose content would have little value as the basis for contextually targeting advertising on their own sites to compete for more highly valued advertising by showing ads to users based on other sites they’ve visited. In both cases, data collection can increase the funding available to publishers to produce more of the content and services preferred by users, thus conferring an enormous indirect benefit on users, but also directly benefits users by increasing the relevance of the advertising they see.^[49] For some of the more extreme advocates of privacy regulation, however, there are no trade-offs, only absolutist “solutions:” To them, privacy is so obviously desirable that they feel at ease in deciding what’s best for everyone else. Such absolutists often respond with righteous indignation and conspiratorial fulmination when challenged to identify the harm against which they’re protecting consumers, while disdainfully dismissing all talk of the benefits of online advertising as self-serving industry propaganda.^[50]

VII. The Principled Alternative: Trust People & Empower Them

There is an alternative to this elitist mentality: freedom and personal responsibility. Individuals should be permitted to live a life of their own, even if they sometimes make mistakes or choices that are at odds with what elites think is best for them. ^[51]

Of course, the world isn’t perfect. In an ideal world, adults would be fully empowered to tailor speech and privacy decisions to their own values and preferences. Specifically, in an ideal world, adults (and parents) would have (1) the information necessary to make informed decisions and (2) the tools and methods necessary to act upon that information. Importantly, those tools and methods would give them the ability to not only block the things they don’t like—objectionable content, annoying ads or the collection of data about them—while also finding the things they want.

Achieving that ideal is likely impossible, but the good news is that we are moving closer to it with each passing day. Citizens have more tools and methods at their disposal than ever before which enable them to make decisions for themselves and their families. And this is true for both parental controls ^[52] and privacy controls.^[53]

Of course, some speech and privacy elitists will argue that we can’t trust empowerment tools ( e.g., filters, rating systems, or other controls) that are created by companies or other affected parties. But rather than trying to enhance those tools and educate users about how to use them, these elitists skip right past user empowerment and channel their energies into regulations that would impose a top-down, one-size-fits all standard on all adults and families—or even into trying to craft the perfect “nudge” that will help users make what elites believe to be the “right” decisions. Of course, these tools can, and should, be improved. Those groups worried about speech/content and privacy issues should focus on how we might drive such protections from the bottom-up by empowering individuals instead of government bureaucrats. The goal in both cases should be a “let-a-thousand-flowers-bloom” approach, which offers diverse tools and strategies for our diverse citizenry.^[54] We need not accept “one-size-fits” all approaches, whether they be regulatory mandates or “nudges,” based on the presumption that elites know best.

Finally, it is vital not to lose sight of what’s ultimately at stake here. If regulatory approaches trump the empowerment agenda we have described, the future of a free and open Internet—indeed, as technology converges, the future of all media—is at risk.^[55] By imposing technological solutions from the top-down that can never keep pace with technological change, regulation necessarily forecloses freedom and innovation.^[56] By contrast, individual empowerment allows innovation to flourish. The better approach across the board is education, not regulation.^[57] Empowerment, not elitism, is the path forward. The digital elite should be leading this effort by developing and promoting technologies of empowerment, not crafting regulatory mandates to force their will upon us.^[58]

#

Adam Thierer is a Senior Fellow with The Progress & Freedom Foundation and the director of its Center for Digital Media Freedom. Berin Szoka  is a Senior Fellow with PFF and the Director of PFF’s Center for Internet Freedom.

[1] . William A. Henry, In Defense of Elitism (1995) at 2-3.

[2] . See Adam Thierer, The Progress & Freedom Foundation, Congress, Content Regulation, and Child Protection: The Expanding Legislative Agenda, Progress Snapshot 4.4, Feb. 2008, www.pff.org/issues-pubs/ps/2008/ps4.4childprotection.html. Like American courts, we use the term “speech” as a broad catch-all for communications, including both actual speaking as well as other forms of transmitting, as well as receiving, information (“content”).

[3] . See generally Adam Thierer, Don’t Scapegoat Media, USA Today, Dec. 4, 2008, www.pff.org/issues-pubs/ps/2008/ps4.24scapegoatmedia.html; Marjorie Heins, Not in Front of the Children, “Indecency,” Censorship, and the Innocence of Youth (2001); Karen Sternheimer, It’s Not the Media: The Truth about Pop Culture’s Influence on Children (2003); Karen Sternheimer, Kids These Days: Facts and Fictions about Today’s Youth (2006).

[4] . See Adam Thierer, The Progress & Freedom Foundation, FCC Violence Report Concludes that Parenting Doesn’t Work, PFF Blog, Apr. 26, 2007, http://blog.pff.org/archives/2007/04/fcc_violence_re.html.

[5] . See Adam Thierer, The Progress & Freedom Foundation, Sen. Rockefeller Gives Up on Parenting at Senate Violence Hearing, PFF Blog, June 26, 2007, blog.pff.org/archives/2007/06/sen_rockefeller_1.html.

[6] . Adam Thierer, Conservatives, Porn, and “Community Standards,” The Technology Liberation Front, March 2, 2009, http://techliberation.com/2009/03/02/conservatives-porn-and-community-standards.

[7] . Berin Szoka & Adam Thierer, The Progress & Freedom Foundation, Online Advertising & User Privacy: Principles to Guide the Debate, Progress Snapshot 4.19, Sept. 2008, www.pff.org/issues-pubs/ps/2008/ps4.19onlinetargeting.html.

[8] . Jeff Chester, for decades the great gadfly of American advertising, has decried “the system … developed to track each and every one of us and our behavior for one-on-one marketing efforts” as “manipulative, intrusive and un-democratic.” Wendy Melillo, Q&A: Chester Writes the Book on Privacy, Dec. 11, 2007, www.gfem.org/node/227. For instance, Chester and other leading “privacy advocates” ridicule the idea of smart phones as a “liberating technology” and insist that,

Despite the glowing words about customization and personalized service, what marketers and advertisers are increasingly offering consumers is merely the illusion of free choice. Mobile operators offer their various options and services, not on an individual basis, but preconfigured according to segmented demographic profiles.

Center for Digital Democracy and U.S. Public Interest Research Group, Complaint and Request for Inquiry and Injunctive Relief Concerning Unfair and Deceptive Mobile Marketing Practices, Jan. 13, 2009 (emphasis original), www.democraticmedia.org/files/FTCmobile_complaint0109.pdf. See generally Berin Szoka & Adam Thierer, The Progress & Freedom Foundation, Targeted Online Advertising: What’s the Harm & Where Are We Heading?, Progress on Point 16.2, Feb. 2009, www.pff.org/issues-pubs/pops/2009/pop16.2targetonlinead.pdf.

