[UPDATE
4/30/13: This article was subsequently published in Volume 65, Issues 2 of the Federal Communications Law Journal in April 2013. The links below now point to the final FCLJ version.]
The Mercatus Center at George Mason University has just released a new paper by Brent Skorup and me entitled, “Uncreative Destruction: The War on Vertical Integration in the Information Economy.” Brent, who is the research director for the Information Economy Project at the George Mason University School of Law, and I have been working on this paper since the Spring and we are looking forward to getting it published in a law review shortly. The paper focuses on Tim Wu’s “separations principle” for the digital economy, something I’ve spent some time critiquing here in the past. Here’s the introduction from the 44-page paper that Brent and I just released:
Are information sectors sufficiently different from other sectors of the economy such that more stringent antitrust standards should be applied to them preemptively? Columbia Law School professor Tim Wu responds in the affirmative in his book The Master Switch: The Rise and Fall of Information Empires. Having successfully pushed net-neutrality regulation into the policy spotlight, Wu has turned his attention to what he regards as excessive market concentration and threats to free speech throughout the entire information economy.To support his call for increased antitrust intervention, Wu explains his view of competition in the information economy—a view that deviates substantially from current mainstream antitrust theory.
Continue reading →
Looking for a concise overview of how Internet architecture has evolved and a principled discussion of the public policies that should govern the Net going forward? Then look no further than Christopher Yoo‘s new book, The Dynamic Internet: How Technology, Users, and Businesses are Transforming the Network. It’s a quick read (just 140 pages) and is worth picking up. Yoo is a Professor of Law, Communication, and Computer & Information Science at the University of Pennsylvania and also serves as the Director of the Center for Technology, Innovation & Competition there. For those who monitor ongoing developments in cyberlaw and digital economics, Yoo is a well-known and prolific intellectual who has established himself as one of the giants of this rapidly growing policy arena.
Yoo makes two straight-forward arguments in his new book. First, the Internet is changing. In Part 1 of the book, Yoo offers a layman-friendly overview of the changing dynamics of Internet architecture and engineering. He documents the evolving nature of Internet standards, traffic management and congestion policies, spam and security control efforts, and peering and pricing policies. He also discusses the rise of peer-to-peer applications, the growth of mobile broadband, the emergence of the app store economy, and what the explosion of online video consumption means for ongoing bandwidth management efforts. Those are the supply-side issues. Yoo also outlines the implications of changes in the demand-side of the equation, such as changing user demographics and rapidly evolving demands from consumers. He notes that these new demand-side realities of Internet usage are resulting in changes to network management and engineering, further reinforcing changes already underway on the supply-side.
Yoo’s second point in the book flows logically from the first: as the Internet continues to evolve in such a highly dynamic fashion, public policy must as well. Yoo is particularly worried about calls to lock in standards, protocols, and policies from what he regards as a bygone era of Internet engineering, architecture, and policy. “The dramatic shift in Internet usage suggests that its founding architectural principles form the mid-1990s may no longer be appropriate today,” he argues. (p. 4) “[T]he optimal network architecture is unlikely to be static. Instead, it is likely to be dynamic over time, changing with the shifts in end-user demands,” he says. (p. 7) Thus, “the static, one-size-fits-all approach that dominates the current debate misses the mark.” (p. 7) Continue reading →
On Friday, California Governor Jerry Brown signed SB 1161, which prohibits the state’s Public Utilities Commission from any new regulation of Voice over Internet Protocol or other IP-based services without the legislature’s authorization.
California now joins over twenty states that have enacted similar legislation.
The bill, which is only a few pages long, was introduced by State Senator Alex Padilla (D) in February. It passed both houses of the California legislature with wide bi-partisan majorities.
California lawmakers and the governor are to be praised for quickly enacting this sensible piece of legislation.
Whatever the cost-benefit of continued state regulation of traditional utilities such as water, power, and landline telephone services, it’s clear that the toolkit of state and local PUCs is a terrible fit for Internet services such as Skype, Google Voice or Apple’s FaceTime. Continue reading →
Vinton Cerf, one of the “fathers of the internet,” discusses what he sees as one of the greatest threats to the internet—the encroachment of the United Nations’ International Telecommunications Union (ITU) into the internet realm. ITU member states will meet this December in Dubai to update international telecommunications regulations and consider proposals to regulate the net. Cerf argues that, as the face of telecommunications is changing, the ITU is attempting to justify its continued existence by expanding its mandate to include the internet. Cerf says that the business model of the internet is fundamentally different from that of traditional telecommunications, and as a result, the ITU’s regulatory model will not work. In place of top-down ITU regulation, Cerf suggests that open multi-stakeholder processes and bilateral agreements may be a better solutions to the challenges of governance on the internet.
