After a slight delay, Jurimetrics has finally published my latest law review article, “Soft Law in U.S. ICT Sectors: Four Case Studies.” It is part of a major symposium that Arizona State University (ASU) Law School put together on “Governing Emerging Technologies Through Soft Law: Lessons For Artificial Intelligence” for the journal. I was 1 of 4 scholars invited to pen foundational essays for this symposium. Jurimetrics is a official publication of the American Bar Association’s Section of Science & Technology Law.

This report was a major undertaking that involved dozens of interviews, extensive historic research, several events and presentations, and then numerous revisions before the final product was released. The final PDF version of the journal article is attached.

Here is the abstract:

Traditional hard law tools and processes are struggling to keep up with the rapid pace of innovation in many emerging technologies sectors. As a result, policy­makers in the United States rely increasingly on less formal “soft law” governance mech­anisms to address concerns surrounding many newer technologies. This Article explores four case studies from different information technology areas where soft law mechanisms have already been utilized to address governance concerns. These four sectoral case stud­ies include domain name management, content oversight, privacy policy, and cyberse­curity matters. After considering the various soft law mechanisms used to address those issues, the Article concludes with some general thoughts about the effectiveness of those approaches and what lessons those case studies might hold for the use of soft law in other emerging technology sectors and contexts.

I was very sad to learn that James Gattuso passed away this week . James was a friend and a wonderful mentor to me. I actually took his position at the Heritage Foundation in the early 1990s, which he had vacated a few years prior to go to work in the White House. But after I left Heritage in 2000, James returned shortly thereafter to take back essentially the same position. We often joked that Heritage should just name the position after us and let us play musical chairs there forevermore! 

I learned so much from James through the years and regularly sought his advice on matters. In fact, when I first started this blog in 2004, James was one of the first three people I reached out to and asked to join. He contributed dozens of essays here. His entries read like newspaper dispatches from the frontlines of a battle. I always thought James would have made a terrific reporter, but his love of liberty made him want to fight for a cause. Hence, his life-long devotion to policy advocacy and the freedom to innovate in particular. 

But the most important thing I learned from working with James was how to properly conduct myself as an analyst and a human being. James was such a kind soul, and he always had time for everyone. Most importantly, he treated them with enormous respect, even when he violently disagreed with them. He listened carefully, digested arguments, and addressed them with a cool tenor, but also a powerful wit.

James famously developed a set of “10 Rules for Policy Analysts” that reflected much of that wisdom. His first rule: If the answer looks easy, you’ve missed something. There’s probably a reason no one has thought of it before.” His third: “Don’t assume everyone has read your paper, even if it is really, really good. Most people didn’t get past the first paragraph. Most of those only read the title.” There are many other gems like that in his Top 10 list. 

But his second rule is perhaps the most important piece of advice he ever gave me: “Don’t assume the other guy is evil. He may be, but will be on your side later.” That’s great advice because so many young people in the world of public policy (and it included me for awhile) tend to look at their opponents as nefarious-minded dimwits who are without hope or a moral compass.

As you age, you realize that’s nonsense, of course. But James taught me early on to avoid falling into this trap. I used to be pretty hot-headed in my early years as an analyst, but James would gently caution me about why I might be better off considering my intellectual opponents in a different light and granting them the same measure of respect that I hoped to garner from them myself. It’s a simple but powerful notion that is too often ignored–in all aspects of life. But James lived by that rule and everyone I know respected him enormously as a result. His advice and his example provide us with a model to live by.     

Thank you for everything you taught me, James. You will be missed, but never forgotten. 

Why can’t governments ever clean up their messes? Occasional spring cleanings are essential not only for keeping our own homes tidy and in good working order, but also for keeping our government systems functioning effectively. What can be done? In a new essay with my Mercatus Center colleagues Patrick McLaughlin and Matthew Mitchell, we note that Idaho Governor Brad Little has just issued a smart Executive Order that aims to clean house by bringing state rules in line with common sense. Specifically, the governor’s order addresses what to do with the 150-plus regulations that Idaho state agencies waived in response to the COVID-19 outbreak. This is a great model for other states, and it tracks a proposal that Patrick, Matt, and I floated in a white paper just a few months ago. The entire essay, which originally ran on The Bridge, is reprinted below.

Idaho “Spring Cleaning” Order a Model for Other States

by Patrick McLaughlin, Matthew D. Mitchell & Adam Thierer

Regulations tend to accumulate endlessly. Today there are over 1 million restrictive words (think “shall” or “must”) in the Code of Federal Regulations. Some states, like California and New York, layer on hundreds of thousands of additional regulatory restrictions. Fewer than 1 percent of these rules have been subjected to rigorous cost-benefit analyses. And once regulations are on the books, it is fairly rare to see them subjected to any sort of retrospective review to see how they have performed.

Regulatory restrictions are not just cumbersome. They throttle  innovation, favor established firms, and limit economic growth. Research suggests that if federal regulatory restrictions had been held to their 1980 levels, the US economy today would be 25 percent larger than it is. If governments are to become more responsive to the needs of their citizens, they should conduct occasional “spring cleanings” of archaic rules and regulations that no longer make sense or are holding back economic and other progress. Unfortunately, these cleanups rarely happen.

Some states, however, appear poised to change that, and Idaho is taking the lead. This week, Idaho Gov. Brad Little signed a new executive order on “Regulatory Relief to Support Economic Recovery.” It is “focused on reducing barriers to economic recovery, waiving licensing provisions, increasing telehealth access, and augmenting healthcare capacity.”

Specifically, the governor’s order addresses what to do with the 150-plus regulations that Idaho state agencies waived in response to the COVID-19 outbreak. Perhaps most importantly, it eliminates the presumption that the affected rules are in the public interest. It states that “if waiving these regulations was deemed necessary to improve public health and welfare during the declared emergency, there is a rebuttable presumption that the regulations are unnecessary or counterproductive outside of the declared emergency.” In other words, if government officials viewed an existing rule as such a hindrance to response efforts during a serious public health emergency that they waived it, then the rule may not be right for normal conditions either.

This is consistent with a proposal we set forth in a recent Mercatus Center white paper, “ A Fresh Start: How to Address Regulations Suspended during the Coronavirus Crisis.” In that paper, we note that the COVID-19 crisis was a major stress test for American institutions and that it “has laid bare the outdated, overlapping, and often contradictory morass of rules that make it difficult for public and private organizations to respond to changing circumstances.” Accordingly, we recommend that federal and state lawmakers consider forming “Fresh Start Initiatives,” and we suggest five steps:

1. Any rule suspended or modified during the pandemic should remain off the books until further study.
2. Congress or the state legislature should form an independent and bipartisan commission to study these rules.
3. The commission should identify and study all the rules revised or suspended during the crisis.
4. The commission should then formulate a set of recommended regulatory reforms for each of those rules and craft a plan and timetable for automatically sunsetting or comprehensively revising those policies or programs as part of a single reform package.
5. All recommendations should take effect automatically unless both houses of Congress or the state legislature and the executive take affirmative action to countermand the commission’s experts.

Fresh Start Initiatives build on the successful experience of the Base Realignment and Closure (BRAC) commissions. For years, defense officials had attempted to close obsolete and unnecessary military facilities. And for years Congress resisted. While these bases served little or no public purpose, they were financially lucrative to the communities that hosted them and these communities (and their congressional representatives) were always able to block reform efforts. Under five rounds of BRAC commissions, however, 350 obsolete military bases were closed.