[9] . Berin Szoka & Adam Thierer, The Progress & Freedom Foundation, COPPA 2.0: The New Battle over Privacy, Age Verification, Online Safety & Free Speech, Progress on Point 16.11, May 2009, www.pff.org/issues-pubs/pops/2009/pop16.11-COPPA-and-age-verification.pdf.

[10] . The Supreme Court has used a “right to privacy” to strike down laws against the use of contraception by married couples, Griswold v Connecticut, 381 U.S. 479 (1965), and abortion, Roe v. Wade, 410 U.S. 113 (1973).

[11] . Eugene Volokh, Freedom of Speech and Information Privacy: The Troubling Implications of a Right to Stop People From Speaking About You, 52 Stanford L. Rev. 1049 (2000), available at www.pff.org/issues-pubs/pops/pop7.15freedomofspeech.pdf.

[12] . See , Amicus Brief for Association Of National Advertisers, Cato Institute, Coalition For Healthcare Communication, Pacific Legal Foundation And The Progress & Freedom Foundation In Support Of Appellants, IMS Health v. Sorrell, No. 09-1913-cv(L), 09-2056-cv(CON) (2nd Cir. 2009), available at www.pff.org/issues-pubs/filings/2009/071309-Brief-Amici-Curiae-ANA-et-al-Second-Circuit-(09-1913-cv).pdf.

[13] . See Adam Thierer, The Progress & Freedom Foundation, Social Networking and Age Verification: Many Hard Questions; No Easy Solutions, Progress on Point No. 14.5, March 2007, www.pff.org/issues-pubs/ pops/pop14.8ageverificationtranscript.pdf; www.pff.org/issues-pubs/pops/pop14.5ageverification.pdfAdam Thierer, The Progress & Freedom Foundation, Statement Regarding the Internet Safety Technical Task Force’s Final Report to the Attorneys General, Jan. 14, 2008, www.pff.org/issues-pubs/other/090114ISTTFthiererclosingstatement.pdf; Nancy Willard, Why Age and Identity Verification Will Not Work—And is a Really Bad Idea, Jan. 26, 2009, www.csriu.org/PDFs/digitalidnot.pdf; Jeff Schmidt, Online Child Safety: A Security Professional’s Take, The Guardian, Spring 2007, www.jschmidt.org/AgeVerification/Gardian_JSchmidt.pdf.

[14] . Adam Thierer, The Progress & Freedom Foundation, Mandatory Data Retention: How Much is Appropriate, PFF Blog, June 26, 2006, http://blog.pff.org/archives/2006/06/mandatory_data.html

[15] . Adam Thierer, The Progress & Freedom Foundation, The Perils of Mandatory Parental Controls and Restrictive Defaults, Progress on Point 14.4, Apr. 11, 2008, www.pff.org/issues-pubs/pops/2008/pop15.4defaultdanger.pdf.

[16] . Adam Thierer, China’s Green Dam Filter and the Threat of Rising Global Censorship, PFF Blog, June 17, 2009, http://blog.pff.org/archives/2009/06/chinas_green_dam_filter_and_threat_of_rising_globa.html

[17] . They define choice architecture as follows: “A structure designed by a choice architect(s) to improve the quality of decisions made by homo sapiens. Often invisible, choice architecture is the specific user-friendly shape of an organization’s policy or physical building when homo sapiens come into contact with it. Examples of choice architecture include a voter ballot, a procedure for handling well-meaning people who forget a deadline, or a skyscraper.” Nudge Glossary of Terms, www.nudges.org/glossary.cfm.

[18] . Lawrence Lessig, Code and Other Laws of Cyberspace (1999) at 6.

[19] . See Adam Thierer, Code, Pessimism, and the Illusion of “Perfect Control,” Cato Unbound, May 2009, www.cato-unbound.org/2009/05/08/adam-thierer/code-pessimism-and-the-illusion-of-perfect-control

[20] . See Solveig Singleton & Jim Harper, With A Grain of Salt: What Consumer Privacy Surveys Don’t Tell Us, 2001, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=299930.

[21] . As Cato Institute scholar Will Wilkinson has argued, the book’s “agreeably banal doctrine of choice-preserving helpfulness” blurs the lines between paternalism and libertarianism, and thus “the thrust of the conceptual renovation behind the term libertarian paternalism is to empower, not limit, political elites.” Why Opting Out Is No “Third Way,” Reason, October 2008, www.reason.com/news/show/128916.html. See also Adam Thierer, The Progress & Freedom Foundation, Sunstein’s “Libertarian Paternalism” is Really Just Paternalism, PFF Blog, April 7, 2008, http://blog.pff.org/archives/2008/04/sunsteins_liber.html.

[22] . See Robert Corn-Revere, “’Voluntary’ Self-Regulation and the Triumph of Euphemism,” in Rationales & Rationalizations: Regulating the Electronic Media (Robert Corn-Revere, ed., 1997), at 183-208.

[23] . Telecom Policy Report, Commission Settles Indecency Charges, But At What Cost?, June 30, 2004, http://findarticles.com/p/articles/mi_m0PJR/is_25_2/ai_n6091525.

[24] . See Adam Thierer, XM-Sirius, Regulatory Blackmail, and Diversity, June 17, 2008, http://blog.pff.org/archives/2008/06/xmsirius_regula.html.

[25] . See Comments of W. Kenneth Ferree on Implementation of Sirius-XM Merger Condition, The Progress & Freedom Foundation, MB Docket No. 07-57, March 30, 2009, www.pff.org/issues-pubs/filings/2009/033009siriusXMconditionfiling.pdf.

[26] . See Szoka & Adam Thierer, supra note 8 at 3.

[27] . See id. at 2.

[28] . Thomas Sowell, The Vision of the Anointed: Self-Congratulation as a Basis for Social Policy (1995) at 5.

[29] . Alice Marwick, To Catch a Predator? The MySpace Moral Panic, First Monday, Vol. 13, No. 6-2, June 2008, www.uic.edu/htbin/cgiwrap/bin/ojs/index.php/fm/article/view/2152/1966; Wade Roush, The Moral Panic over Social Networking Sites, Technology Review, Aug. 7, 2006, www.technologyreview.com/communications/17266; Anne Collier, Why Techopanics are Bad, Net Family News, April 23, 2009, www.netfamilynews.org/2009/04/why-technopanics-are-bad.html; Adam Thierer, Parents, Kids & Policymakers in the Digital Age: Safeguarding Against ‘Techno-Panics,’ Inside ALEC, July 2009, at 16-17, www.alec.org/am/pdf/Inside_July09.pdf; Adam Thierer, Progress & Freedom Foundation, Technopanics and the Great Social Networking Scare, PFF Blog, June 10, 2008, http://techliberation.com/2008/07/10/technopanics-and-the-great-social-networking-scare.

