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Obama’s talked a big game about online privacy. He promised reform during the 2008 campaign. A year ago, the White House proposed a “Privacy Bill of Rights.” But so far, the Administration’s delivered little more than fine words. Worse, they’ve focused on the wrong problems.

Government has an important role to play in protecting consumer privacy, but its snooping and surveillance are far bigger problems—which have only grown worse. While Washington talks of a new commercial privacy “Bill of Rights,” the real Bill of Rights is in peril.

The American Revolution erupted, in large part, out of seething resentment at British privacy intrusions—without judicial supervision. Virginia adopted its own Bill of Rights shortly before the Declaration of Independence, including what later became Madison’s Fourth Amendment to the Constitution: “the right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated.” Law enforcement must generally obtain a warrant before conducting a search—which means convincing a judge that probable cause exists to believe a crime has been committed. Continue reading →

In an important essay this week entitled “Silicon Valley’s ‘Suicide Impulse’,” Wall Street Journal columnist L. Gordon Crovitz warns that “Silicon Valley has long prided itself on avoiding the lumbering relationship between big government and most industries, but somehow it has become one of the top lobbyists in Washington.” Crovitz is worried that Internet and technology companies are falling prey to what Milton Friedman labeled “The Business Community’s Suicidal Impulse”: the persistent propensity to persecute one’s competitors using regulation or the threat thereof. “Rather than lobby government to go after one another,” Crovitz argues, “Silicon Valley lobbyists should unite to go after overreaching government. Instead of the ‘suicide impulse’ of lobbying for more regulation, Silicon Valley should seek deregulation and a long-overdue freedom to return to its entrepreneurial roots.”

Crovitz’s essay touches upon a dangerous trend I have written about here and elsewhere in the past: the increasing politicization of the Internet and information technology sectors and the gradual rise of rent-seeking (i.e., favor-seeking) over time. I’ve written about this problem in essays like:

These essays have documented how tech companies are increasingly vying for the attention of legislators and regulators in Washington, statehouses, and international capitals across the globe.

Why should we care about the increasing politicization of the information technology sector? Continue reading →

posted an analysis of Netflix’s new Internet blocking strategy last week. I concluded that Netflix is attempting to leverage net neutrality regulations to gain an anticompetitive price advantage in the marketplace. In my view, this harm is an unintended consequence of the FCC’s decision to abandon its free market approach to the Internet and adopt net neutrality rules that enhance the market power of so-called “edge” companies. As Neil Stevens said in his Tech at Night column: “Told you so.”

Harold Feld apparently agrees that Netflix is threatening competition, and he has is own case of Cassandrafreude (“told you so,” but with a smile). In his view, however, the problem is that the FCC didn’t go far enough. He believes this situation could have been avoided if the FCC had applied common carrier regulation to the Internet (also known as Title II), which would regulate the Internet using statutes written for the old monopoly telephone network.

Though Harold Feld and I disagree on the appropriate level of Internet regulation (I would prefer less rather than more), it appears we do agree on several issues raised by Netflix’s decision to block access to its Super HD service. The unintended consequence of Netflix’s decision is that the ensuing debate has clarified some important Internet policy issues. Continue reading →

When the smoke cleared and I found myself half caught-up on sleep, the information and sensory overload that was CES 2013 had ended.

There was a kind of split-personality to how I approached the event this year. Monday through Wednesday was spent in conference tracks, most of all the excellent Innovation Policy Summit put together by the Consumer Electronics Association. (Kudos again to Gary Shapiro, Michael Petricone and their team of logistics judo masters.)

The Summit has become an important annual event bringing together legislators, regulators, industry and advocates to help solidify the technology policy agenda for the coming year and, in this case, a new Congress.

I spent Thursday and Friday on the show floor, looking in particular for technologies that satisfy what I coined the The Law of Disruption: social, political, and economic systems change incrementally, but technology changes exponentially.

What I found, as I wrote in a long post-mortem for Forbes, is that such technologies are well-represented at CES, but are mostly found at the edges of the show–literally. Continue reading →

Unfortunately, most consumers won’t realize that Netflix is trying to impose its costs on all Internet consumers to gain an anticompetitive price advantage against its over-the-top competitors.

At the Consumer Electronic Show two weeks ago, Netflix announced that it would block consumer access to high definition and 3D movies (HD) for customers of Internet service providers (ISPs) that Netflix disfavors. Netflix’s goal is to coerce ISPs into paying for a free Internet fast lane for Netflix content. If Netflix succeeds, it would harm Internet consumers and competition among video streaming providers. It would also fundamentally alter the economics and openness of the Internet, “where consumers make their own choices about what applications and services to use and are free to decide what content they want to access, create, or share with others.”

Ironically, Netflix’s strategy is a variant of the doomsday narrative spun by net neutrality activists over the last decade. Their narrative assumes ISPs will use their gatekeeper control to block their customers from accessing Internet content distributed by competitors. Of course, ISPs have never blocked consumer access to competitive Internet content. Now that the FCC has distorted the Internet marketplace through the adoption of asymmetric net neutrality rules, Netflix, the dominant streaming video provider, has decided to block consumer access to its content.