There were four key elements to the success of the BRAC approach. First, legislators were able to cast conspicuous votes for the general interest goal of reducing unnecessary spending, by supporting the closure of bases that no longer held strategic value in a post-Cold War environment. Second, a separate institution —namely, the commission itself, with expert and impartial members—decided which particular bases had to go. This allowed members of Congress to blame a decision to close any particular base on “those eggheads on the commission.” Third, it was difficult for the legislators to countermand the recommendations of the experts. All of the BRAC commissions’ recommendations took effect unless both chambers of Congress and the president took affirmative action to countermand them. And finally, the institution’s progress toward the end goal was measured and regularly reported to the public.

These same principles can clear away obsolete and counterproductive regulations—especially those that, like obsolete military bases, benefit special interests at the expense of the general public. Fresh Start Initiatives and other spring cleaning efforts are just one of many approaches to addressing regulatory accumulation and regulatory quality. Other reforms are also needed and, once again, Idaho has paved the way.

The state was already a leader on regulatory reform and has been taking steps to address ineffective and outdated regulations through efforts such as the earlier “Red Tape Reduction Act” and the “Zero-Based Regulation” executive orders. A year ago Idaho actually  sunset its entire regulatory code in an effort to clean up its 8,200 pages of regulations containing 736 chapters of state rules.

Our Mercatus Center colleague James Broughel  has written extensively on these and other state-based reforms. And along with co-author, Krista Chavez, he has shown that “the Idaho experience demonstrates that state governments can significantly reduce regulations without much fanfare or controversy.” They argue, “The state’s recent experience shows that it’s not inevitable that a state’s regulatory code grows ever larger and more complicated year after year. Indeed, major cuts in regulations are possible and need not be controversial.”

Now that Idaho has added the new “spring cleaning” executive order, it offers other states an even better roadmap for common sense regulatory reform.

The Mercatus Center at George Mason University has just released a new paper by Patrick A. McLaughlin, Matthew D. Mitchell, and me entitled, “A Fresh Start: How to Address Regulations Suspended during the Coronavirus Crisis.” Here’s a quick summary.

As the COVID-19 crisis intensified, policymakers at the federal, state, and local levels started suspending or rescinding laws and regulations that hindered sensible, speedy responses to the pandemic. These “rule departures” raised many questions. Were the paused rules undermining public health and welfare even before the crisis? Even if the rules were well intentioned or once possibly served a compelling interest, had they grown unnecessary or counterproductive? If so, why did they persist? How will the suspended rules be dealt with after the crisis? Are there other rules on the books that might transform from merely unnecessary to actively harmful in future crises?

Once the COVID-19 crisis subsides, there is likely to be considerable momentum to review the rules that have slowed down the response. If policymakers felt the need to abandon these rules during the current crisis, those same rules should probably be permanently repealed or at least comprehensively reformed to allow for more flexible responses in the future.

Accordingly, when the pandemic subsides, policymakers at the federal and state levels should create “Fresh Start Initiatives” that would comprehensively review all suspended rules and then outline sunsetting or reform options for them. To this end, we propose an approach based on the successful experience of the Base Realignment and Closure (BRAC) Commission.

Read the entire paper here to see how it would work. This is our chance to finally do some much-needed spring cleaning for the regulatory state.

A decade ago, a heated debate raged over the benefits of “a la carte” (or “unbundling”) mandates for cable and satellite TV operators. Regulatory advocates said consumers wanted to buy all TV channels individually to lower costs. The FCC under former Republican Chairman Kevin Martin got close to mandating a la carte regulation.

But the math just didn’t add up. A la carte mandates, many economists noted, would actually cost consumers just as much (or even more) once they repurchased all the individual channels they desired. And it wasn’t clear people really wanted a completely atomized one-by-one content shopping experience anyway.

Throughout media history, bundles of all different sorts had been used across many different sectors (books, newspapers, music, etc.). This was because consumers often enjoyed the benefits of getting a package of diverse content delivered to them in an all-in-one package. Bundling also helped media operators create and sustain a diversity of content using creative cross-subsidization schemes. The traditional newspaper format and business is perhaps the greatest example of media bundling. The classifieds and sports sections helped cross-subsidize hard news (especially local reporting). See this 2008 essay by Jeff Eisenach and me for details for more details on the economics of a la carte.

Yet, with the rise of cable and satellite television, some critics protested the use of bundles for delivering content. Even though it was clear that the incredible diversity of 500+ channels on pay TV was directly attributable to strong channels cross-subsidizing weaker ones, many regulatory advocates said we would be better off without bundles. Moreover, they said, online video markets could show us the path forward in the form of radically atomized content options and cheaper prices.

Flash-forward to today. As this Wall Street Journal article points out, online video providers are rejecting a la carte and recreating content bundles to keep a diversity of programming flowing. This happened in unregulated markets without any FCC rules. YouTube, Hulu, PlayStation, and many other online video providers are creating new bundles and monetization schemes.

It is also worth noting that this same sort of “re-bundling” of content is happening with online news sources and other digital platforms as various sites struggle to find content monetization schemes that can sustain diverse, high-quality content in the Digital Era. Content bundling and various paywall schemes are helping them do so.

The lesson here is that the economics of content creation and delivery are quite dynamic, challenging, and extremely hard to predict. Mandating “a la carte” unbundling of content sounded smart and well-intentioned to many people a decade ago, but it proved to be problematic even in highly competitive online markets. Thankfully, we did not mandate unbundling by law. We waited and watched to see how it naturally played out in various markets. We now have a better feel for how big of a mistake mandatory a la carte would have likely been in practice.

Sen. Warren makes many interesting points about the dangers of regulatory capture, but the heart of her argument about how to deal with the problem can basically be summarized as ‘Let’s Build a Better Breed of Bureaucrat and Give Them More Money.’  In her own words, she says we should “limit opportunities for ‘cultural’ capture'” of government officials and also “give agencies the money that they need to do their jobs.”

It may sound good in theory, but I’m always a bit perplexed by that argument because the implicit claims here are that:

(a) the regulatory officials of the past were somehow less noble-minded and more open to corruption than some hypothetical better breed of bureaucrat that is out there waiting to be found and put into office; and

(b) that the regulatory agencies of the past were somehow starved for resources and lacked “the money that they need to do their jobs.”

Neither of these assumptions is true and yet those arguments seem to animate most of the reform proposals set forth by progressive politicians and scholars for how to deal with the problem of capture.

I think it’s wishful thinking at best and willful ignorance of history at worst. First, people–including regulators–were no different in the past than they are today. We are not magically going to find a more noble lot who will walk into office and be immune from these pressures. If anything, you could make the argument that the regulators of the early Progressive Era were less susceptible to this sort of influence because they were riding a wave of impassioned regulatory zeal that accompanied that period. I don’t buy it, but it’s more believable tale than the opposite story.

Secondly, if you think that the problem of regulatory capture is solved by simply giving agencies more money, you’ve got it exactly backwards. Regulated interests go to where the power and money is. They find it and influence it. You can deny it all you want, but that’s what history shows us. So long as we are delegating broad administrative powers to administrative agencies and then sending them big bags of enforcement money at the same time, special interests will seek and find ways to influence that process.

Is that too grim of a statement on the modern administrative state? No, it’s simply a perspective informed by history; a history that has best been told, incidentally, by progressive scholars and critics! And yet they all too often don’t seem willing to learn the lessons of that history.