[30] . Supra note 13.

[31] . In the 109th Congress, former Rep. Michael Fitzpatrick (R-PA) introduced the Deleting Online Predators Act (DOPA), which proposed a ban on social networking sites in public schools and libraries. DOPA passed the House of Representatives shortly thereafter by a lopsided 410-15 vote, but failed to pass the Senate. The measure was reintroduced just a few weeks into the 110th Congress by Senator Ted Stevens (R-AK), the ranking minority member and former chairman of the Senate Commerce Committee. It was section 2 of a bill that Sen. Stevens sponsored titled the “Protecting Children in the 21st Century Act” (S. 49), but was later removed from the bill. See Declan McCullagh, Chat Rooms Could Face Expulsion, CNet News.com, July 28, 2006, http://news.com.com/2100-1028_3-6099414.html?part=rss&tag=6099414&subj=news.

[32] . See Emily Steel & Julia Angwin, MySpace Receives More Pressure to Limit Children’s Access to Site, Wall Street Journal, June 23, 2006, online.wsj.com/public/article/SB115102268445288250-YRxkt0rTsyyf1QiQf2EPBYSf7iU_20070624.html; Susan Haigh, Conn. Bill Would Force MySpace Age Check, Yahoo News.com, March 7, 2007, www.msnbc.msn.com/id/17502005.

[33] . See, e.g., Letter of Henry McMaster, Attorney General, South Carolina to Attorney General Richard Blumenthal and Attorney General Roy Cooper Regarding Internet Safety Task Force (“ISTTF”) Report, January 14, 2009, www.scag.gov/newsroom/pdf/2009/internetsafetyreport.pdf

[34] . See Adam Thierer, The Progress & Freedom Foundation, Video Games and “Moral Panic,” PFF Blog, Jan. 23, 2009, http://blog.pff.org/archives/2009/01/video_games_and_moral_panic.html ; Adam Thierer, The Progress & Freedom Foundation, Fact and Fiction in the Debate over Video Game Regulation, Progress Snapshot 13.7, March 2006, www.pff.org/issues-pubs/pops/pop13.7videogames.pdf.

[35] . “All varieties of interference with the market phenomena not only fail to achieve the ends aimed at by their authors and supporters, but bring about a state of affairs which—from the point of view of their authors’ and advocates’ valuations—is less desirable than the previous state affairs which they were designed to alter. If one wants to correct their manifest unsuitableness and preposterousness by supplementing the first acts of intervention with more and more of such acts, one must go farther and farther until the market economy has been entirely destroyed and socialism has been substituted for it.” Ludwig von Mises, Human Action, at 858 (3rd ed. 1963) (1949).

[36] . See generally Adam Thierer, The Progress & Freedom Foundation, Media Myths: Making Sense of the Debate over Media Ownership (2005) at 119-123, www.pff.org/issues-pubs/books/050610mediamyths.pdf (Explaining how the third-person effect serves as a powerful explanation for the heated backlash that followed an FCC effort to moderately liberalize media ownership rules in 2003-04).

[37] . W. Phillips Davison, The Third-Person Effect in Communication, 47 Public Opinion Quarterly 1, Spring 1983, at 3.

[38] . For the best overview of third-person effect research, see Douglas M. McLeod, Benjamin H. Detenber, and William P. Eveland., Jr., Behind the Third-Person Effect: Differentiating Perceptual Processes for Self and Other, 51 Journal of Communication, Vol. 51, No. 4, 2001, at 678-695.

[39] . Vincent Price, David H. Tewksbury & Li-Ning Huang, Third-person Effects of News Coverage: Orientations Toward Media, Journalism & Mass Communications Quarterly, Vol. 74, at 525-540.

[40] . Douglas M. McLeod, William P. Eveland & Amy I. Nathanson, Support for Censorship of Violent and Misogynic Rap Lyrics: And Analysis of the Third-Person Effect, Communications Research, Vol. 24, 1997, at 153-174.

[41] . Hernando Rojas, Dhavan V. Shah, and Ronald J. Faber, For the Good of Others: Censorship and the Third-Person Effect, International Journal of Public Opinion Research, Vol. 8, 1996, at 163-186.

[42] . James D. Ivory, Addictive, But Not For Me: The Third-Person Effect and Electronic Game Players’ Views Toward the Medium’s Potential for Dependency and Addiction, University of North Carolina at Chapel Hill, School of Journalism and Mass Communication, Aug. 2002.

[43] . Albert C. Gunther, Overrating the X-rating: The Third-person Perception and Support for Censorship of Pornography, Journal of Communication, Vol. 45, No. 1, 1995, at 27-38

[44] . Supra note 37 at 14. Along these lines, a December 2004 Washington Post article documented the process by which the Parents Television Council, a vociferous censorship advocacy group, screens various television programming. One of the PTC screeners interviewed for the story talked about the societal dangers of various broadcast and cable programs she rates, but then also noted how much she personally enjoys HBO’s “The Sopranos” and “Sex and the City,” as well as ABC’s “Desperate Housewives.” Apparently, in her opinion, what’s good for the goose is not good for the gander! See Bob Thompson, Fighting Indecency, One Bleep at a Time, The Washington Post, Dec. 9, 2004, at C1, www.washingtonpost.com/wp-dyn/articles/A49907-2004Dec8.html.

[45] . See Chris Anderson, Free: The Future of a Radical Price at 112-118 (2009).

[46] . See Letter from Chris Jay Hoofnagle, Electronic Privacy Information Center, Beth Givens, Privacy Rights Clearinghouse, Pam Dixon, World Privacy Forum, to California Attorney General Lockyer, May 3, 2004, http://epic.org/privacy/gmail/agltr5.3.04.html.

[47] . See email from Adam Thierer to Declan McCullaugh on Politech Email discussion group, April 30, 2004, http://lists.jammed.com/politech/2004/04/0083.html (emphasis added).

[48] . See Complaint and Request for Injunction of the Electronic Privacy Information Center against Google, Inc., March 17, 2009, http://epic.org/privacy/cloudcomputing/google/ftc031709.pdf; see also Ryan Radia, Should the FTC Shut Down Gmail and Google Docs Because of an Already-Fixed Bug?, Technology Liberation Front Blog, March 18, 2009, http://techliberation.com/2009/03/18/should-the-ftc-shut-down-gmail-and-google-docs-because-of-an-already-fixed-bug/.

