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Video Games, Free Speech & the Lunacy of “Ecogenerism”

by Adam Thierer on October 25, 2009 · 3 comments

I’ve been meaning to say something about this new paper by Renee Newman Knake of Michigan State University College of Law, which calls for a new paradigm to analyze, and then likely regulate, video game content. Knake’s paper is entitled, “From Research Conclusions to Real Change: Understanding the First Amendment’s (Non)Response to Negative Effects of Mass Media on Children by Looking to the Example of Violent Video Game Regulations.” In it, she proposes to extend an emerging legal philosophy known as “ecogenerism” to the field of video games and the First Amendment treatment thereof. “Ecogenerism” is largely the creation of Barbara Bennett Woodhouse and the theory argues that we should apply lessons or legal frameworks from the field of environmental law to the area of media and children. “Under an ecogenerist model,” states Knake, “media harm decisions should prioritize concern about the level of ‘toxic’ media which children are exposed over free speech interests.” Simply stated, we should treat “toxic media” like toxic chemicals.

There have been other efforts to get courts to relax the legal scrutiny applied to video game content from “strict” to something more relaxed or intermediate in character. For example, there is the “violence as obscenity” approach proposed by Kevin Saunders, who, like Knake, is also with the Michigan State University College of Law. But whereas Saunders has proposed applying an adjacent legal theory or framework (obscenity law) to legal analysis of the constitutionality of regulation of video game content, Woodhouse and now Knake propose a much broader, and more radical, reformulation of First Amendment law along the lines of entirely different body of jurisprudence — again, environment law and regulation.

Of course, this is nuts. The notion that words or images are as “toxic” as chemicals is preposterous, and yet that is exactly what Knake and Woodhouse want us to accept. We can determine with a great deal of certainly the physiological impact of too much mercury or lead on the development of the human brain or body. Generally speaking, we know what dose would kill or deform. The same cannot possibly be said of media, and the very allusion to toxic materials or chemicals is ludicrous to begin with since words and images have never directly killed anyone. EVER! Continue reading →

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Net Neutrality, Slippery Slopes & High-Tech Mutually Assured Destruction

by Berin Szoka on October 23, 2009 · 43 comments

by Berin Szoka & Adam Thierer, Progress Snapshot 5.11 (PDF)

Ten years ago, Nobel Prize-winning economist Milton Friedman lamented the “Business Community’s Suicidal Impulse:” the persistent propensity to persecute one’s competitors through regulation or the threat thereof. Friedman asked: “Is it really in the self-interest of Silicon Valley to set the government on Microsoft?” After yesterday’s FCC vote’s to open a formal “Net Neutrality” rule-making, we must ask whether the high-tech industry—or consumers—will benefit from inviting government regulation of the Internet under the mantra of “neutrality.”

The hatred directed at Microsoft in the 1990s has more recently been focused on the industry that has brought broadband to Americans’ homes (Internet Service Providers) and the company that has done more than any other to make the web useful (Google). Both have been attacked for exercising supposed “gatekeeper” control over the Internet in one fashion or another. They are now turning their guns on each other—the first strikes in what threatens to become an all-out, thermonuclear war in the tech industry over increasingly broad neutrality mandates. Unless we find a way to achieve “Digital Détente,” the consequences of this increasing regulatory brinkmanship will be “mutually assured destruction” (MAD) for industry and consumers.

New Fronts in the Neutrality Wars

The FCC’s proposed rules would apply to all broadband providers, including wireless, but not to Google or many other players operating in other layers of the Net who favor such broadband-specific rules. With this rulemaking looming, AT&T came after Google with letters to the FCC in late September and then another last week accusing the company of violating neutrality principles in their business practices and arguing that any neutrality rules that apply to ISPs should apply equally to Google’s panoply of popular services. In particular, AT&T accused Google of “search engine bias,” suggesting that only government-enforced neutrality mandates could protect consumers from Google’s supposed “monopolist” control.