The cycle of influence doesn’t end just because you try to erect more firewalls to keep the special interests out. Where power exists, they will  always find a way to flex their muscle. It’s only really a question if you want this activity to be over or under the table. The whole “get-all-the-money-out-of-politics” fiction is, well, just that–a fiction. It’s a fine-sounding fairly tale that we continue to repeat again and again and yet nothing much ever changes. And, yet, a whole hell of lot of smart people continue to believe in that fairy tale if for no other reason than they can’t possible live with the idea that perhaps the only way to get this problem under control is to limit the underlying discretion and power of regulatory agencies to begin with.

On a better, more optimistic note, I want to highlight one argument Sen, Warren made in her essay with which I find myself in wholehearted agreement: We need more simple rules. As she correctly notes:

Complex rules take longer to finalize, are harder for the public to understand, and inevitably contain more special interest carve-outs that favor big business interests over small businesses and individuals. Complex rules are also more reliant on industry itself to provide additional detail and expertise—and that means more opportunities for capture. Simple works better.

Amen to all that! This is an issue I address in Chapter 6 of my recent book,  Permissionless Innovation: The Continuing Case for Comprehensive Technological Freedom. In subjection F beginning on pg. 140, I explain why policymakers should “Rely on ‘Simple Rules for a Complex World’ When Regulation Is Needed.” I build that section around the insights of Philip K. Howard and Richard Epstein. Howard, who is chair of Common Good and the author of The Rule of Nobody, notes:

Too much law . . can have similar effects as too little law. People slow down, they become defensive, they don’t initiate projects because they are surrounded by legal risks and bureaucratic hurdles. They tiptoe through the day looking over their shoulders rather than driving forward on the power of their instincts. Instead of trial and error, they focus on avoiding error. Modern America is the land of too much law. Like sediment in a harbor, law has steadily accumulated, mainly since the 1960s, until most productive activity requires slogging through a legal swamp. It’s degenerative. Law is denser now than it was 10 years ago, and will be denser still in the next decade. This growing legal burden impedes economic growth.

That’s exactly why we need, to borrow the title of Richard Epstein’s 1995 book of the same name, “simple rules for a complex world.” As I argue in my book:

This is why flexible, bottom-up approaches to solving complex problems. . .  are almost always superior to top-down laws and regulations. For example, we have already identified how social norms and pressure from the public, media, or activist groups can “regulate” behavior and curb potential abuses. And we have seen how education, awareness-building, transparency, and empowerment-based efforts can often help alleviate the problems associated with new forms of technological change. But there are other useful approaches that can be tapped to address or alleviate concerns or harms associated with new innovations. To the extent that other public policies are needed to guide technological developments, simple legal principles are greatly preferable to technology-specific, micromanaged regulatory regimes. Ex ante (preemptive and precautionary) regulation is often highly inefficient, even dangerous. Prospective regulation based on hypothesizing about future harms that may never materialize is likely to come at the expense of innovation and growth opportunities. To the extent that any corrective action is needed to address harms, ex post measures, especially via the common law, are typically superior.

I itemized those “simple rules” and solutions in another recent piece (“What 20 Years of Internet Law Teaches Us about Innovation Policy“). They include both formal mechanisms (property and contract law, torts, class action activity, and other common law tools) and informal strategies (ongoing voluntary negotiations, multistakeholder agreements, industry self-regulatory best practices and codes of conduct, education and transparency efforts, and so on). We should exhaust those sorts of solutions first before turning to administrative regulation. And then we should subject such regulatory proposals to a strict benefit-cost analysis (BCA). As I note in my Permissionless Innovation book,

All new proposed regulatory enactments should be subjected to strict BCA and, if they are formally enacted, they should also be retroactively reviewed to gauge their cost-effectiveness. Better yet, the sunsetting guidelines recommended above should be applied to make sure outdated regulations are periodically removed from the books so that innovation is not discouraged.

If Sen. Warren is serious about crafting more sensible “simple” rules and working to end the problem of regulatory chapter, this is a better approach than simply trying, yet again, to build a better breed of bureaucrat.

I wanted to draw your attention to this important address on online platform regulation by Alex Chisholm, the head of UK’s Competition and Markets Authority. That’s the non-ministerial department in the UK responsible for competition policy issues. Chisholm delivered the address on October 27th at the Bundesnetzagentur conference in Bonn. It’s a terrific speech that other policymakers would be wise to read and mimic to ensure that antitrust and competition policy decisions don’t derail the many benefits of the Information Revolution.

“Today, as regulators, we have the responsibility but also the great historical privilege of playing an influential role in the deployment throughout the economy of the latest of these defining technological eras,” Chisholm began. “As regulators, we must try to minimise the inevitable mismatch between how we’ve done things before and the opportunities and risks of the new,” he argued.

He continued on to specify three recommendations for those crafting policy on this front:

1. “First, blanket solutions should be avoided. Instead an evidence-based assessment of potential adverse effects of specific industry features or practices should be carried out before either ex ante regulatory or ex post enforcement tools are deployed. In either case this should be closely targeted to the specific harm identified, and every care given to avoid disproportionate actions and unwelcome side-effects. In that respect, online platforms and the digital economy do not differ from any other sector: there is no need to reinvent the regulatory wheel.
2. Secondly, the significant risks associated with premature, broad-brush ex ante legislation or rule-making point towards a need to shift away from sector-specific regulation to ex post antitrust enforcement, which is better adapted to the period we’re in, with its fast-changing technology and evolving market reactions.
3. Thirdly, as regulators, policymakers, businesses and consumers, we all need to adapt our practices to harvest the benefits of the new while containing its costs and risks.”

That’s an excellent framework that can and should guide future antitrust and competition policy decisions by policymakers across the globe. But Chisholm wasn’t done. Here are some of my other favorite highlights from his address:

• On avoiding “one-size-fits-all” regulation: “[T]here is no ‘digital one size fits all’. . .  [O]penness is not necessarily always good for competition, nor are closed systems always bad.”
• On dealing with the pace of change: “Leaving aside costs of compliance, protecting consumers by virtue of ex ante regulation is inherently difficult in digital markets where consumer preferences evolve fast and in a less predictable manner.”
• On the difficulty of forecasting: “Where ex ante regulation is introduced, it therefore risks harming innovation by locking in existing standards and discouraging or preventing more disruptive innovations. The evolution of digital markets has been particularly difficult to predict.”
• On how to level the playing field: “Finally, consider deregulation. If policymakers were to seek to avoid every hypothetical consumer harm through pre-emptive ex ante regulation, they would likely prevent many best-case scenarios entailing significant consumer benefits from ever coming about. Policymakers and regulators should be open to the idea that a review of existing regulation and its suitability in the context of online platforms may in certain cases actually result in a withdrawal of such regulation – creating a reasonably level playing field by ‘levelling down’ as opposed to ‘levelling up’.”

I really appreciate those last few points, and they are very much consistent with the recommendations set forth in my recent book on  Permissionless Innovation. In the book, I argued that, “Trying to preemptively plan for every hypothetical worst-case scenario means that many best-case scenarios will never come about.”