[49] . See Berin Szoka & Mark Adams, The Progress & Freedom Foundation, The Benefits of Online Advertising & the Costs of Regulation, PFF Working Paper, forthcoming.

[50] . Anti-advertising crusader Jeff Chester often resorts to questioning the motives of those who question whether his regulatory prescriptions would actually benefit consumers, see, e.g., http://techliberation.com/2009/06/17/behavioral-advertising-industry-practices-hearing-some-issues-that-need-to-be-discussed/#comment-11698840. See generally Jeff Chester, Digital Destiny: New Media and the Future of Democracy (2007).

[51] . “The only freedom which deserves the name is that of pursuing our own good in our own way, so long as we do not attempt to deprive others of theirs or impede their efforts to obtain it. Each is the proper guardian of his own health, whether bodily or mental and spiritual.” John Stuart Mill, On Liberty (Penguin Classics, 1859, 1986) at 72.

[52] . Adam Thierer, The Progress & Freedom Foundation, Parental Controls & Online Child Protection, Special Report, Version 4.0, Summer 2009, www.pff.org/parentalcontrols.

[53] . Adam Thierer, Berin Szoka & Adam Marcus, The Progress & Freedom Foundation, Privacy Solutions, PFF Blog, Ongoing Series, http://blog.pff.org/archives/ongoing_series/privacy_solutions.

[54] . Comments of Adam Thierer, The Progress & Freedom Foundation, In the Matter of Implementation of the Child Save Viewing Act; Examination of Parental Control Technologies for Video or Audio Programming; MB Docket No. 09-26, April 16, 2009, www.pff.org/issues-pubs/filings/2009/041509-%5bFCC-FILING%5d-Adam-Thierer-PFF-re-FCC-Child-Safe-Viewing-Act-NOI-(MB-09-26).pdf.

[55] . See Adam Thierer, FCC v. Fox and the Future of the First Amendment in the Information Age, Engage, Feb. 20, 2009, www.fed-soc.org/doclib/20090216_ThiererEngage101.pdf

[56] . “To act on the belief that we possess the knowledge and the power which enable us to shape the processes of society entirely to our liking, knowledge which in fact we do not possess, is likely to make us do much harm.” Friedrich von Hayek, “The Pretence of Knowledge,” in The Essence of Hayek, (Hoover Inst., 1984), at 276.

[57] . Adam Thierer, The Progress & Freedom Foundation, Two Sensible, Education-Based Legislative Approaches to Online Child safety, Progress Snapshot 3.10, Sept. 2007, www.pff.org/issues-pubs/ps/2007/ps3.10safetyeducationbills.pdf.

[58] . See, e.g., Berin Szoka, Google, CDT, Online Advertising & Preserving Persistent User Choice Across Ad Networks Through Plug-ins, Technology Liberation Front Blog, March 13, 2009, http://techliberation.com/2009/ 03/13/google-cdt-online-advertising-preserving-persistent-user-choice-across-ad-networks-through-plug-ins/.

I’ve just had a new article published by the American Legislative Exchange Council (ALEC) in which I make the case against “techno-panics,” which refers to public and political crusades against the use of new media or technologies by the young. The article is entitled “Parents, Kids & Policymakers in the Digital Age: Safeguarding Against ‘Techno-Panics‘” and it appears in the July 2009 Inside ALEC newsletter.  This is something I have spent a lot of time writing about here in recent years (See 1, 2, 3, 4, 5) and I finally got around to putting it altogether in a concise essay here.  I have pasted the full text below. [And I just want to send a shout-out to my friend Anne Collier of Net Family News.org, whose work on this topic has been very influential on my thinking.]

“Parents, Kids & Policymakers in the Digital Age: Safeguarding Against ‘Techno-Panics‘” by Adam Thierer

A cursory review of the history of media and communications technologies reveals a reoccurring cycle of “techno-panics” — public and political crusades against the use of new media or technologies by the young.  From the waltz to rock-and-roll to rap music, from movies to comic books to video games, from radio and television to the Internet and social networking websites, every new media format or technology has spawned a fresh debate about the potential negative effects they might have on kids.

Inevitably, fueled by media sensationalism and various activist groups, these social and cultural debates quickly become political debates. Indeed, each of the media technologies or outlets mentioned above was either regulated or threatened with regulation at some point in its history. And the cycle continues today. During recent sessions of Congress, countless hearings were held and bills introduced on a wide variety of media and content-related issues. These proposals dealt with broadcast television and radio programming, cable and satellite television content, video games, the Internet, social networking sites, and much more.  State policymakers, especially state Attorneys General (AGs), have also joined in such crusades on occasion.  The recent push by AGs for mandatory age verification for all social networking sites is merely the latest example.

What is perhaps most ironic about these techno-panics is how quickly yesterday’s boogeyman becomes tomorrow’s accepted medium, even as the new villains replace old ones.  For example, the children of the 1950s and 60s were told that Elvis’s hip shakes and the rock-and-roll revolution would make them all the tools of the devil. They grew up fine and became parents themselves, but then promptly began demonizing rap music and video games in the ‘80s and ‘90s.  And now those aging Pac Man-era parents are worried sick about their kids being abducted by predators lurking on MySpace and Facebook. We shouldn’t be surprised if, a decade or two from now, today’s Internet generation will be decrying the dangers of virtual reality.

These techno-panics are almost always disproportionate to the real risk posed by new media and technology, which typically do not have the corrupting influence on youth that older generations fear.  Parents and public policymakers alike need to remember they were once kids, too, and managed to live through many of the same fears and concerns about media and popular culture. As the late University of North Carolina journalism professor Margaret A. Blanchard once noted: “[P]arents and grandparents who lead the efforts to cleanse today’s society seem to forget that they survived alleged attacks on their morals by different media when they were children. Each generation’s adults either lose faith in the ability of their young people to do the same or they become convinced that the dangers facing the new generation are much more substantial than the ones they faced as children.” And Thomas Hine, author of The Rise and Fall of the American Teenager, argues that: “We seem to have moved, without skipping a beat, from blaming our parents for the ills of society to blaming our children. We want them to embody virtues we only rarely practice. We want them to eschew habits we’ve never managed to break.”