The promise made yesterday by the FCC—to only apply neutrality principles to the infrastructure layer of the Net—is hollow and will ultimately prove unenforceable. Continue reading →

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A positive agenda to promote sustainable net neutrality

by Jerry Ellig on October 21, 2009 · 0 comments

I like the idea of having a neutral Internet that allows me to go where I want to go and read what I want to read, all for the price of my monthly subscription. Sure, it took me awhile to figure out why anyone would want to access skype on an iphone (after all, an iphone is already a phone!), but now I can see why some people might enjoy making free international calls without having to plop down in front of the ol’ PC wedged into the guest bedroom.

At the same time, I don’t see a pressing need for regulation to ensure that we get whatever degree of neutrality is practical. Even in his speech announcing that he would propose net neutrality rules, FCC Chairman Genachowski could cite only the same three old anecdotes that have been tirelessly trotted out by others as proof that new regulation is required. Sure, by Washington standards, that’s two more anecdotes than are usually required to justify issuing a regulation. But it’s hardly proof of a broad, systemic problem that requires new rules (as Jerry Brito and I argued here.)

Nevertheless, as the saying goes, “You can’t beat something with nothing.” So I suggest a positive agenda to promote sustainable net neutrality.

Many of the arguments for a non-neutral net are based on the assumption that last-mile bandwidth is, at least sometimes, congested — or may soon become that way as people use more bandwidth-intensive applications. One solution is for the network operator to prioritize some packets over others, so if I have a heart attack, my wife’s VOIP call for an ambulance doesn’t get crowded out by the neighbor’s kid playing video games with his buddies in Australia. Another solution, though, is to make sure the network operators have adequate ability and incentive to build plenty of bandwidth. As an economist, I understand that some network management or usage-based pricing might be less expensive for consumers than building massive bandwidth. But that’s no reason to persist with policies that artificially constrain bandwidth.

For wired broadband, a positive agenda to promote sustainable net neutrality means avoiding regulations that impair incentives for investment that increases the capacity of the last-mile network. For wireless broadband, that means freeing up more spectrum to be auctioned for commercial wireless services.

And while you’re at it, FCC, maybe you can do something about the NIMBY problem that prevents me from receiving a decent 3G broadband signal in my house. Now that would expand last-mile bandwidth and promote competition to boot!

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Internet Companies’ Bogus Plea for Regulation

by Jim Harper on October 20, 2009 · 9 comments

Some of the most prominent Internet companies sent a letter yesterday asking for protection from market forces. Among them: Facebook, Google, Amazon, and Twitter.

A Washington Post story summarizes their concerns: “[W]ithout a strong anti-discrimination policy, companies like theirs may not get a fair shot on the Internet because carriers could decide to block them from ever reaching consumers.”

No ISP could block access to these popular services and survive, of course. What they could do is try to charge the most popular services a higher tarriff to get their services through. Thus, weep the helpless, multi-billion-dollar Internet behemoths, we need a “fair shot”!

Plain and simple, these companies want regulation to ensure that ISPs can’t capture a larger share of the profits that the Internet generates. They want it all for themselves. Phrased another way, the goal is to create a subsidy for content creators by blocking ISPs from getting a piece of the action.

It’s all very reminiscent of disputes between coal mines and railroads. The coal mines “produced the coal” and believed that the profitability of the coal-energy ecosystem should accrue only to themselves, with railroads earning the barest minimum. But where is it written that digging coal out of the ground is what creates the value, and getting it were it’s used creates none? Transport may be as valuable as “production” of both commodities and content. The market should decide, not the industry with the best lobbyists.

What happens if ISPs can’t capture the value of providing transport? Of course, less investment flows to transport and we have less of it. Consumers will have to pay more of their dollars out of pocket for broadband, while Facebook’s boy CEO draws an excessive salary from atop a pile of overpriced stock holdings. The irony is thick when opponents of high executive compensation support “net neutrality” regulation.