I was pleased to see the book cited in Chisholm’s speech, as well as some work that Mercatus scholars had done on how to level the proverbial playing field within sectors undergoing rapid technological and regulatory change. Chris Koopman, Matt Mitchell, and I have argue that, while regulatory asymmetries represent a legitimate policy problem,

the solution is not to punish new innovations by simply rolling old regulatory regimes onto new technologies and sectors. The better alternative is to level the playing field by “deregulating down” to put everyone on equal footing, not by “regulating up” to achieve parity. Policymakers should relax old rules on incumbents as new entrants and new technologies challenge the status quo. By extension, new entrants should only face minimal regulatory requirements as more onerous and unnecessary restrictions on incumbents are relaxed.

Anyway, make sure to read Alex Chisholm’s entire speech. It’s very much worth your time. Incidentally, I think his vision is very much consistent with that of  Maureen K. Ohlhausen, a Commissioner with the Federal Trade Commission (FTC). I have written extensively here and elsewhere about Commissioner Ohlhausen’s laudable vision for wise tech policy-making, most recently in this essay.

Today, the U.S. Department of Transportation and the Federal Aviation Administration (FAA) announced that it will soon require Unmanned Aircraft Systems (UAS) or private drones, used for both personal and commercial purposes, to be registered in a national database. To facilitate this process, the agencies announced the creation of a new federal task force that will develop recommendations for a UAS registration process. Rules are to be published by November 20th (presumably to cover new devices sold before Christmas).

Here are some quick initial reactions on the proposed registration rules:

• The FAA is a creating a ‘show-us-your-papers’ regulatory regime for average Americans who own drones. Forcing all of us to register our devices with the authorities in a national drone owner’s database raises clear civil liberties concerns.
• Americans are generally opposed to the idea of registering their technologies and a ‘DMV for Drones,’ which isn’t likely to be run any more efficiently than existing government registration systems.
• Moreover, by demanding that all drones be registered, the FAA is opening the door to a potentially far greater regulatory threat since drones are, in essence, flying computers. We don’t have federal registration systems for computers or cameras, and we shouldn’t have such a regulatory regime for private drones.
• It’s not unclear how the agency plans to enforce against existing users, but in response to a question at the press conference announcing the new rules, the head of the DOT said that the task force would determine how to enforce registration retroactively for existing drone owners. So apparently they will be brought under the new rules.
• Mandatory registration of all drones also might raise some First Amendment-related issues for journalists, too, depending on how the FAA enforces its regulations. A government drone database could intimidate reporters (or potentially even private individuals and organizations) and make it harder for them to engage in whistle-blowing activities with the aid of drones.
• Because of these problems, I would not be surprised if the FAA’s new drone registration regime leads to a rise in acts of technological civil disobedience among average Americans, many of whom will actively oppose such heavy-handed tactics and the creation of yet-another federal database of their private information.
• Of course, it could be that the FAA handles objections by creating a long list of carve-outs and exemptions from the new database requirements. In fact, in the press release announcing the formation of the task force, the agency said that the task force “will advise the Department on which aircraft should be exempt from registration due to a low safety risk, including toys and certain other small UAS.” That could take some of the pressure off, but only by creating an even more convoluted regulatory regime.
• Finally, as an administrative matter, the way the FAA to pushing hard to ram this all through before Christmas has led them to believe that they can just skirt the law in the process. As Marc Scribner of the Competitive Enterprise Institute notes, the agency “will likely be in violation of two different federal laws: the FAA Modernization and Reform Act of 2012 and the Administrative Procedure Act.” Read Marc’s full post for the details, but in a nutshell, the FAA cannot simply throw out standard operating procedures in terms of federal rule-making guidelines simply because they wish to suggest that there is some sort of imminent threat to public safety here. The real danger comes not from unregistered drones, but lawmakers and regulators who believe they can suspend the rule of law and ignore administrative accountability when it suits their desires.

The Mercatus Center at George Mason University has published several reports and agency filings discussing the problems associated with the regulation of private and commercial drones. Most recently, Mercatus filed comments with the FAA as part of it proceeding on “Operation and Certification of Small Unmanned Aircraft Systems.”

Additional Reading:

• Jason Koebler, “8 Questions Raised by the FAA’s Decision to Register Every Drone in the US,” Motherboard, October 19, 2015.
• Alex Howard, “Get Ready To Stand In Line At The Department of Drone Vehicles” Huffington Post, October 19, 2015.
• John Goglia, “DOT/FAA Announce Mandatory Registration Of All Drones; Task Force Formed,” Forbes, October 19, 2015.
• Matt McFarland, “The frantic sprint begins to figure out drone registration,” Washington Post, October 20, 2015.
• Jonathan Rupprecht, “The Problems with Mandatory Drone Registration in Drone Law,” Drone Law Blog.
• Marc Scribner, “Is a Drone Registration Mandate Illegal?” CEI Blog, October 19, 2015.
• Kaveh Waddell, “Getting a Drone for Christmas? Better Register with the Government,” National Journal, October 19, 2015.
• Sally French, “All drones to require federal registration,” MarketWatch, October 18, 2015.

Yesterday afternoon, the Federal Aviation Administration (FAA) finally released its much-delayed rules for private drone operations. As The Wall Street Journal  points out, the rules “are about four years behind schedule,” but now the agency is asking for expedited public comments over the next 60 days on the whopping 200-page order. (You have to love the irony in that!) I’m still going through all the details in the FAA’s new order — and here’s a summary of what the major provisions — but here are some high-level thoughts about what the agency has proposed.

Opening the Skies…

• The good news is that, after a long delay, the FAA is finally taking some baby steps toward freeing up the market for private drone operations.
• Innovators will no longer have to operate entirely outside the law in a sort of drone black market. There’s now a path to legal operation. Specifically, small unmanned aircraft systems (UAS) operators (for drones under 55 lbs.) will be able to go through a formal certification process and, after passing a test, get to operate their systems.

… but Not Without Some Serious Constraints

• The problem is that the rules only open the skies incrementally for drone innovation.
• You can’t read through these 200 pages of regulations without getting sense that the FAA still wishes that private drones would just go away.
• For example, the FAA still wants to keep a bit of a leash around drones by (1) limiting their use to being daylight-only flights (2) that are in the visual line-of-sight of the operators at all times. And (3) the agency also says that drones cannot be flown over people.
• Those three limitations will hinder some obvious innovations, such as same-day drone delivery for small packages, which Amazon has suggested they are interested in pursuing. (Amazon isn’t happy about these restrictions.)

Impact on Small Innovators?

• But what I worry about more are all the small ‘Mom-and-Pop’ drone entrepreneur, who want to use airspace as a platform for open, creative innovation. These folks are out there but they don’t have the name or the resources to weather these restrictions the way that Amazon can. After all, if Amazon has to abandon same-day drone delivery because of the FAA rules, the company will still have a thriving commercial operation to fall back on. But all those small, nameless drone innovators currently experimenting with new, unforeseeable innovations may not be so lucky.
• As a result, there’s a real threat here of drone entrepreneurs bolting the U.S. and offering their services in more hospitable environments if the FAA doesn’t take a more flexible approach.
• [For more discussion of this problem, see my recent essay on “global innovation arbitrage.”]

Impact on News-Gathering?

• It’s also worth asking how these rules might limit legitimate news-gathering operations by both journalistic enterprises and average citizens. If we can never fly a drone over a crowd of people, as the rules stipulate, that places some rather serious constraints on our ability to capture real-time images and video from events of societal importance (such as political protests or even just major events like sporting events or concerts).
• [For more discussion about this, see this September 2014 Mercatus Center working paper, “News from Above: First Amendment Implications of the Federal Aviation Administration Ban on Commercial Drones.”]