This may not seem like a big deal given the relatively limited HD content currently available on Netflix. But that’s about to change in a very big way. Netflix recently announced a new multi-year licensing agreement that makes it the “ exclusive American subscription TV service for first run live-action and animated features from the Walt Disney Studios.” In addition to Disney-branded content (e.g., The Lion King), the deal includes content produced by Pixar (e.g., Brave), Lucasfilm (e.g., Star Wars), and Marvel (e.g., The Avengers). Netflix also announced a multi-year deal with Turner Broadcasting and Warner Bros. that includes the Cartoon Network and exclusive distribution rights to TNT’s television series Dallas. As an analyst recently told Ars Technica, “These movies, if you’ve got young kids—you’ve got to have Netflix.”

Netflix has decided to use this new market power to force ISPs to pay for its own Internet fast lane. In classic double-speak, Netflix calls its fast lane the “Netflix Open Connect” content delivery network (CDN). Though Netflix uses the word “open” to describe its CDN, it is not part of the open Internet. It is only “open” to Netflix for the delivery of its content, and it is only “open” to ISPs who connect to it on terms dictated by Netflix. Continue reading →

Daniel Lyons, assistant professor at Boston College Law School, discusses his new Mercatus Center Working Paper, “The Impact of Data Caps and Other Forms of Usage-Based Pricing for Broadband Access.” Describing the system most of us are used to as an all-you-can-eat version of internet access, Lyons explains why it might make more sense for Internet Service Providers (ISPs) to transition to usage-based pricing, a type of metered model for broadband.

According to Lyons, the fixed costs of building up a broadband network are so great that any attempt to create an equitable cost distribution that can recoup these costs forces lighter users to subsidize heavier users. These types of flat rate payment programs often can be a barrier to low-income users. Instead, Lyons advocates for a usage-based system. In response to concerns about possible anti-competitive behavior by ISPs, Lyons further proposes that enforcement of policy transparency among ISPs might be an appropriate role for government.

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By Geoffrey Manne & Berin Szoka

As Democrats insist that income taxes on the 1% must go up in the name of fairness, one Democratic Senator wants to make sure that the 1% of heaviest Internet users pay the same price as the rest of us. It’s ironic how confused social justice gets when the Internet’s involved.

Senator Ron Wyden is beloved by defenders of Internet freedom, most notably for blocking the Protect IP bill—sister to the more infamous SOPA—in the Senate. He’s widely celebrated as one of the most tech-savvy members of Congress. But his latest bill, the “Data Cap Integrity Act,” is a bizarre, reverse-Robin Hood form of price control for broadband. It should offend those who defend Internet freedom just as much as SOPA did.

Wyden worries that “data caps” will discourage Internet use and allow “Internet providers to extract monopoly rents,” quoting a New York Times editorial from July that stirred up a tempest in a teapot. But his fears are straw men, based on four false premises.

First, US ISPs aren’t “capping” anyone’s broadband; they’re experimenting with usage-based pricing—service tiers. If you want more than the basic tier, your usage isn’t capped: you can always pay more for more bandwidth. But few users will actually exceed that basic tier. For example, Comcast’s basic tier, 300 GB/month, is so generous that 98.5% of users will not exceed it. That’s enough for 130 hours of HD video each month (two full-length movies a day) or between 300 and 1000 hours of standard (compressed) video streaming.

Second, Wyden sets up a false dichotomy: Caps (or tiers, more accurately) are, according to Wyden, “appropriate if they are carefully constructed to manage network congestion,” but apparently for Wyden the only alternative explanation for usage-based pricing is extraction of monopoly rents. This simply isn’t the case, and propagating that fallacy risks chilling investment in network infrastructure. In fact, usage-based pricing allows networks to charge heavy users more, thereby recovering more costs and actually reducing prices for the majority of us who don’t need more bandwidth than the basic tier permits—and whose usage is effectively subsidized by those few who do. Unfortunately, Wyden’s bill wouldn’t allow pricing structures based on cost recovery—only network congestion. So, for example, an ISP might be allowed to price usage during times of peak congestion, but couldn’t simply offer a lower price for the basic tier to light users.

That’s nuts—from the perspective of social justice as well as basic economic rationality. Even as the FCC was issuing its famous Net Neutrality regulations, the agency rejected proposals to ban usage-based pricing, explaining:

prohibiting tiered or usage-based pricing and requiring all subscribers to pay the same amount for broadband service, regardless of the performance or usage of the service, would force lighter end users of the network to subsidize heavier end users. It would also foreclose practices that may appropriately align incentives to encourage efficient use of networks.