The better response by both parents and policymakers is a measured and balanced approach to children’s exposure to media content and online interactions.  All-or-nothing extremes are never going to work.  In particular, techno-panics are hopelessly counter-productive. “Fear, in many cases, is leading to overreaction, which in turn could give rise to greater problems as young people take detours around the roadblocks we think we are erecting,” argue John Palfrey and Urs Gasser, authors of Born Digital: Understanding the First Generation of Digital Natives. What parents, educators, and policymakers need to understand, they argue, “is that the traditional values and common sense that have served them well in the past will be relevant in this new world, too.”

Most simply, we need to be willing to talk to our kids about the new technologies and cultural developments that shape their generation. When we as parents (or policymakers) do not fully comprehend or appreciate the new-fangled gadget in our kids’ pocket—or whatever they are playing, watching, or listening to on it—instead of engaging in demagoguery and driving a wedge between us and them, we should instead invite them to have a conversation with us about it.  Ask three simple questions to get that conversation started: “What is this new thing all about?”  “Tell me how you use it.”  “Why is it important to you?”  Once you’ve got them talking to you, good ‘ol fashion common sense and timeless parenting principles should kick in. “Do you understand why too much of this might be bad for you?” “Will you please come talk to me if you don’t understand something you’ve seen or heard?” And so on.

In sum, it’s about parental responsibility and rational, measured responses. The “techno-panic” mentality, by contrast, creates distrust and distance between our kids and us. As Anne Collier of Net Family News notes, techno-panics “cause fear, which interferes with parent-child communication, which in turn puts kids at greater risk.”

Parents and policymakers need to engage kids in an ongoing conversation about the technologies du jour—even when we don’t fully understand or appreciate them.

————— [printable Scribd version follows] —————

“Against Techno-Panics” by Adam Thierer, PFF (July 2009 – Inside ALEC) http://d.scribd.com/ScribdViewer.swf?document_id=17392730&access_key=key-2gdkqylyeu5h376buyyi&page=1&version=1&viewMode=

As anyone who has spent time searching for comments on the FCC’s website can tell you, the agency doesn’t exactly have the most user-friendly website.  In the interest of making it easier for others to read the comments that came in last week in the agency’s “Child Safe Viewing Act” Notice of Inquiry, I have compiled all the major comments (those over 3 or 4 pages) and provided links to them below the fold.

Again, this proceeding was required under the “Child Safe Viewing Act of 2007,” which Congress passed last year and President Bush signed last December. The goal of the bill and the FCC’s proceeding (MB 09-26) is to study “advanced blocking technologies” that “may be appropriate across a wide variety of distribution platforms, including wired, wireless, and Internet platforms.”  I filed 150+ pages worth of comments in this matter last week, and here’s my analysis of why this bill and the FCC’s proceeding are worth monitoring closely.

• Association of National Advertisers (ANA)
• AT&T
• Center for Democracy & Technology (Individual Comments)
• CDT (Joint Comments with other Public Interest Groups)
• Children’s Media Policy Coalition
• Coalition for Independent Ratings
• Comcast
• Common Sense Media
• Consumer Electronic Association (CEA)
• CTIA – The Wireless Association
• Cox Communications
• CustomPlay
• Digimarc Corp
• Digital Watermarking Alliance
• Digital Media Association
• Dish Network
• DirecTV
• Entertainment Software Association (ESA)
• Family Online Safety Institute (FOSI)
• Google (+ attachments A, B, C)
• Motion Picture Association of America (MPAA)
• Microsoft
• NAB + NCTA + MPAA (0n TV Guidelines)
• National Cable & Telecommunications Association (NCTA)
• Progress & Freedom Foundation (PFF)
• Sanyo
• Smart Television Alliance
• Sprint-Nextel
• TiVo
• TV Guardian
• TV Watch
• U.S. Telecom Association
• Verizon & Verizon Wireless
• Wi-LAN V-Chip Corp

Today I filed comments with the Federal Communications Commission (FCC) in its proceeding examining the marketplace for “advanced blocking technologies.”  This proceeding was required under the “Child Safe Viewing Act of 2007,” which Congress passed last year and President Bush signed last December. The goal of the bill and the FCC’s proceeding (MB 09-26) is to study “advanced blocking technologies” that “may be appropriate across a wide variety of distribution platforms, including wired, wireless, and Internet platforms.”  My colleagues will no doubt laugh about the fact that I have dropped an absurd 150 pages worth of comments on the FCC in this matter, but I had a lot to say on this topic!  Parental controls, child safety, and free speech issues have been the focus of much of my research agenda over the past 10 years.

In my filing, I argue that the FCC should tread carefully in this matter since the agency has no authority over most of the media platforms and technologies described in the Commission’s recent Notice of Inquiry.  Moreover, any related mandates or regulatory actions in in this area could diminish future innovation in this field and would violate the First Amendment rights of media creators and consumers alike.  The other major conclusions of my filing are as follows:

• There exists an unprecedented abundance of parental control tools to help parents decide what constitutes acceptable media content in their homes and in the lives of their children.
• There is a trade-off between complexity and convenience for both tools and ratings, and no parental control tool is completely foolproof.
• Most homes have no need for parental control technologies because parents rely on other methods or there are no children in the home.
• The role of household media rules and methods is underappreciated and those rules have an important bearing on this debate.
• Parental control technologies work best in combination with educational efforts and parental involvement.
• The search for technological silver-bullets and “universal” solutions represent a quixotic, Holy Grail-like quest and it will destroy innovation in this marketplace.
• Enforcement of “household standards” made possible through use of parental controls and other methods negates the need for “community standards”-based content regulation.

My entire filing can be found here and down below in a Scribd reader.  All comments in the matter are due tomorrow and then reply comments are due on May 18th.

[FCC FILING] Adam Thierer-PFF Re Child Safe Viewing Act NOI (MB 09-26) http://d.scribd.com/ScribdViewer.swf?document_id=14264143&access_key=key-2nrvjm96q9cl5vep567l&page=1&version=1&viewMode=

Today, it was my great privilege to guest lecture at Princeton University’s Center for Information Technology Policy. Under the leadership of Ed Felten, who also runs the excellent “Freedom to Tinker” blog, the CITP has quickly become one of America’s premier institutions in the field of IT policy matters. David Robinson, who some of you will remember from his days as an editor at The American, serves as associate director of the CITP program and was kind enough to invite me to speak.  And our own Tim Lee is currently studying there as well.  I wish I was smart enough to get into that program!