Still Time to Reconsider More Flexible Rules

• Of course, these aren’t final rules and the agency still has time to relax some of these restrictions to free the skies for less fettered private drone operation.
• I suspect that drone innovators will protest the three specific limitations I identified above and ask for a more flexible approach to enforcing those rules.
• But it’s good that the FAA has finally taken the first step toward decriminalizing private drone operations in the United States.

___________________________

Additional  Reading

• Permissionless Innovation & Commercial Drones, February 4, 2015.
• DRM for Drones Will Fail, January 28, 2015.
• Regulatory Capture: FAA and Commercial Drones Edition, January 16, 2015.
• Global Innovation Arbitrage: Commercial Drones & Sharing Economy Edition, December 9, 2014.
• How to Destroy American Innovation: The FAA & Commercial Drones, October 6, 2014.
• Filing to FAA on Drones & “Model Aircraft”, Sept. 23, 2014.
• Private Drones & the First Amendment, Sept. 19, 2014.
• [TV interview] The Beneficial Uses of Private Drones, March 28, 2014.
• Comments of the Mercatus Center to the FAA on integration of drones into the nation’s airspace, April 23, 2o13.
• Eli Dourado, Deregulate the Skies: Why We Can’t Afford to Fear Drones, Wired, April 23, 2013.
• Permissionless Innovation: The Continuing Case for Comprehensive Technological Freedom (2014).
• [Video] Cap Hill Briefing on Emerging Tech Policy Issues (June 2014).

If you want a devastating portrait of how well-intentioned regulation sometimes has profoundly deleterious unintended consequences, look no further than the Federal Aviation Administration’s (FAA) current ban on commercial drones in domestic airspace. As Jack Nicas reports in a story in today’s Wall Street Journal (“Regulation Clips Wings of U.S. Drone Makers“), the FAA’s heavy-handed regulatory regime is stifling America’s ability to innovate in this space and remain competitive internationally. As Nicas notes:

as unmanned aircraft enter private industry—for purposes as varied as filming movies, inspecting wind farms and herding cattle—many U.S. drone entrepreneurs are finding it hard to get off the ground, even as rivals in Europe, Canada, Australia and China are taking off. The reason, according to interviews with two-dozen drone makers, sellers and users across the world: regulation. The FAA has banned all but a handful of private-sector drones in the U.S. while it completes rules for them, expected in the next several years. That policy has stifled the U.S. drone market and driven operators underground, where it is difficult to find funding, insurance and customers. Outside the U.S., relatively accommodating policies have fueled a commercial-drone boom. Foreign drone makers have fed those markets, while U.S. export rules have generally kept many American manufacturers from serving them.

Of course, the FAA simply responds that they are looking out for the safety of the skies and that we shouldn’t blame them. Again, there’s no doubt that the agency’s hyper-cautious approach to commercial drone integration is based on the best of intentions. But as we’ve noted here again and again, all the best of intentions don’t count for much–or at least shouldn’t count for much–when stacked against real-world evidence and results. And the results in this case are quite troubling.

An article last week from Alan McQuinn of the Information Technology and Innovation Foundation (“Commercial Drone Companies Fly Away from FAA Regulations, Go Abroad“) documented how problematic this situation has become:

With no certainty surrounding a timeline, limited access to exemptions, and a dithering pace for setting its rules, the FAA is slowing innovation. . . .  These overbearing rules have pushed U.S. companies to move their drone research and development projects to more permissive nations, such as Australia, where Google chose to test its drones. Australia’s Civil Aviation Safety Authority, the agency in charge of commercial drones, offers a great example of unrestrictive regulations. While it has not yet finalized its drone laws, it still allows companies and citizens to test and use these technologies under certain rules. Instead of forcing companies to reveal their technologies at government test sites, it allows them to test outdoors if they receive an operator’s certificate and submit their test area for approval. Australia’s more permissive nature shows how a country can allow innovation to thrive while simultaneously examining it for potential safety concerns.

The Wall Street Journal’s Nicas similarly observes that foreign innovators are already taking advantage of America’s regulatory mistakes to leapfrog us in drone innovation. He reports that Germany, Canada, Australia and China are starting to move ahead of us. Nicas quotes Steve Klindworth, head of a DJI drone retailer in Liberty Hill, Texas, who says that if the United States doesn’t move soon to adopt a more sensible policy position for drones that, “It’ll reach a point of no return where American companies won’t ever be able to catch up.”

In essence, the United States is adopting the exact opposite  approach we did a generation ago for the Internet and digital technology.  I’ve written recently about how “permissionless innovation” powered the Information Revolution and helped American companies become the envy of the globe. (See my essay, “Why Permissionless Innovation Matters,” for more details and data.) That happened because America got policy right, whereas other countries either tried to micromanage the Information Revolution into existence or they adopted policies that instead actively stifled it. (See my recent book on this subject for more discussion.)

In essence, we see this story playing out in reverse with commercial drones. The FAA is adopting a hyper-precautionary principle position that is holding back innovation based on worse-case scenarios. Certainly the safety of the national airspace is a vital matter. But to shut down all other aerial innovation in the meantime is completely unreasonable. As I wrote in a filing to the FAA with my Mercatus Center colleagues Eli Dourado and Jerry Brito last year:

Like the Internet, airspace is a platform for commercial and social innovation. We cannot accurately predict to what uses it will be put when restrictions on commercial use of UASs are lifted. Nevertheless, experience shows that it is vital that innovation and entrepreneurship be allowed to proceed without ex ante barriers imposed by regulators. We therefore urge the FAA not to impose  any  prospective restrictions on the use of commercial UASs without clear evidence of actual, not merely hypothesized, harm.

Countless life-enriching innovations are being sacrificed because of the FAA’s draconian policy. (Below I have embedded a video of me discussing those innovations with John Stossel, which was taped earlier this year.) New industry sectors and many jobs are also being forgone. It’s time for the FAA to get moving to open up the skies to drone innovation. Congress should be pushing the agency harder on this front since the agency seems determined to ignore the law, which requires the agency to integrate commercial drones into the nation’s airspace.

Additional  Reading

• Filing to FAA on Drones & “Model Aircraft”, Sept. 23, 2014
• Private Drones & the First Amendment, Sept. 19, 2014
• [TV interview] The Beneficial Uses of Private Drones, March 28, 2014
• Comments of the Mercatus Center to the FAA on integration of drones into the nation’s airspace, April 23, 2o13
• Eli Dourado, Deregulate the Skies: Why We Can’t Afford to Fear Drones, Wired, April 23, 2013
• Permissionless Innovation: The Continuing Case for Comprehensive Technological Freedom (2014)
• [Video] Cap Hill Briefing on Emerging Tech Policy Issues (June 2014)

Here’s a sharp editorial from The Economist about Internet governance entitled,  “In Praise of Chaos: Governments’ Attempts to Control the Internet Should be Resisted.” In the wake of the recent Internet Governance Forum meeting, many folks are once again debating the question of who rules the Net? Along with Wayne Crews, I edited a huge collection of essays on that topic back in 2003 and it’s a subject that continues to interest me greatly. As I noted here last week, many of those who desire greater centralization of control over Net governance decisions are using the fear that “fragmentation” will occur without some sort of greater plan for the Net’s future. I believe these fears are greatly overstated and are being used to justify expanded government meddling with online culture and economics.

