As always, this year’s “State of the Net” conference features a variety of breakout sessions from which to choose and, sadly, until I figure out a way to clone myself, I can’t cover them all. So, I decided to sit in on the panel about “Antitrust in the Internet Era,” since it’s a subject I find of great interest. It featured the following lineup:

• David Balto, Center for American Progress (moderator)
• Brian Bieron, Senior Director of Federal Affairs, eBay
• Joseph Farrell, Director of the Bureau of Economics, Federal Trade Commission
• Roberta Katz, U.S. Department of Justice
• Catherine Sandoval, Santa Clara University School of Law

Here’s a summary of some of the highlights:

David Balto

• Internet has empowered consumers with more and better information that they did not have in past

Roberta Katz, U.S. Department of Justice

• Says many companies exist today only because of Microsoft case
• public became more educated about Net because of the case
• Christine Varney & Obama Admin more sensitive to innovation concerns & serious about antitrust intervention
• Says Ticketmaster-Live Nation deal was anti-competitive but behavioral & structural remedies will address concerns
• Everything is case-by-case and fact-specific; fact are important

Joseph Farrell, Federal Trade Commission

• going too far to judge MS case based on state of operating system competition
• competition policy crucial to innovation, incentives, openness & opportunity
• incentives for incumbents vs. openness to others is where debate is at
• Key tension = If you protect property rights on one side, you affect innovation and openness on the other side
• Do you try to fix problems or prevent them? antitrust law does both but can be slow
• criticizes Chicago School thinking on vertical restraints and mergers; says it shouldn’t “hamstring” antitrust with Chicago School reasoning
• “consumer information failures” concerning what is going to happen in the aftermarket tend to undermine Chicago School reasoning
• worries about “science” vs. “art” of disclosures

Brian Bieron, Senior Director of Federal Affairs, eBay

• antitrust struggling to keep up with speed of Net development
• Internet is, or should, change some of the analysis
• new entry is important, but are new players just “free riders” on existing players?
• Still plenty of retail competition to the Net; players like eBay are not taking over
• Worried about Ticketmaster-Live Nation leveraging market power, especially with sports teams

Catherine Sandoval, Santa Clara University School of Law

• Relevant market still at heart of debate; what is compliment vs. substitute?
• Is there a “duty to deal” by incumbents?
• Retail price fixing now treated differently in U.S. than in Europe, where it is still regulated
• Recent Supreme Court decisions view of competition is “Hobbseian” (nasty, brutish, and short)
• Feels Supreme Court relies too heavily on faith in innovation to take place without; she thinks regulation needed to aid competitors
• Intel should pay more attention to what happened to Microsoft; learn lessons & change behavior
• Wants federal regulators to look at disclosure issues (ex: “unlimited data” claims & ETFs); says they keep consumers locked in

[You can follow my live Tweeting from the State of the Net conference @AdamThierer]

At the “State of the Net” conference this morning, Alan Murray of The Wall Street Journal interviewed Brian Roberts, Chairman & CEO of Comcast. Here are some highlights. [You can follow all of my live Tweeting at: @AdamThierer]

• Stresses synergies from combination of Comcast cable channels & NBC broadcast properties (ex: Golf Channel & NBC Sports)
• Program access rules “should give fair amount of comfort” to critics who fear that content will be withheld
• “Businesses have to transform & reinvent themselves all the time” NBC part of that transformation for Comcast
• Internet is more friend than foe; broadband has transformed the business for the better
• Businesses grappling w/ ways to extend traditional services to consumers in new ways & still make $$$ (ex: TV Everywhere)

• still not certain if the Hulu business model works; wonders where revenue will come
• says that broadcasting still has a role & big audience, although it may decrease over time as kids flock away to cable
• Need to deal with copyright piracy; Comcast-NBC will be chance to address it from both sides of problem
• Net neutrality principles fine, but regulation will go too far; no need for it; Net & innovation growing rapidly
• NN debate often driven by irrational fears; no carrier wants to block services that could bring customers
• defers question about whether he will follow Rupert Murdoch’s lead in asking Google for compensation for content
• cybersecurity in tomorrow’s world is as important as physical security has been in the past.”
• Doubts that 3D TV will be killer app since most people will not want to sit around all day with glasses on
• targeted advertising can give consumers more relevant ads & allow interaction (= secret to Google’s success)
• targeted ads on TV are being held back by old set-top boxes (STBs); need for modernization of STBs; next gen of STBs should have capability