The topic of my talk was “The Future of the First Amendment in an Age of Technological Convergence” and I used the opportunity to create a narrated video of this presentation, which I have made to several other groups through the years. In this presentation, I talk about “America’s First Amendment Twilight Zone,” which refers to the fact that identical words and images are being regulated in completely different ways today depending on the mode of transmission. This illogical and unfair situation could eventually threaten the Internet, video games, and all new media with many of the misguided regulations that have long been imposed on broadcast television and radio operators. In my presentation, which you can watch below, I make the case for changing our First Amendment regime to ensure “bit equality”; all speech and media platforms should be accorded the gold standard of First Amendment protection.

The presentation is based upon several other essays, court filings, and law review articles I have written on the topic, including:

• “Why Regulate Broadcasting: Toward a Consistent First Amendment Standard for the Information Age,” by Adam Thierer, 7/10/07.
• “FCC v. Fox and the Future of the First Amendment in the Information Age,” by Adam Thierer, 1/20/09.
• Joint Amicus Brief of The Center for Democracy & Technology and The Progress & Freedom Foundation, U.S. Supreme Court in the matter of FCC v. Fox Television Stations, by Adam Thierer, John B. Morris, Jr., and Sophia Cope, August 8, 2008

I was over at the Federal Communications Commission (FCC) the other day chatting with someone about various regulatory issues and Rush Limbaugh’s WSJ editorial came up.  The person I was speaking with made a comment about how conservatives have really been energized and unified in opposition to the re-imposition to the Doctrine.  I reminded them, however, that it wasn’t always the case that conservatives stood together in the fight over the Fairness Doctrine.  In fact, when I first came to town almost 20 years ago, there were still plenty of conservatives who actually favored it.  I was reminded of that fact when reading a new piece in Engage about “Broadcast ‘Fairness’ in the Twenty-First Century” by my friend Robert Corn-Revere.  Bob is one America’s great First Amendment defenders and his new essay offers an excellent history of efforts to micro-manage speech on the broadcast airwaves over the years.  In it, he reminds us that:

Given the recent vocal opposition to the Fairness Doctrine in the interest of preserving conservative talk radio, it is easy to forget that many prominent conservatives championed the doctrine before its demise. Phyllis Schlafly was a vocal proponent of the Fairness Doctrine because of what she described as “the outrageous and blatant anti-Reagan bias of the TV network newscasts,” and she testified at the FCC in the 1980s in support of the policy “to serve as a small restraint on the monopoly power wielded by Big TV Media.” Senator Jesse Helms was another long-time advocate of the Fairness Doctrine, and conservative groups Accuracy in Media and the American Legal Foundation actively pursued fairness complaints at the FCC against network newscasts.

Likewise, in our book, A Manifesto for Media Freedom, Brian Anderson and I note that some other prominent right-leaning politicians, such as Sen. Trent Lott, favored the Fairness Doctrine.  Moreover, even though most of those conservative individuals and groups have now turned against the Fairness Doctrine, some Republicans still defend (or even seek to expand) the same underlying regulatory concepts that served as the foundation of the Fairness Doctrine.  As Corn-Revere notes:

More recently, a Republican-controlled FCC under Kevin Martin has advocated far more extensive controls over broadcast and cable programming, including news and public affairs. These proposed regulations include requirements governing local programming, restrictions on the use of video news releases, and other new rules that would extend content controls beyond broadcasting. These initiatives have been embraced by liberal media activists, who have said they will seek to ensure that the FCC under the Democrats will adopt and enforce the proposals of the Martin Commission.  The common denominator of the liberal and conservative factions is the overriding belief that traditional First Amendment protections should not be applied to broadcasting or other electronic media.

Unfortunately, Bob’s got it exactly right: You really can’t trust anyone on the Left or Right to make a principled or consistent argument in favor of First Amendment freedoms across the board, including for broadcasting. I have made that point in greater detail in my recent essay on “FCC v. Fox and the Future of the First Amendment” as well as this old law review article, “Why Regulate Broadcasting: Toward a Consistent First Amendment Standard for the Information Age.”

Simply stated, proposals to regulate speech — especially speech delivered over broadcast TV and radio platforms — can emanate from either side of the political aisle.  Of course, each side has their own set of rationales for imposing controls on speech and violating the First Amendment. It often comes down to content restraint (the conservative justification) versus content promotion (the liberal justification).  In his excellent book, The Creation of Media: Political Origins of Modern Communications, media historian Paul Starr labels these different groups the “advocates of repression” (those in favor of content restraint), versus the “advocates of uplift” (those in favor of promoting specific types of content). Typically, conservatives and Republicans have dominated the “advocates of repression” camp, while most liberals and Democrats fall in the “advocates of uplift” category.  Ford Rowan, author of the book Broadcast Fairness, put it this way: “Many liberals want regulation to make broadcasting do wonderful things; many conservatives want regulation to restrain broadcasting from doing terrible things.”

Increasingly, however, the ideological divide is disappearing between these two camps. Congressional lawmakers such as former Sen. Hillary Clinton (D-NY) and Sen. Joseph Lieberman (D-Conn.) on the political Left often favor the same content controls and mandates that Sen. John McCain (R-Ariz.) and Sen. Sam Brownback (R-Kan.) on the political Right. That’s true not just of broadcast regulation, but for proposals to censor video games, the Internet, and social networking sites.  And, even when it comes to the Fairness Doctrine, until just recently there was “a vast bipartisan conspiracy” to keep it on the books, as Corn-Revere argues.  I’m glad those conservatives who once favored the Fairness Doctrine came around to seeing the error in the ways.  Nonetheless, this episode illustrates how, once again, those of us who care about free speech and expression must remain vigilant in defending the First Amendment from attacks by both conservatives and liberals.

My new article on “FCC v. Fox and the Future of the First Amendment” has just been published in the February 2009 edition of Engage, the journal of the Federalist Society. Here’s how it begins:

On November 4th, 2008, the Supreme Court heard oral arguments in the potentially historic free speech case of Federal Communications Commission v. Fox Television Stations, Inc. This case, which originated in the Second Circuit Court of Appeals, deals with the FCC’s new policy for “fleeting expletives” on broadcast television. The FCC lost and appealed to the Supreme Court. By contrast, the so-called “Janet Jackson case” — CBS v. FCC — was heard in the Third Circuit Court of Appeals. The FCC also lost that case and has also petitioned the Supreme Court to review the lower court’s ruling. These two cases reflect an old and odd tension in American media policy and First Amendment jurisprudence. Words and images presented over one medium-in this case broadcast television-are regulated differently than when transmitted through any other media platform (such as newspapers, cable TV, DVDs, or the Internet). Various rationales have been put forward in support of this asymmetrical regulatory standard. Those rationales have always been weak, however. Worse yet, they have opened the door to an array of other regulatory shenanigans, such as the so-called Fairness Doctrine, and many other media marketplace restrictions. Whatever sense this arrangement made in the past, technological and marketplace developments are now calling into question the wisdom and efficacy of the traditional broadcast industry regulatory paradigm. This article will explore both the old and new rationales for differential First Amendment treatment of broadcast television and radio operators and conclude that those rationales: (1) have never been justified, and (2) cannot, and should not, survive in our new era of media abundance and technological convergence.