Another reason why these Internet companies’ concerns are bogus is their size and popularity. They have a direct line to consumers and more than enough capability to convince consumers that any given ISP is wrongly degrading access to their services. As Tim Lee pointed out in his excellent paper, The Durable Internet, ownership of a network service does not equate to control. ISPs can be quickly reined in by the public, as has already happened.

A “net neutrality” subsidy for small start-up services is also unnecessary: They have no profits to share with ISPs. What about mid-size services—heading to profitability, but not there yet? Can ISPs choke them off? Absolutely not.

Large, established companies are not known for being ahead of trends, for one thing, and the anti-authoritarian culture of the Internet is the perfect place to play “beleagured upstart” against the giant, evil ISP. There could be no greater PR gift than for a small service to have access to it degraded by an ISP.

The Internet companies’ plea for regulation is bogus, and these companies are losing their way. The leadership of these companies should fire their government relations staffs, disband their contrived advocacy organization, and get back to innovating and competing.

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Crovitz on FTC Blogger Rules

by Adam Thierer on October 19, 2009 · 4 comments

Another great column by the Wall Street Journal’s Gordon Crovitz, who is quickly becoming my favorite tech policy columnist. In today’s column, “Bloggers Mugged by Regulators,” he comments on the FTC’s new disclosure rules for bloggers, which I discussed here over the weekend. Crovitz focuses on the enforcement challenges associated with the new rules and also argues that self-regulation should be given a chance to work:

There should be more disclosure, but the Web is different from earlier media in ways that make government regulation less relevant and practical. The Web has its own self-regulatory mechanisms. Failing to disclose interests sullies one’s reputation online, and reputation harm travels faster and lasts longer than it did before the Web. There’s also greater need for caveat emptor online, because there is no practical way that any government agency can monitor the world’s bloggers and posters. There will always be people who post comments about products and services that are self-serving in one way or another, at least by someone’s definition. […] Instead of trying to extend analog-era regulations onto the Web, the FTC should encourage readers to be vigilant about assessing for themselves the independence of sources online. At least we now know the biggest fraudulent claim so far on the Web: It’s been committed by regulators claiming there can be a government stamp of approval on everything anyone posts anywhere on the Web.

Amen brother.

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Wireless Innovation is Alive & Well: Two New Reports Set the Record Straight

by Adam Thierer on October 11, 2009 · 20 comments

The smell of high-tech regulation is increasingly in the air these days and many lawmakers and some activist groups now have the mobile marketplace in their regulatory cross-hairs. Critics make a variety of claims about the wireless market supposedly lacking competition, choice, innovation, or reasonable pricing. Consequently, they want to wrap America’s wireless sector in a sea of red tape. Two important new studies thoroughly debunk these assertions and set the record straight regarding the state of wireless competition and innovation in the U.S. today. These reports are must-reading for Washington policymakers and FCC officials who are currently contemplating regulatory action.

First, Gerald Faulhaber and Dave Farber have a new report out entitled “Innovation in the Wireless Ecosystem: A Customer-Centric Framework.” Here’s what Faulhaber and Farber find:

the three segments of the wireless marketplace (applications, devices, and core network) have exhibited very substantial innovation and investment since its inception. Perhaps more interesting, innovation in each segment is highly dependent upon innovation in the other segments. For example, new applications depend upon both advances in device hardware capabilities and advances in spectral efficiency of the core network to provide the network capacity to serve those applications. Further, we find that the three segments of the industry are also highly competitive. There are many players in each segment, each of which aggressively seeks out customers through new technology and new business methods. The results of this competition are manifest: (i) firms are driven to innovate and invest in order to win in the competitive marketplace; (ii) new business models have emerged that give customers more choice; and (iii) firms have opened new areas such as wireless broadband and laptop wireless in order to expand their strategic options.