I’m attending day 2 of the 2010 “State of the Net” conference today. CDT founder Jerry Berman kicked off the show and, echoing Ithiel de sola Pool, said that the Internet is a “technology of freedom” but that it needs stewardship and protection to thrive. He specifically mentioned how First Amendment protections were vital.

Jerry then introduced Rep. Rick Boucher of the House Commerce Committee and the Co-chair of the Congressional Internet Caucus. Here are some of the highlights:  [And you can follow my ongoing live Tweeting from the State of the Net conference @AdamThierer]

• “We have an active year ahead of us” in Congress
• Priority #1: Spectrum inventory legislation will help ensure more efficient use; will hopefully help America meet growing demand for wireless service
• Priority #2: Comprehensive reform of universal service fund; “current system is simply unsustainable”; “change must come and come soon”; people on both sides of the debate have now come to the table and agreed to work together;
• Heart of universal service reform = Competitive bidding; cap on high-cost fund; other steps to ensure efficiency; expanding  contribution base
• Key part of reform is move to expand fund to cover broadband service instead of just basic telephony; requirement that carriers use it for broadband
• Priority #3: Satellite Home Viewer Act renewal
• Priority #4: Privacy & online advertising bill… says he doesn’t want to derail targeted advertising but give people “greater control”; discussion draft coming soon
• Priority #5: cell phone bill w/ national consumer protection standards
• “an ambitious agenda” but he hopes it can all get done
• Hearing coming about FCC’s national broadband plan once it is out
• Feb. 4^th oversight hearing about the Comcast-NBC Universal deal (I’m testifying there!)

Panel #2 at this year’s “State of the Net” pre-conference featured a lively debate about net neutrality and investment. It included a debate between Hal Singer of Empiris LLC and Michael Livermore of the New York University Law School. It also featured the comments of Markham Erickson of the Open Internet Coalition and Christopher Yoo of the University of Pennsylvania Law School.  The panel was ably moderated by Susan Crawford.  Here are some highlights of what proved to be a fun and feisty debate, which began with the comments of Hal Singer:

Hal Singer, Empiris LLC

• FCC wants to constrain pricing flexibility for networks
• Not clear we need price regulation for service delivery in absence of clear market power
• FCC offers novel “collective action” theory to justify regulation, but doesn’t make sense and doesn’t apply here
• Investment at edge of network will not decline in absence of Net neutrality regulation
• Outlawing priority delivery would discourage investment in new networks AND applications
• “Net neutrality would harm the very folks it seeks to protect”; end users will see price hikes
• Investment at core is crucial

Michael Livermore, New York University Law School

• says there is market failure that justifies Net Neutrality regulation + positive externalities with regs
• w/o Net neutrality rules there will be under-investment at both core and edge
• govt subsidies are 1 way to subsidize infrastructure & content, or can use pricing rule / regulation
• need a pricing rule to protect content creators and encourage investment
• will need to ensure fair returns for ISPs as part of regulation

H. Singer

• says that Livermore’s theories about Net Neutrality and investment are equivalent of “bunch of crap”!
• if you lower the expected return on an investment, you will see less investment

M. Livermore

• flips it, says we will see less investment from content providers with regulation of infrastructure providers

Susan Crawford

• what are the “harms”?