I go on in the piece to make the case against the those rationales and the call for the Supreme Court to use the Fox and CBS cases to end this historical First Amendment anomaly of differential treatment of broadcast platforms relative to all other media providers.

This article can be downloaded as a PDF here, or viewed down below the fold in the Scribd reader.

FCC v Fox and Future of First Amendment (Thierer-PFF) http://d.scribd.com/ScribdViewer.swf?document_id=12683998&access_key=key-epitk15wtp38l34jow7&page=1&version=1&viewMode=list

[This represents a bit of a departure from the traditional format of my ongoing “Media Deconsolidiation Series,” but you will see how it ties in…]

So, some guy from the (Un)Free Press — the activist group that wants to regulate every facet of the media and broadband universe — has created a scary looking chart about “Information Control” [seen below]. It’s based loosely on the Periodic Table of Elements, you know, to give it the aura of science and fact. In reality, it’s just another silly scare tactic that tells us very little about the true nature of our modern media marketplace.

The chart is accompanied by the typical Free Press gloom-and-doom rhetoric about the unfolding media apocalypse. “Nearly everything you see, hear and read that isn’t from a friend — whether on TV, the radio, or even on the Web — comes from a for-profit gatekeeper.”  And then comes the obligatory A.J. Liebling quote about how “Freedom of the press belongs to those who own one,” followed quickly by the typical punch line about how just a handful of companies (in this case 55 of ’em) are puppeteering all our thoughts in America today:

Combined, these 55 powerful media and telecommunications companies raked in total revenues in excess of $700 billion in 2007. Together they own over 540 TV stations, 2000 radio stations, 430 newspapers, 230 magazines, and 80 major cable channels in the United States. They provide paid TV service to approximately 52 million subscribers and broadband Internet service to over 57 million subscribers. They’re the bottlenecks through which our news, our entertainment, and our political discourse must travel. What they want to promote becomes prominent; what they suppress stays out of the mainstream. As such, these companies are the elements of information control.

Oh my God! We are all just brainwashed sheep!

Except we’re not. It amazes me how these “information control” and “media monopoly” myths keep getting widespread circulation. But the first thing to note is how the media reformistas can’t get even their story straight when it comes to how many “monopolists” are supposedly out there today. As I noted in my 2005 book, Media Myths: Making Sense of the Debate over Media Ownership, the critics seem to just pull their numbers out of a hat. Some say as few as 3 companies control everything. Others says 5 or 6. Still others say it might be a few dozen. And now this guy says its 55. Hey, that’s progress that even the Free Press should love!

Regardless of the number, does this really represent the totality of our modern media universe? Do those 55 companies really “own most of the 21st-century presses in America” as the “Info Control” website states? Answer: NOT. EVEN. CLOSE.  Here are the facts. [I happened to have compiled them for a PFF special report entitled Media Metrics: The True State of the Modern Media Marketplace to debunk myths just like this.]

In the table above, I have taken the number of media outlets owned by the 55 companies and then divided it by the total number of media outlets. This gives us the actual percentage of media outlets owned by the 55 media providers listed in the “Information Control” chart.  Needless to say, it’s hard to see how anyone can claim “bottleneck” control or “media monopoly” when an average of just 18% of all those outlets are owned by the 55 companies! And what that number doesn’t tell you is that — as my “Media Deconsolidation” series has been illustrating over the past two years — America’s media marketplace has been growing less concentrated with each passing month. Media companies are selling off and shedding assets and divisions faster than ever. There’s a 24-hour death watch going on over at Twitter these days on the “Media is Dying” thread if you care to follow the carnage in less than 140 characters at a time.

Oh, here’s another problem with the “Information Control” chart: Where exactly does the Internet fit into the picture? Answer: It doesn’t. They’ve conveniently left out the Net, online media, blogging, social networking, podcasting, and other bottom-up, user-generated content and forms of communication.

But let’s ignore the Internet and all those new Digital Age options for a moment. Let’s say this guy had it right and that only 55 companies really did control “Nearly everything you see, hear and read.”  The fact is, that really wouldn’t be the end of the world. 55 competitors would be considered a luxury in just about any other major economic sector.  Care to draw up a “Periodic Chart” for autos, airlines, supermarkets, or semiconductors? If one did, there would be far fewer squares on it. The fact is, even if we accepted the artificial limitations of this chart, we’d still have a lot of choices at our disposal.

But we need not accept those limitations. We live in a different world; a better world. With far more choices and diversity than this silly chart indicates. Indeed, by every conceivable measure we have more media options and diversity than we did 30 years ago. Magnitudes more. I bet the guy who put this chart together isn’t even old enough to remember when three old white guys in bad suits delivered us a half-hour of news each night at 6:30, and if we weren’t lucky enough to be sitting in front of our TVs at that exact moment, then we were screwed. Compare that pre-1980 reality to today and the unprecedented information cornucopia at our disposal. In my lifetime (I’m 40) we have seen the death of mass media and the end of “appointment-based” media consumption.  Media providers no longer call the shots; we the viewing and listening public do.

But shhhhh… we’re not suppose to talk about these meddlesome things called facts. You see, the entire media policy drama in this country is based on a glorious set of mega-myths. There’s a handful of nefarious schemers aiming to program our little minds with corporate propaganda, or so the story goes. They must be stopped. At all costs. Luckily, the enlightened few at the Free Press and other media reformista outfits have managed to avoid the corporate brainwashing — My God, how did they ever do it! — and so they are ready to lead us to the media promised land. But to get there, we must first burn the village to save it. We must destroy free media (as in free-market, for-profit media) to rebuild free media (as in media controlled by government masters). Only then will we enter Information Nirvana and liberate our minds from our evil corporate overlords!

Or so the story goes.

(P.S. Brian Anderson and I recently penned a book to counter these fantasies and the efforts by the media reformistas to remake the media marketplace in their preferred image. See: A Manifesto for Media Freedom, Encounter Books, 2008).