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I’ve been hearing more rumblings about “API neutrality” lately. This idea, which originated with Jonathan Zittrain’s book, The Future of the Internet–And How to Stop It, proposes to apply Net neutrality to the code/application layer of the Internet. A blog called “The API Rating Agency,” which appears to be written by Mehdi Medjaoui, posted an essay last week endorsing Zittrain’s proposal and adding some meat to the bones of it. (My thanks to CNet’s Declan McCullagh for bringing it to my attention).
Medjaoui is particularly worried about some of Twitter’s recent moves to crack down on 3rd party API uses. Twitter is trying to figure out how to monetize its platform and, in a digital environment where advertising seems to be the only business model that works, the company has decided to establish more restrictive guidelines for API use. In essence, Twitter believes it can no longer be a perfectly open platform if it hopes to find a way to make money. The company apparently believes that some restrictions will need to be placed on 3rd party uses of its API if the firm hopes to be able to attract and monetize enough eyeballs.
While no one is sure whether that strategy will work, Medjaoui doesn’t even want the experiment to go forward. Building on Zittrain, he proposes the following approach to API neutrality:
- Absolute data to 3rd party non-discrimination : all content, data, and views equally distributed on the third party ecosystem. Even a competitor could use an API in the same conditions than all others, with not restricted re-use of the data.
- Limited discrimination without tiering : If you don’t pay specific fees for quality of service, you cannot have a better quality of service, as rate limit, quotas, SLA than someone else in the API ecosystem.If you pay for a high level Quality of service, so you’ll benefit of this high level quality of service, but in the same condition than an other customer paying the same fee.
- First come first served : No enqueuing API calls from paying third party applications, as the free 3rd-party are in the rate limits.
Before I critique this, let’s go back and recall why Zittrain suggested we might need API neutrality for certain online services or digital platforms. Continue reading →
Psychologists Daniel Simons and Christopher Chabris had an interesting editorial in The Wall Street Journal this weekend asking, “Do Our Gadgets Really Threaten Planes?” They conducted an online survey of 492 American adults who have flown in the past year and found that “40% said they did not turn their phones off completely during takeoff and landing on their most recent flight; more than 7% left their phones on, with the Wi-Fi and cellular communications functions active. And 2% pulled a full Baldwin, actively using their phones when they weren’t supposed to.”
Despite the widespread prevalence of such law-breaking activity, planes aren’t falling from the sky and yet the Federal Aviation Administration continues to enforce the rule prohibiting the use of digital gadgets during certain times during flight. “Why has the regulation remained in force for so long despite the lack of solid evidence to support it?” Simons and Chabris ask. They note:
Human minds are notoriously overzealous “cause detectors.” When two events occur close in time, and one plausibly might have caused the other, we tend to assume it did. There is no reason to doubt the anecdotes told by airline personnel about glitches that have occurred on flights when they also have discovered someone illicitly using a device. But when thinking about these anecdotes, we don’t consider that glitches also occur in the absence of illicit gadget use. More important, we don’t consider how often gadgets have been in use when flights have been completed without a hitch. Our survey strongly suggests that there are multiple gadget violators on almost every flight.
That’s all certain true, but what actually motivated this ban — and has ensured its continuation despite a lack of evidence it is needed to diminish technological risk — is the precautionary principle. As the authors correct note: Continue reading →
In my last post, I discussed an outstanding new paper from Ronald Cass on “Antitrust for High-Tech and Low: Regulation, Innovation, and Risk
.” As I noted, it’s one of the best things I’ve ever read about the relationship between antitrust regulation and the modern information economy. That got me thinking about what other papers on this topic that I might recommend to others. So, for what it’s worth, here are the 12 papers that have most influenced my own thinking on the issue. (If you have other suggestions for what belongs on the list, let me know. No reason to keep it limited to just 12.)
- J. Gregory Sidak & David J. Teece, “Dynamic Competition in Antitrust Law,” 5 Journal of Competition Law & Economics (2009).
- Geoffrey A. Manne & Joshua D. Wright, “Innovation and the Limits of Antitrust,” 6 Journal of Competition Law & Economics, (2010): 153
- Joshua D. Wright, “Antitrust, Multi-Dimensional Competition, and Innovation: Do We Have an Antitrust-Relevant Theory of Competition Now?” (August 2009).
- Daniel F. Spulber, “Unlocking Technology: Antitrust and Innovation,” 4(4) Journal of Competition Law & Economics, (2008): 915.