The new Economist piece nicely brings into focus the key question about who or what we should trust to guide the future of the Internet. It rightly notes that the current state of Net governance is, well, messy. But that’s not such a bad thing when compared to the alternative:

the internet is shambolically governed. It is run by a hotch-potch of organisations with three- to five-letter acronyms. Many of their meetings, both online and offline, are open to the public. Some—like the Internet Governance Forum, which held its annual meeting in Nairobi this week—are just talking shops. Decision-making is slow and often unpredictable.

It is in short a bit chaotic. But sometimes chaos, even one that adherents like to claim somewhat disingenuously is a “multi-stakeholder” approach, is not disastrous: the internet mostly works. And the shambles is a lot better than the alternative—which nearly always in this case means governments bringing the internet under their control.

Quite right, and the editorial continues on to pose the crucial question about today’s situation:

Imagine if the ITU, a classic example of a sluggish international bureaucracy with antiquated diplomatic rituals, or indeed any other inter-governmental organisation, had been put in charge of the nascent global network two decades ago. Would it have produced a world-changing fount of innovation? We think not.

Indeed, it would be hard to imagine top-down design and central planning could have given rise to today’s Internet. While very few global officials propose the wholesale government takeover of the Net today, we should nonetheless be skeptical about calls to have international bureaucracies exert greater authority over the Internet, regardless of the justification. Messy governance beats top-down planning.

Note to Washington regulators and would-be censors… Don’t look now but parenting is happening!  Yes, it really is true: Parents are parenting. That’s the result of this new survey by Yahoo & Ipsos OTX.  Please pardon my snarky-ness, but I’ve been going at it for years with mobs of people here in DC who think that all parents are asleep at the wheel and kids are heading straight for the moral abyss. It’s a bunch of bunk, as I’ve pointed out here before. This new Yahoo!/Ipsos survey illustrates that, once again, parents are monitoring what their kids are up to online and taking an active role in mentoring them about web use:

• 78% of parents are concerned about their children’s online safety.
• 70% of parents talk to their children about online safety at least 2-3 times a year; 45% talk to their children at least once a month.
• 74% of parents are connected to their children’s profiles on social networking sites.
• 71% of parents have taken at least one action to manage their children’s use of the Internet or cell phones such as: Check to see where children are searching online; Set time limits for children’s use of computers or cell phones; Set parental controls on video sites; Use filters to limit where children go on the Web.

These results are consistent with what I have found and described in my ongoing PFF special report, Parental Controls & Online Child Protection: A Survey of Tools and Methods.  Obviously, many parents utilize the growing diversity of parental control technologies that are at their disposal to better control/monitor their children’s online activities/interactions. But what’s really impressive (and far more important) is that so many surveys and studies continue to show that the vast majority of parents utilize a variety of household “media consumption rules” as a substitute for, or compliment to, parental control technologies. In fact, in many ways, these household efforts represent the most important steps that most parents can take in dealing with potentially objectionable content or teaching their children how to be sensible, savvy media consumers. In my work, I have divided these household media rules into four categories: (1) “where” rules (assigning a place for media consumption); (2) “when and how much” rules (creating a media allowance); (3) “under what conditions” rules (carrot-and-stick incentives); and, (4) “what” rules (specifying the programming kids can and cannot watch).  Again, many households reject technical blocking tools in favor of these household media rules.

For example,  the U.S. Census Bureau’s ”A Child’s Day” reports, conducted from 1994 to 2006, illustrate how the use of household media rules appears to be growing. Parents are crafting more TV rules for their kids today than they were in the past. The press release for the 2004 report reveals that, “Parents are taking a more active role in the lives of their children than they did 10 years ago.” The 2006 study found that 72.4 percent of parents of children age 6 to 11 imposed family television rules on which programs, how early or late, and how many hours children were allowed to watch.

Other surveys and studies have confirmed this. A 2003 Kaiser Family Foundation survey found that “Almost all parents say they have some type of rules about their children’s use of media.” More recent Kaiser surveys have bolstered that finding. For example, a 2006 Kaiser survey of families with infants and preschoolers revealed that 85 percent of those parents who let their children watch TV at that age have rules about what their child can and cannot watch. Of those parents, 63 percent say they always enforce those rules. About the same percentage of parents said they had similar rules for video game and computer usage. Likewise, a June 2007 Kaiser poll revealed that:

• 65% of parents say they closely monitor their children’s media use;
• 73% of parents say they know a lot about what their kids are doing online;
• 87% of parents check their children’s instant messaging “buddy lists;”
• 82% of parents review their children’s social networking sites; and,
• 76% of parents look to see what websites their children have visited.

Finally, a 2007 poll commissioned by Common Sense Media and Cable in the Classroom revealed that 85 percent of parents and legal guardians of children ages 6 to 18 who go online say they have talked to their child in the past year about how to be safe and smart online. And I cite many additional numbers like these in my Parental Controls & Online Child Protection report.

Incidentally, one of the most interesting findings of the Yahoo! survey is that, “Dads are doing their part, and then some.” “Today’s fathers spend more time with their children than three decades ago and take on more household responsibilities,” the survey notes. Specifically:

• 71% of dads (compared to 63% of moms) say they are taking at least one action to help manage their children’s online behavior including having conversations about respecting the privacy of others and checking their children’s privacy settings. — More dads than moms have had a conversation with their children about their digital reputations and how to promote a positive online reputation.
• Fathers more often check to see what personal information can be easily found about their children by searching for their names online. — 53% of dads surveyed told us they plug their children’s names into a search engine at least 2–3 times per year (compared to 38% of moms) — 33% of dads told us they do this search at least once a month.
• Dads spend slightly more time talking to their children about online safety. 47% of dads have the conversation at least once a month or more; 42% of moms have the conversation at least once a month or more.
• According to the survey, more dads than moms use filters to limit where their kids go online, and more dads monitor the time children send text messages and how many text messages they send.

As the father of two elementary school kids, I can only say… Dads rule!

While some might protest that more can and should be done by parents — which is always going to be the case about everything — I would hope those critics wouldn’t lose sight of how much is already being done by parents to monitor and mentor their children’s online actions and interactions.  Let’s give parents some credit for once!

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. The reality is that regulation always spreads. The march of regulation can sometimes be glacial, but it is, sadly, almost inevitable: Regulatory regimes grow but almost never contract. Indeed, in some ways, the prediction we made just three weeks ago is already coming true: The basic premise of neutrality regulation is already being proposed for other layers of the Internet—and not just by AT&T in retaliation. One need not agree with all of AT&T’s accusations to recognize that, whatever the FCC might say today, any large online intermediary with a popular platform potentially faces the threat of “network neutrality” mandates—because every platform is essentially a “network,” too. We’re not just talking about “search neutrality” (Google as well as Microsoft) but also about “device neutrality” (mobile handsets), “app neutrality” (Apple’s iTunes store, Facebook’s developers and Google’s Android mobile OS) and so on for social networking, email, instant messaging, online advertising, etc.

An open letter sent to FCC Chairman Julius Genachowski this week by 28 founders and CEOs of leading application providers—including Amazon, Google, Facebook, Netflix, Craigslist, Sony and Twitter—speaks generally about the need for the FCC to enforce a “guarantee of neutral, nondiscriminatory access by users.” While many of these signatories may have in mind ISPs as the network “gatekeepers” that need to be reined in by the FCC, the more successful among them are likely to find this letter used against them in the future—perhaps even by co-signatories—to advance a broad conception of what the government must do to ensure “openness” and “access” for platforms at all layers of the Internet.