This is just a listing of the installments of my ongoing “Media Deconsolidation Series.” I needed to create a single repository of all the essays so I could point back to them in future articles and papers. For those not familiar with it, this series represents an effort to set the record straight regarding the many myths surrounding the media marketplace. These myths are usually propagated by a group of radical anti-media regulatory activists who I call the “media reformistas.” Sadly, however, many policymakers, journalists, and members of the public are buying into some of these myths, too.

In particular, I have spent much time here debunking the notion that rampant consolidation is taking place and that media operators are only growing larger and devouring more and more companies. In fact, nothing could be further from the truth. Over the past several years, traditional media operators and sectors have been coming apart at the seams in the face of unprecedented innovation and competition. The volume of divestiture activity has been quite intense, and most traditional media operators have been getting smaller, not bigger. As a result, America’s media marketplace is growing more fragmented and atomistic with each passing day.

Anyway, here’s the series so far…

• Media Deconsolidation (Part 24): I Read the News Today, Oh Boy
• Media Deconsolidation (Part 23): Cox Selling Most of its Newspapers
• Media Deconsolidation (Part 22): TW spin-off of cable unit
• Media Deconsolidation (Part 21): TW spin-off of AOL
• Media Deconsolidation (Part 20): News Corp spins off 8 TV stations
• Media Deconsolidation (Part 19): IAC/Interactive Corp. divides by 5
• Media Deconsolidation (Part 18): Scripps Splits
• Media Deconsolidation (Part 17): Clear Channel Station Sell-off
• Media Deconsolidation (Part 16): Clear Channel Crackup
• Media Deconsolidation (Part 15): AOL-TW Divorce Near?
• Media Deconsolidation, Part 14: Time Warner Without Time?
• Media Deconsolidation, Part 13: Tribune Considering Major Downsizing
• Media Deconsolidation, Part 12: Time Warner President Calls Synergy “Bull—t”
• Media Deconsolidation, Part 11: Knight Ridder’s Coming Crackup
• Media Deconsolidation, Part 10: Viacom’s Breakup Official
• Media Deconsolidation, Part 9: Viacom’s Split
• Media Deconsolidation, Part 8: Time Warner Spin Off of AOL Likely
• Media Deconsolidation, Parts 6 & 7: Emmis & Disney Divestitures
• Media Deconsolidation, Part 5: “Clear Channel to Dismantle Media Empire”
• Media Deconsolidation, Part 4: Is News Corp. Next to Downsize?
• Still More on Media Deconsolidation
• More on Media (De)Consolidation
• Stop This Insane Media De-Consolidation!

Related reading:

• What the Media Reformistas Really Want
• Your Soapbox is My Soapbox! Thoughts on the Media Access Movement
• BOOK: Media Myths: Making Sense of the Debate over Media Ownership (2005)
• SPECIAL REPORT: Media Metrics: The True State of the Modern Media Marketplace (2008)
• BOOK:  A Manifesto for Media Freedom (with Brian Anderson, 2008).

George Will’s weekly Washington Post column focuses on the Fairness Doctrine and calls out those on the Left who would support its reinstatement:

Because liberals have been even less successful in competing with conservatives on talk radio than Detroit has been in competing with its rivals, liberals are seeking intellectual protectionism in the form of regulations that suppress ideological rivals. If liberals advertise their illiberalism by reimposing the fairness doctrine, the Supreme Court might revisit its 1969 ruling that the fairness doctrine is constitutional. The court probably would dismay reactionary liberals by reversing that decision on the ground that the world has changed vastly, pertinently and for the better.

Mr. Will was kind enough to cite my new book with Brian Anderson, A Manifesto for Media Freedom [more info here] on the explosion of media outlets and options since the Supreme Court’s disastrous 1969 Red Lion decision, which blessed the Fairness Doctrine.  Some of those stats: today there are about 14,000 radio stations, twice as many as in 1969; 18.9 million subscribers to satellite radio, up 17 percent in 12 months; and that 86 percent of households with either cable or satellite television receive an average of 102 of the 500 available channels.

No need to be putting the “Unfairness Doctrine” back on the books with unprecedented abundance like that.

Last night, I appeared on the Jim Bohannon radio show for 30 minutes and discussed the past, present, and future of the Fairness Doctrine and broadcast industry regulation in general. More specifically, we got into efforts to drive Fairness Doctrine-like regulations back on the books via backdoor efforts like “localism” mandates, community oversight boards, and other public interest requirements. These are issues that Brian Anderson and I discuss in our new book, A Manifesto for Media Freedom, which I blogged about here when it was released in October.

If you’re interested, you can listen to the entire show by clicking here.

I’m fond of quoting Diane Mermigas, editor-at-large at MediaPost, who is one of the finest media market watchers in the journalism business today. Her latest MediaPost column offers another sobering look at the radical changing sweeping through the media marketplace today. In that article, she notes that even though we are in an era of Big Government bailouts for financial institutions and (possibly) auto makers, old media operators will be left to to fend for themselves, and many will likely die off as a result:

What we do know is there will be no federally funded bail for media, Internet, entertainment and advertising. Big media by definition is not nimble and innovative enough to simply dump what’s not working, modify what can be saved, and grow what works. There isn’t much that big media companies can bank on or reliably forecast moving into 2009. They are hamstrung between deteriorating traditional costs and revenues and evolving digital business models that do not offset the losses, generating less than 10% of their overall incomes. Big media isn’t just being ravaged by recession; it is being sacked by a technological transformation of enormous proportions.

I discussed a lot of the forces behind the current media meltdown in my recent PFF special report, “Media Metrics: The True State of America’s Marketplace.” As I noted there, this Schumpeterian “creative destruction” we are witnessing today is a normal (but gut-wrenching) part of any major technological transformation, and it need not be addressed with government subsides or interference. However, the problem for many traditional media providers is, as I noted in my special report:

there’s a lot of regulating still going on as well. America’s media marketplace remains subject to a wide variety of regulations… These regulations limit the ability of media operators to respond to the rapidly changing market environment. If all market players were equally hobbled by regulation, perhaps this issue would be less problematic. But these rules are applied in a remarkably arbitrary fashion, with some sectors and firms (over-the-air broadcasters, in particular) being singled out for harsher regulatory treatment than others.

Some will say, “Just let ’em die. We don’t need those old media providers anyway.” If that’s your position, so be it, but I would hope that others (especially public policymakers) would understand the radical unfairness of not giving those players a fighting chance at survival by eliminating the archaic regulations that bind their hands as the seek to reinvent themselves.

[For additional discussion, see my essay from earlier this week, “Remember Newspapers?”]