M. Livermore

• says harms deal with externalities and need to have regs to incentivize positive externalities

H. Singer

• fears of quality of service (QOS) prioritization are overblown

M. Livermore

• while some may benefit, problem with QOS is that some users are left less well off
• ISPs will set the price point incorrectly and harm other parties

H. Singer

• who is harmed?
• will carriers be forced to get permission to innovation

M. Livermore

• new entrants into marketplace will be harmed w/o regulation to ensure “open system”
• big boys will prioritize service and drive little guys away

H. Singer

• priority service is being mistakenly conflated with general access to networks
• we should strive for equality of opportunity, not outcome
• Net neutrality proponents keep creating new rationales for regulation, but no showing of harm

Markham Erickson – Open Internet Coalition

• The way the Net works now is relatively efficient
• Equate prioritization with a “tax” on providers
• don’t want to encourage ISPs to be getting returns though QOS efforts

Christopher Yoo – Univ. of Penn. Law School

• Big surprise with FCC Net Neutrality docket was how many comments were AGAINST regulation
• Most understood connection between regulation and investment
• NN debate often looks too much to the past
• Internet as we know it today (layered model) is fine, but network is evolving and flexibility is needed for new network applications (ex: multicasting, mobility, security, interactive video)
• Shouldn’t regulate to address ambiguous harms; will have unintended consequences
• wireless networks are particular problem since they operate differently; NN regs would hurt
• horror stories driving debate… remember AOL-Time Warner?  ended up being no big deal (Indeed!)

M. Erickson

• fears “slow lane” for most edge providers
• says ISPs will not re-invest “fast lane” money

C. Yoo

• raises First Amendment implications for Net Neutrality regulation
• some intermediaries will filter content to help focus people of best content; Is that allowed?

Audience Questions

• is there a third way that doesn’t “destroy the Internet?”
• what about negative externalities? (esp. congestion) (Livermore says change price structure for end users)

FCC Commissioners Michael Copps and Meredith Attwell Baker kicked off the 2010 Congressional Internet Caucus “State of the Net” conference this afternoon with two brief keynote addresses.  Below I’ve summarized the highlights here from my live Tweeting at the event (@AdamThierer):

Commissioner Copps

• “every great challenge this country faces… has a broadband component at its core if it’s going to be successfully dealt with” • Broadband is the great enabler; Private sector will lead, but national objectives and visionary public policy also have to be at core • “sins of recent public policy past” got in way of us doing things that needed to get done • Worries about wider new “divides between us”; have opportunity to close them • Praises Hillary Clinton’s Internet freedom speech from last week • Hard to conceptualize the changes that next 5-10 years hold in light of the developments of past 5-10 • Worried about open Internet; “unreasonable discrimination”… doesn’t want to allow “too much latitude” to private operators… says it is threat to “openness” (he never really defines the term, however) • Passionate views on both sides of Net neutrality debate • Need big pipes and more spectrum to grow capacity (I certainly agree on that one! But Net neutrality isn’t going to help us much in that regard) • He fears consolidation • Says minority and women voices are not getting heard online (he says we should measure it by audience measurements & ad $$ but doesn’t bothering mentioning how much wider the gap was in the old mass media era when none of those voices could get heard at all) • How do we assure what we’re doing “actually works for democracy” and the “public interest” (but never defines what that means) • Says media is failing us today; victims are public; investigative journalism is dying (but never discusses how current FCC regulation affects the equation) • cites Founders (Jefferson, Madison) re importance of media … and then favorably cites McChesney & Nichols new book (ugh, someone needs to tell Commissioner Copps that McChesney is a neo-Marxist who wants to destroy all private media providers!)

Commissioner Baker • 69,000 comments on the record and 30+ workshops for National Broadband Plan • We need to repurpose universal service funds for broadband era • Spectrum policy needs rethinking, need to make better use and get more to market • Need comprehensive inventory and database; secondary markets are vital • Net neutrality proceeding… not clear there is a systematic failure that warrants regulation • NN regs could distort markets; could investment and innovation on Net • Broadband deployed to about 90% of households • No clear definition of Net neutrality; no shared concept; people taking past each other • Many recognize that quality of service is important and network management is necessary • Transparency could obviate the need for Net Neutrality regulations • Unclear where FCC gets its jurisdiction; should wait for Court decision in Comcast case • The FCC’s “light touch” has worked and we shouldn’t move away from it at this point (Amen!)