Dumb Networks, Dumb Devices

The intellectual foundations for this regulatory creep have already been laid by groups like Free Press and Public Knowledge and law professors like Columbia’s Tim Wu, Harvard’s Jonathan Zittrain and Seton Hall’s Frank Pasquale. As originally conceived by Tim Wu in 2003, “network neutrality” is not unique to broadband networks: “the basic economic problem found in the network neutrality debate (a form of ‘platform exclusion’ or ‘vertical foreclosure’) can be found in many other markets.” Indeed, Wu’s popular Net Neutrality FAQ declares:

The promotion of network neutrality is no different than the challenge of promoting fair evolutionary competition in any privately owned environment, whether a telephone network, operating system, or even a retail store. Government regulation in such contexts invariably tries to help ensure that the short-term interests of the owner do not prevent the best products or applications becoming available to end-users.

Zittrain picked up where Wu left off in The Future of the Internet and How to Stop It—attacking, as the enemies of innovation, not ISPs but the supposedly “closed” platforms of Apple, TiVo and Microsoft’s Xbox. Zittrain warns that:

If there is a present worldwide threat to neutrality in the movement of bits, it comes not from restrictions on traditional Internet access that can be evaded using generative PCs, but from enhancements to traditional and emerging appliancized services that are not open to third-party tinkering.

Zittrain’s general solution is “API [Applications Programming Interface] neutrality:” If you create a platform (whether hardware or software) and begin allowing third-party contributions (“generativity”), you will lose all control over devices or applications that can run on that platform.

Those who offer open APIs on the Net in an attempt to harness the generative cycle ought to remain application-neutral after their efforts have succeeded, so all those who built on top of their interface can continue to do so on equal terms…. [N]etwork neutrality ought to be applied to the new platforms of Web services that, in turn, depend on Internet connectivity to function.

Clearly, if Zittrain and his allies have their way, the sort of neutrality mandates envisioned by the FCC or some Congressmen for ISPs will eventually cover companies such as Apple, Google, Facebook, Myspace, Twitter and Amazon—all singled out by Zittrain in a New York Times op-ed in July:

If the market settles into a handful of gated cloud communities whose proprietors control the availability of new code, the time may come to ensure that their platforms do not discriminate. Such a demand could take many forms, from an outright regulatory requirement to a more subtle set of incentives — tax breaks or liability relief — that nudge companies to maintain the kind of openness that earlier allowed them a level playing field on which they could lure users from competing, mighty incumbents.

Frank Pasquale agrees on the need to restrain all “the dominant players at all layers of online life,” but focuses on his demand for a Federal Search Commission to control supposedly “biased” search results. While the FCC wrings its hands over “managed services” offered by ISPs, search engines are increasingly offering their own value-added services by “blending” algorithmically-derived results with special features like maps, videos, books or music depending on what the search term suggests the user is interested in. “Artificially” ensuring that these features appear on the first page of search results is clearly non-neutral, and necessarily involves search engines making ”managed” decisions as to whose features to include. Yet such features also clearly benefit users—dramatically improving the usefulness of search engines and helping to sustain struggling business models like music retailing.

But one need not resort to the works of “ivory tower” academics to see the slippery slope we’re already tumbling down with the infinitely elastic principle of “neutrality.” The prospect of the FCC gradually transforming into a “Federal Information Commission” becomes more apparent when one reads the Wireless Innovation and Investment Notice of Inquiry recently released by the FCC:

As other approaches, such as cloud computing, evolve, will established standards or de facto standards become more important to the applications development process? For example, can a dominant cloud computing position raise the same competitive issues that are now being discussed in the context of network neutrality? Will it be necessary to modify the existing balance between regulatory and market forces to promote further innovation in the development and deployment of new applications and services?

One can imagine how some might use such language to accuse Google of being in “a dominant cloud computing position” such that “the context of network neutrality” will be applied to cloud service (like Google Voice) to “modify the existing balance between regulatory and market forces” through regulation. Indeed, that’s precisely what AT&T has suggested in recent letters (September 25 ^th and October 14 ^th) to the FCC.

AT&T’s partner Apple has already been the subject of such attacks for its decision to block the Google Voice app earlier this summer. The incident marked the beginning of open warfare between Google and AT&T/Apple. The FCC quickly jumped into the mix, first questioning how Apple manages its iTunes apps store for the iPhone, then questioning how Google runs its free Voice application. What legal authority the FCC has over either service is far from clear, but Apple seems to have gotten the message: It recently approved the Spotify music streaming app for the iPhone, which could be a serious competitive threat to the iTunes music store. This small incident highlights how easily regulators can impose their will through informal mechanisms like open-ended investigations even without clear authority to issue rules or bring enforcement actions. Yet none dare call it what it is: regulatory blackmail.

The Inevitability of Regulatory Capture

No doubt, other industry players will cheer on such regulatory harassment of the titans of tech—and maybe even demand more of it. Regulatory creep is driven by more than the self-interests of every bureaucracy to expand its own mission, budget and staff. As the Electronic Frontier Foundation has noted, “Experience shows that the FCC is particularly vulnerable to regulatory capture.” While lobbyists play an important role in defending business from government, all too many businesses naively look at government as a beast that can be tamed, trained, and turned to one’s own advantage, and often try to use the expanding regulatory apparatus to their own advantage or simply throw their competitors under the bus to save themselves. The result is a Hobbesian regulatory “war of all against all” within industry.

As Professor Alfred E. Kahn explained in his 2-volume opus, The Economics of Regulation, all regulation—however high-minded—is inevitably captured by special interests because:

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. […] 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.

If Internet regulation follows the same course as other industries, the FCC and/or lawmakers will eventually indulge calls by all sides to bring more providers and technologies “into the regulatory fold.” Clearly, this process has already begun. Even before rules are on the books, the companies that have made America the leader in the Digital Revolution are turning on each other in a dangerous game of brinksmanship, escalating demands for regulation and playing right into the hands of those who want to bring the entire high-tech sector under the thumb of government—under an Orwellian conception of “Internet Freedom” that makes corporations the real Big Brother, and government, our savior.

Toward a Less MAD World: Digital Détente

Sincere defenders of real Internet Freedom—that is, freedom from government techno-meddling—recognize that there will always be disputes over how companies deal with each other online across all layers of the Internet. The question is not whether we need a technical coordinating mechanism for handling such disputes. Someone should mediate conflicts over alleged deviations from abstract neutrality principles. But should that arbitrator be an inherently political body like FCC? Or should we instead look to truly independent, apolitical arbitrators like the Internet Engineering Task Force or collaborative efforts like the Network Neutrality Squad? Such alternative dispute resolution mechanisms and fora need not have the power of law to be effective: The weight of their expert opinion, based on careful investigation of the facts, would likely resolve most disputes, because companies have strong reputational incentives to comply with reasoned rulings by truly neutral experts. And the white hot spotlight of public attention has a way of disciplining marketplace behavior as well.

Government would still have a role to play, of course, in enforcing antitrust laws where anticompetitive harm to consumers can be proven, and in enforcing the promises companies make to consumers. Ultimately, however, certain business models and technologies require non-neutral treatment, and the best remedy for concerns about non-neutrality is competition itself: In the high-tech sector more than any other, disruptive innovation makes it difficult for even the most successful companies to stay on top forever. Competitive entry—or even the threat of new entry—provides a powerful check on the power of so-called “gatekeepers,” but even more important is the prospect that today’s leaders will be tomorrow’s laggards: There’s little reason to think Google (search and advertising), Apple (smart phones and music) and Facebook (social networking) won’t someday find themselves playing catch-up, just as IBM (computers), Microsoft (desktop software and search), Friendster and MySpace (social networking), and Yahoo! and AOL (web portals) have had to do.

