Topic: Telecom, Internet & Information Policy

FCC’s Net Neutrality Rules

On May 15 the FCC announced a proposed rule that would govern the relationship between content providers and internet service providers.  Consumer groups argued the proposed rule was not strong enough because it did not ban differential arrangements between them.

The underlying economic issues are several.  Should the government concern itself with the relationship between the “creators” of things and the “transporters” of them?  In particular should economic profits go just to the creators of things?  Is it “wrong” for the transporters to extract some as well?  What if a creator of content and a transporter want to vertically integrate or enter into a long-term contract to end the costly dispute between them over the division of any economic profits?  Should such arrangements be forbidden because of the possibility such an entity would refuse to transport the content of a different creator?

These issues are not new.  In fact they first arose between railroads and the creators of “content” i.e. farmers, mines, steel mills etc. in the 19th century.  The political resolution of these issues was the Interstate Commerce Act of 1887.  It took about one hundred years for the experiment in transportation common carrier rate regulation to end.  Scholars have concluded that rate regulation raised rather than lowered transportation prices.  And the public has come to the same conclusion because in the quarter century since the end of transportation rate regulation, prices have decreased dramatically.  For a discussion of the rise and fall of transportation regulation see this article by Thomas Gale Moore.

In “Antecedents to Net Neutrality” Bruce Owen explicitly makes the link between the concerns of traditional transportation common carrier regulation and the contemporary notion of “Internet neutrality.”  Net neutrality policies could be implemented only through detailed price regulation, an approach that failed to improve consumer welfare in the transportation sector. History thus counsels against adoption of most versions of net neutrality.  Christopher Yoo has written a detailed history of how difficult common carriage regulation was to implement in traditional telecommunications regulation.  A shorter version will appear in the summer issue of Regulation.

The public debate over net neutrality also does not reflect the increased variation in the price and quality of its services that already exists.  Innovations such as private peering, multihoming, secondary peering, server farms, and content delivery networks have caused the Internet’s traditional one-size-fits-all architecture to be replaced by one that is more heterogeneous. Related, network providers have begun to employ an increasingly varied array of business arrangements and pricing. These changes reflect network providers’ attempts to reduce cost, manage congestion, and maintain quality of service. Policy proposals to constrain this variation risk harming these beneficial developments.

Do Anti-REAL-ID Senators Support REAL ID Spending?

Each year, the homeland security appropriations bill provides for funding that supports REAL ID, the national ID law that Congress passed in haste in 2005.

States across the country originally refused to implement the national ID law, but as we showed in the recently released report, “REAL ID: A State-by-State Update,” some states are reversing course and beginning to implement, and in other states bureaucrats are moving forward with REAL ID contrary to state policy.

Part of the reason this continues is because the federal government continues to funnel money into REAL ID compliance. Year over year, federal grant money keeps state bureaucrats and state bureaucrat interest groups like the American Association of Motor Vehicle Administrators sniffing around for grant dollars and contracts.

Interestingly, four members of the Senate appropriations subcommittee that funds REAL ID through the Department of Homeland Security are from states that have rejected REAL ID. Senators Patty Murray (D-WA), Jon Tester (D-MT), Mark Begich (D-AK), and Lisa Murkowski (R-AK) could move to cut off funding for REAL ID if they chose, but, to my knowledge, have not done so in the past.

Senators Tester and Begich are cosponsors of a bill by Senator John Walsh (D-MT) to repeal REAL ID, and Senator Tester came to Cato in 2008 to call out REAL ID’s demerits (his presentation starts at 21:00 in the mp3).

If the senators from anti-REAL-ID states could tap one more member of the homeland security appropriations subcommittee, they would have a majority to amend the bill to withdraw funds from the national ID project. Will they stand by and let REAL ID funding go through again this year?

REAL ID: Walking Dead

The REAL ID Act is a federal law that calls on states to knit their driver licensing systems together into a national ID. Congress passed it nine years ago yesterday, setting a three-year deadline for state compliance.

You might think that a program would be dead if it failed to materialize after more than triple the time Congress gave for its implementation. But REAL ID is walking dead.