- Ronald Cass, “Antitrust for High-Tech and Low: Regulation, Innovation, and Risk
,” 9(2) Journal of Law, Economics and Policy, Forthcoming (Spring 2012)
- Richard Posner, “Antitrust in the New Economy,” 68 Antitrust Law Journal, (2001).
- Stan J. Liebowitz & Stephen E. Margolis,”Path Dependence, Lock-in, and History,” 11(1) Journal of Law, Economics and Organization, (April 1995): 205-26.
- Robert Crandall and Charles Jackson, “Antitrust in High-Tech Industries,” Technology Policy Institute (December 2010).
- Bruce Owen, “Antitrust and Vertical Integration in ‘New Economy’ Industries,” Technology Policy Institute (November 2010).
- Douglas H. Ginsburg & Joshua D. Wright, “Dynamic Analysis and the Limits of Antitrust Institutions,” 78 (1) Antitrust Law Journal (2012): 1-21.
- Thomas Hazlett, David Teece, Leonard Waverman, “Walled Garden Rivalry: The Creation of Mobile Network Ecosystems,” George Mason University Law and Economics Research Paper Series, (November 21, 2011), No. 11-50.
- David S. Evans, “The Antitrust Economics of Two Sided Markets.”
Ronald Cass, Dean Emeritus of Boston University School of Law, has penned the best paper on antitrust regulation that you will read this year, especially if you’re interested in the relationship between antitrust and information technology sectors. His paper is entitled, “Antitrust for High-Tech and Low: Regulation, Innovation, and Risk,” and it makes two straightforward points:
- Antitrust enforcement has characteristics and risks similar to other forms of regulation.
- Antitrust authorities need to exercise special care in making enforcement decisions respecting conduct of individual dominant firms in high-technology industries.
Here are some highlights from the paper that build on those two points. Continue reading →
I have always found it strange that the ACLU speaks with two voices when it comes to user empowerment as a response to government regulation of the Internet. That is, when responding to government efforts to regulate the Internet for online safety or speech purposes, the ACLU stresses personal responsibility and user empowerment as the first-order response. But as soon as the conversation switches to online advertising and data collection, the ACLU suggests that people are basically sheep who can’t possibly look out for themselves and, therefore, increased Internet regulation is essential. They’re not the only ones adopting this paradoxical position. In previous essays I’ve highlighted how both EFF and CDT do the same thing. But let me focus here on ACLU.
Writing today on the ACLU “Free Future” blog, ACLU senior policy analyst Jay Stanley cites a new paper that he says proves “the absurdity of the position that individuals who desire privacy must attempt to win a technological arms race with the multi-billion dollar internet-advertising industry.” The new study Stanley cites says that “advertisers are making it impossible to avoid online tracking” and that it isn’t paternalistic for government to intervene and regulate if the goal is to enhance user privacy choices. Stanley wholeheartedly agrees. In this and other posts, he and other ACLU analysts have endorsed greater government action to address this perceived threat on the grounds that, in essence, user empowerment cannot work when it comes to online privacy.
Again, this represents a very different position from the one that ACLU has staked out and brilliantly defended over the past 15 years when it comes to user empowerment as the proper and practical response to government regulation of objectionable online speech and pornography. For those not familiar, beginning in the mid-1990s, lawmakers started pursuing a number of new forms of Internet regulation — direct censorship and mandatory age verification were the primary methods of control — aimed at curbing objectionable online speech. In case after case, the ACLU rose up to rightly defend our online liberties against such government encroachment. (I was proud to have worked closely with many former ACLU officials in these battles.) Most notably, the ACLU pushed back against the Communications Decency Act of 1996 (CDA) and the Child Online Protection Act of 1998 (COPA) and they won landmark decisions for us in the process. Continue reading →
To summarize, on August 22, the FCC found it was appropriate to re-impose monopoly price cap regulations developed over twenty years ago because the FCC lacked “reliable” evidence that cable operators are competing in the special access market. On August 23, the very next day, the FCC found cable companies are “well-positioned” to compete in the special access market and are “increasingly successful” competing in that market. . . . It is impossible to reconcile these inconsistent findings.
Last week, the FCC issued two significant orders. Late Wednesday evening, the FCC issued an order suspending its pricing flexibility rules for special access services (“Special Access Order”), and on Thursday afternoon, it issued an order approving multiple transactions between Verizon Wireless and several cable companies (Comcast, Time Warner, Bright House Networks, and Cox) as well as mobile providers T-Mobile and Leap (“Verizon-Cable Order”).
The FCC addressed special access competition in both orders. One would assume two FCC findings regarding special access issued within a single 24-hour period would be consistent with one another, but that would be assuming too much. The findings in these two orders relied on evidence submitted by the same companies to reach contradictory conclusions. Continue reading →
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