They continue on to address the policy issues in play here and discuss the “consumer-centric” approach they recommend that the FCC adopt: Continue reading →

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Will the FCC regulate wireless phone rates?

by Jerry Ellig on September 30, 2009 · 4 comments

Today is the filing deadline in a somewhat unusual Federal Communications Notice of Inquiry that asks how the commission should revise its framework for evaluating competition in mobile wireless communications. Among other things, the FCC asks how it should measure wireless companies’ profits. It’s clear from an earlier public notice issued by the FCC’s Wireless Bureau that regulators are looking for a way to identify “abnormal” profits that might justify new regulation.

For 13 years, Congress has required the FCC to issue annual reports on wireless competition. These reports have usually found that wireless is pretty competitive by most conventional measures. There are now four national competitors, numerous regional ones that are growing larger, and a bunch of resellers. The FCC’s most recent report provides numerous examples of innovation in technology, pricing, and services.

About the only fly in the ointment is federal policies that severely limit the amount of spectrum allocated for “flexible use.” Limits on the amount of flexible use spectrum are like taxi medallions: they hinder entry and limit the amount of service the wireless firms can offer.

Nevertheless, the wireless industry’s performance has been impressive. Adjusted for inflation, average revenue per minute fell by 87 percent between 1997 and 2007, and average voice revenue per minute fell by 90 percent. Just during the last five years, inflation-adjusted average revenue per minute fell by 53 percent, and average voice revenue per minute fell by 61 percent.

Could regulation improve on these outcomes? In our comments to the FCC, Jerry Brito and I offer a little thought experiment. Suppose the wireless industry were subject to enlightened, highly efficient, and perfectly operating price regulation. Specifically, suppose the FCC had mandated a version of “incentive” regulation that allowed the wireless companies to increase their prices by no more than the rate of increase in the consumer price index minus an annual 7 percent offset to reflect increased productivity. (Seven percent is the highest productivity offset we’ve seen any telecommuncations regulator in the U.S. use in any context.) Would this be better or worse than what the market actually produced?

This graph shows the answer. If wireless had been subject to incentive regulation, even a 7 percent productivity offset would have reduced wireless revenue per minute by only 36 percent since 1997 and by 19 percent since 2002. In other words, the lightly regulated wireless market produced price reductions nearly 2.5 times as large as those that could have been expected under severe, highly efficient, perfectly operating regulation. And these results measure only the price effects, not the explosion of innovation that accompanied the price reductions.

Would the results have been even better if more spectrum were available for wireless services? Probably. But beyond that step, it’s doubtful that regulators could have done much else to improve on the 90 percent price reduction we’ve seen in the past decade.

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Is Apple’s iPhone the End of Innovation? Hahn & Singer on Handset Exclusivity Fears

by Adam Thierer on September 27, 2009 · 11 comments

In a week in which neutrality regulation is making a lot of news, I hope that Robert Hahn and Hal Singer’s terrific new study, “Why the iPhone Won’t Last Forever and What the Government Should Do to Promote its Successor” gets some attention. It provides a wonderful overview of how dynamically competitive the mobile marketplace has been over the past two decades and why critics are wrong to get worked up about the short-term “dominance” of Apple’s iPhone. Here’s the abstract of their paper:

Because of the overwhelming, positive response to the iPhone as compared to other smart phones, exclusive agreements between handset makers and wireless carriers have come under increasing scrutiny by regulators and lawmakers. In this paper, we document the myriad revolutions that have occurred in the mobile handset market over the past twenty years. Although casual observers have often claimed that a particular innovation was here to stay, they commonly are proven wrong by unforeseen developments in this fast-changing marketplace. We argue that exclusive agreements can play an important role in helping to ensure that another must-have device will soon come along that will supplant the iPhone, and generate large benefits for consumers. These agreements, which encourage risk taking, increase choice, and frequently lower prices, should be applauded by the government. In contrast, government regulation that would require forced sharing of a successful break-through technology is likely to stifle innovation and hurt consumer welfare.