It is unclear why Senator Wyden thinks the FCC—no friend of broadband “monopolists”—has this wrong. Continue reading →

Three rings for the broadcast-kings filling the sky,
Seven for the cable-lords in their head-end halls,
Nine for the telco-men doomed to die,
One for the White House to make its calls
On Capitol Hill where the powers lie,
One ring to rule them all, one ring to find them,
One ring to bring them all and without the Court bind them,
On Capitol Hill where the powers lie.

Myths resonate because they illustrate existential truths. In J.R.R. Tolkien’s mythical tale, the Lord of the Rings, the evil Lord Sauron imbued an otherwise very ordinary ring – the “One Ring”– with an extraordinary power: It could influence thought. When Sauron wore the One Ring, he could control the lords of the free peoples of Middle Earth through lesser “rings of power” he helped create. The extraordinary power of the One Ring was also its weakness: It eventually corrupted all who wore it, even those with good intentions. This duality is the central truth in Tolkien’s tale.

It is also central to current debates about freedom of expression and the Internet.

Since the invention of the printing press, those who control the means of mass communication have had the ability to influence thought. The printing press enabled the rapid and widespread circulation of ideas and information for the first time in history, including ideas that challenged the status quo (e.g., sedition and heresy). Governments viewed this new technology as a threat and responded by establishing control over the machinery of the printing press through state monopolies, press licenses, and special taxation.

The right to think is the beginning of freedom, and speech must be protected from the government because speech is the beginning of thought.”

The Framers knew that freedom of expression is the foundation of freedom. They also recognized that governments could control thought by controlling the printing press, and included a clause in the First Amendment prohibiting government interference with the “freedom of the press.” Though this clause was aimed at the printing press, its protection is not limited to the mass communications media of the Eighteenth Century. The courts have held that the First Amendment encompasses new mass media technologies, including broadcast television and cable.

Several public interest groups, academics, and pundits across the political spectrum nevertheless argue that the latest mass communications technology – the Internet – does not merit protection from government interference on First Amendment grounds. They assert that neither the dissemination of speech by Internet service providers (ISPs) nor the results of Internet search engines (e.g., Google) are entitled to First Amendment protection. They fear that Internet companies will use the First Amendment to justify the exercise of editorial control over the free expression of their consumers.

Others (including the Competitive Enterprise Institute) argue that the First Amendment applies to bothISPs and search engines. They believe a government with unrestrained control over the means of mass communications has the incentive and the ability to use that power to control the thoughts of its people, which inevitably leads to authoritarianism. They point to Internet censorship by ChinaSyria, and other authoritarian governments as current proof of this principle.

Both sides in the Internet debate raise legitimate concerns. I suspect many consumers do not want ISPs and search engines to exercise unfettered control over the Internet. I suspect that just as many consumers do not want government to exercise unfettered control over the Internet either. How can we resolve these dual concerns?

The free peoples of Middle Earth struggled with a similar duality at the Council of Elrond, where they decided what should be done with the One Ring. “Why not use this ring?” wondered Boromir, a bold hero who had long fought the forces of Sauron and believed the ring could save his people. Aragorn, a cautious but no less valiant hero, abruptly answered that no one on the Council could safely wield it. When Elrond suggested that the ring must be destroyed, mutual distrust drove the Council to chaos. Order was restored only when Frodo, a hobbit with no armies to command and no physical power, volunteered for the dangerous task of destroying the ring.

The judicial branch is our Frodo. It has no armies to command and no physical power. It must rely on the willingness of others to abide by its decisions and their strength to enforce them. Like the peoples of Middle Earth who relied on Frodo, we rely on the courts to protect us from abuse of government power because the judicial branch is the least threatening to our liberty.

This is as true today as it was when the Constitution was signed. Changes in technology do not change the balance of power among our branches of government. As we have in the earlier eras of the printing press, broadcast television, and cable, we must trust the courts to apply the First Amendment to mass communications in the Internet era.

Providing ISPs and search engines with First Amendment rights would prevent dangerous and unnecessary government interference with the Internet while permitting the government to protect Internet consumers within Constitutional bounds. Although some advocates imply otherwise, application of the First Amendment to Internet companies would not preclude the government from regulating the Internet. The courts uphold regulations that limit freedom of expression so long as they are narrowly tailored to advance a compelling or substantial government interest.

We have always trusted the courts to balance the right to freedom of expression with other rights and governmental interests, and there is no reason to believe they cannot appropriately balance competing concerns involving the Internet. If the courts cannot be trusted with this task, no one can.

Given the rate at which telephone companies are losing customers when they cannot raise prices as a regulatory matter, it is preposterous to continue presuming that they could raise prices as an economic matter.

Today, the United States Telecom Association (USTA) asked the Federal Communications Commission (FCC) to declare that incumbent telephone companies are no longer monopolies. Ten years ago, when most households had “plain old telephone service,” this request would have seemed preposterous. Today, when only one in three homes have a phone line, it is merely stating the obvious: Switched telephone service has no market power at all. Continue reading →

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

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

Continue reading →