“Digital Détente” would require that all parties concede something and work constructively toward a more “peaceful” ( i.e., less regulatory) resolution. And yet, no Internet company wants to disarm unilaterally, foreswearing politics as a continuation of competition by other means. Only through multilateral disarmament could they break out of the current cycle of regulatory one-upmanship: If the companies in the Internet ecosystem could form a united front against increased government regulation and in favor of removing existing regulatory obstacles to competition, they could all return to their core competencies of creativity and innovation.

The alternative is a regulatory “nuclear winter”: high-tech titans turning their political fire on each other, catching innocent third parties in the cross-fire and bringing a dark cloud of government regulation over the entire Internet. Such increased regulation would stifle investment and innovation throughout the Internet ecosystem. Thus, it is consumers who will ultimately suffer most from the tech industry’s suicidal impulse, as their choices and digital lives are impoverished. For their sake, we hope all industry players will step back from the brink to avoid such high-tech mutually assured destruction.

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.

Three cheers for Randall Rothenberg, President and Chief Executive Officer of the Interactive Advertising Bureau (IAB) for having the guts to send this splendid open letter to Federal Trade Commission (FTC) Chairman Jon Leibowitz about the agency’s new disclosure rules for bloggers. Rothenberg’s entertaining and brutally honest letter is a rarity for a trade association chief. Most of the time trade associations fall all over themselves to whisper sweet-nothings in the ears of regulators, even when those regulators are out to crush the industries in question. But Rothernberg doesn’t pull any punches in his letter to Chairman Leibowitz. After walking through some of the stunning ambiguities of the rules, such as how much “weight consumers give to [a] review” by a blogger who might have a commercial sponsor, Rothenberg asks:

With all due respect, Mr. Chairman: Huh? Does the FTC really intend to probe America’s opinion-mongering apparatus this closely? Do you have a team of Freuds and Jungs able to examine “the weight” consumers give such opinion – and the way they weigh that weight? Naturally, this expedition from Oceania – that’s the place Big Brother ruled – should be worrisome to all Americans, and to all viewers, readers, listeners, users, and providers of any communications medium. But for the 400 members of the Interactive Advertising Bureau, most of which are small and medium-sized enterprises struggling to build their businesses in the face of the worst decline in marketing spending since the 1930’s, the implication that online social media represent a separate class of communications channels with less Constitutional protection than corporate-owned newspapers, radio stations, or cable television networks is of particularly grave concern. They – and we — are not arguing that bloggers and social media be treated differently than incumbent media. After all, most newspapers, magazines, radio stations and television networks, in recognition that Americans are embracing new forms of social communications, have established their own blogs, boards, Facebook pages, Twitter feeds, and the like. Rather, we’re saying the new conversational media should be accorded the same rights and freedoms as other communications channels.

Yep, exactly right and it echoes the questions I’ve raised here before.  And his letter just gets better from there regarding the enforcement nightmare presented by these ambiguous rules:

Indeed, to copious industry protests that provision of free samples, tickets, and services to independent reviewers has been a staple of media since media began and shouldn’t be regulated more strictly online than off, the Commission simply disagreed and said it will “consider each use of these new media on a case-by-case basis for purposes of law enforcement.” So if Niero Gonzales fails to flash “freebie” across each review of a first-person shooter posted on his gamer site Destructoid.com, will he be dragged down to Pennsylvania Avenue for a civil investigation? If I blog on randallrothenberg.com about the dozens of free management books I receive each year from publishers, will I, John Wiley & Sons, or Harper Business be subject to a penalty? Again with all due respect, Mr. Chairman, the Commission’s Guidelines really provides no guidance at all.

And Rothenberg wraps up the letter with a definite bang, not a whimper:

This confusion easily could have been avoided. The IAB and other industry organizations clearly identified the risks to free expression and provided the FTC significant, formal First Amendment guidance when you first mooted the new guidelines earlier this year. We offered to bring in bloggers, social media executives and others from among our membership and work with you to develop practical guidelines and self-regulatory mechanisms that would protect consumers from real harm, while assuring that independent opinion in digital media isn’t stifled. But Commission staff did not follow up with us on our offer, held no public hearings on the proposed Guides, and ultimately dismissed our concerns. Instead, they took the perverse – and Constitutionally dubious – step of saying that individuals writing in social media bear greater liability than do those writing for offline, one-way media. Mr. Chairman, these are the types of vital regulatory issues that, if decided without due care and reasoned judgment, will impair the continued growth of news and content in the online space. I urge the Commission to retract the current set of Guides and to commence a fair and open process in order to develop a roadmap by which responsible online actors can engage with consumers and continue to provide their invaluable content and services.

Wow, powerful stuff.  [Perhaps Mr. Rothenberg should be a Tech Liberation Front blogger when he wraps up his gig at IAB!]  However, I’m not sure I agree with his call for FTC to open a new proceeding on this front.  They should just dump these rules and get back to other business.

I also agree with TechDirt’s Mike Masnick, who says this about the unclear need for these rules in the first place:

Again, it’s not clear why people can’t just sort this out themselves. People who post bogus reviews of things because someone pays them to, or because of something “free,” are going to get called out on it eventually and lose their credibility. When people talk amongst friends, they don’t reveal where they got the products they talk about, or if they happened to get a promotional sample — and that’s fine. While you can understand where the FTC is coming from, it really has gone overboard with these rules.

Agreed, and it gets back to a point I made here awhile back when I pointed out that this should really be a matter of journalistic ethics, self-regulation, and social watchdog policing. That’s the way to strike a more sensible balance.  The FTC needs to scrap its misguided rules now.

Today I was invited to the Federal Communications Commission (FCC) to testify at one of the agency’s Broadband Working Group workshops. This particular workshop was on “Broadband Consumer Context,” which focused on “a range of challenges and opportunities as the internet becomes a focal point for commercial transactions, social networking, and a host of activities pertaining to information gathering and exchange.”

I was asked to address the issue of whether there is a relationship between online safety concerns and broadband uptake. In my testimony, I noted that, in my 15 years of research in this area, I have never unearthed any substantive empirical evidence suggesting a correlation between parental concerns about online activity and overall household broadband uptake. I have seen occasional anecdotal news stories discussing the concerns some parents have had about their kids online that led them to reject online connectivity, but these stories have been exceedingly rare (and I haven’t seen any in recent memory).

I also argued that I did not think it at all surprising that such anecdotes are harder to find, or that empirical evidence on this front seems non-existent. I argued that there were four logical explanations for why parental concerns about online safety haven’t “moved the broadband needle” much in the negative direction:

1. Not every home has children present
2. Parents use a variety of household media rules to control media & Internet usage
3. A vibrant marketplace of parental control technologies exists
4. Likely that most parents believe that the benefits of broadband outweigh the potential downsides

For all the details on each of those, read my entire testimony or check out the presentation embedded below that I made to the FCC today.

Is There a Relationship Between Online Safety Concerns and Broadband Uptake? (Adam Thierer – PFF) http://d.scribd.com/ScribdViewer.swf?document_id=19575851&access_key=key-1igiha619z8f15dm6hg5&page=1&version=1&viewMode=