“New technologies often seemingly emerge from nowhere, but also frequently lose their luster quickly,” Hahn and Singer go on to argue. As evidence they cite the recent examples of Second Life and MySpace, which were hyped as potentially become dominant providers in their respective areas just a few years ago, but now are subjected to intense competition. “[T]he the mobile handset market is subject to these same disruptive forces,” they argue: Continue reading →

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Google Voice & the Slippery Slope of Net Neutrality Regulation

by Adam Thierer on September 26, 2009 · 12 comments

Whatever you think about this messy dispute between AT&T and Google about how to classify web-based telephony apps for regulatory purposes — in this case, Google Voice — the key issue not to lose site of here is that we are inching ever closer to FCC regulation of web-based apps! Again, this is the point we have stressed here again and again and again and again when opposing Net neutrality mandates: If you open the door to regulation of one layer of the Net, you open up the door to the eventual regulation of all layers of the Net.

You might not buy that story initially but if you doubt it then I invite you to read just about any history of American broadcast media regulation over the course of the past seven decades. (You might want to start with Krattenmaker & Powe’s Regulating Broadcast Programming or Jonathan Emord’s Freedom, Technology, and the First Amendment). In such histories you will find a common theme: Once regulation of media and communications platforms gets underway, the natural progression of things is uni-directional — Up! That is, when new questions arise about how to “deal with” a new service, network, platform, or technology, the general tendency is the “regulate up” instead of “deregulating down.” When regulators are given a greater say about the contours of markets as technologies evolve and/or converge, we shouldn’t be surprised that their first instinct is to “bring them into the fold.”

And, sadly, that is exactly what is likely to occur eventually with Google Voice. The only really interesting question is what else regulators start mucking with in the search and applications layer once they get their hands on it. And if you still insist that I am being overly paranoid about “regulatory creep” and the prospect of the FCC gradually transforming into the Federal Information Commission, then consider what the agency had to say about cloud computing in paragraph 60 (pg. 21) of the FCC’s recent Wireless Innovation and Investment Notice of Inquiry, which was launched on August 27th: Continue reading →

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Apple, Spotify & the Threat of FCC High-Tech Regulation

by Adam Thierer on September 23, 2009 · 16 comments

Over at TechDirt, Mike Masnick has an interesting post asking “Why Did Apple Approve Spotify?” which builds on an AdAge column asking a similar question: “Did Apple Sacrifice ITunes With Latest Apps?” As the title of that AdAge piece suggests, some folks are wondering if Apple shot itself in the foot by approving Spotify, a music streaming app that some regard as a potential iTunes killer. I don’t really have any comment on the business angle here, rather, I wanted to just comment on Mike’s suggestion that one possible explanation for Apple’s approval of the app is that:

As we noted when the app was approved, Apple appears to be somewhat gunshy, following the FCC inquiry into why it “blocked” Google Voice on the iPhone (and, yes, Apple still insists it didn’t actually block the app, but Google says otherwise). Given the scrutiny, Apple probably realized that it was in for some serious political trouble if it blocked an app like Spotify, which would have received a lot of press attention. Oddly, the AdAge article doesn’t mention this at all.

Indeed, it is odd that AdAge didn’t bother mentioning that fact. But what I find doubly odd here is that nobody is even blinking an eye at the prospect of such political meddling with — or even possible FCC regulation of — Apple, iTunes, or music streaming market in general! Seriously, have we gotten to the point now in our Bold New World of Neutrality Regulation that innovative high-tech companies must live in fear of constant regulatory intervention even when they completely lack any statutory authority to play these games? Moreover, does anyone think that the a bunch of Beltway bureaucrats can micro-manage music and high-tech application markets and give us more options than we have today?

I know the prospect of such meddling makes some academics and regulatory activists groups happy, but I can’t see how this ends well for consumers or high-tech markets more generally. Regardless, for those of you who laugh when we suggest that the slippery slope of regulation is real, consider this case to be Exhibit A. Or perhaps it’s Exhibit B since the Google Voice spat with Apple was already moving the FCC in the direction of becoming a device regulator and applying “handset neutrality” principles that have no basis in law. It’s your anything-goes government at work.

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