After the law passed, half the states in the country passed resolutions objecting to REAL ID or laws barring their states from complying. And the Department of Homeland Security has pushed back the deadline again and again and again. But the federal government keeps funding REAL ID, and state bureaucrats keep plodding forward with the national ID system.

In a Policy Analysis released today, we examined the progress of REAL ID in states around the country. REAL ID: A State-by-State Update reveals that some states’ legislatures have backtracked on their opposition to the national ID law. Some motor vehicle bureaucrats have quietly moved forward with REAL ID compliance contrary to state policy. And in some states, motor vehicle bureaucrats have worked to undercut state policy opposing REAL ID and the national ID system.

Louisiana recently reversed course and embraced the national ID law. The District of Columbia began requiring drivers to get REAL ID-compliant licenses effective May 1st.

Funds for implementing REAL ID come from DHS annual budget, which is appropriated by the House and Senate Appropriations Committees’ homeland security subcommittees. Congress has put around $50 million a year toward REAL ID in recent years, part of $300 to $500 million a year it spends on identification and tracking programs.

The alternative is better: Congress could save money and protect liberty if it fully defunded REAL ID. State political leaders should check to see if the administrators who work under them are building a national ID contrary to state policy, or if bureaucrats are lobbying to put the legislature behind the national ID program.

It hasn’t been implemented, but because it hasn’t been repealed or defunded, REAL ID awaits the day when the political winds blow in favor of a national ID.

Copyright Law’s Abuse

Yesterday, we had a very interesting discussion of copyright at our event on Tom W. Bell’s book, Intellectual Privilege. (Video will be available soon.) Today, I received an email that reflects how the copyright statute can be misused.

In a 2009 blog post about an $18,000,000 U.S. government web site, I pointed to the web site, Recovery.org, which was then hosting the same information as the government site, and doing it for free. Since then, the Recovery.org domain has evidently been transferred to an organization specializing in recovery from addiction (to alcohol and drugs, not government spending).

The email I received today purports to be from an attorney named “Rick Smith” of the “Law Offices of Rick Smith & Associates”—no web site or phone number, and only a Gmail account. It asks me to remove the link to http://www.recovery.org/, claiming to have “received numerous complaints” from readers of the 2009 blog post.

It goes on: “If you fail to respond by May 13 we will be forced to serve you with a formal DMCA take down notice. A copy can also be sent to the hosting provider and major search engines that can exclude this and other pages from organic search rankings.”

The notice-and-take-down provision of the Digital Millennium Copyright Act allows aggrieved copyright holders to attack the wrongful Internet posting of material over which the law gives them control. It is not there to help people seeking correction of web site inaccuracies, much less for them to threaten suppression of access to material in which they do not hold the copyright.

I know this, of course, but many people don’t. Emails like this can fool people into thinking that they have to make demanded changes.

I’m going to make the change because there’s no sense in preserving a bad link. I’m also going to contact the folks at Recovery.org to see if they’re aware that someone purporting to be their attorney is misusing copyright in their name.

Let’s See What DATA Can Do

The New York Times reported at the top of page one yesterday on the $4.1 million in payments that a single physical therapist in Brooklyn got from Medicare in 2012. It’s a shocking sum, and Medicare fraud is common in both physical therapy and the Brooklyn area. The therapist who received the money says that the billings are for his large, multi-office practice.

The point is broader: Reporters, medical trade association figures, investigators and researchers are poring over newly released data about Medicare spending. They’re strengthening public oversight and the public’s capacity to question this government program. It’s data that the American Medical Association and other industry groups fought against releasing. There is risk that the numbers will lead some to unfair conclusions, perhaps even in the case of this Brooklyn physical therapist, but the public oversight it brings to the Medicare program and the circumspection it brings to fraudsters and others will be more than worth it. Data is a powerful oversight tool.

That’s why I think it’s good news that the House of Representatives passed the DATA Act yesterday. The Digital Accountability and Transparency Act, introduced by Mark Warner (D-VA) in the Senate and Darrell Issa (R-CA) in the House, requires the federal government to adopt data standards for all federal spending and publish all of it online. This will permit the public to gather insights like the ones in that New York Times story across the vastness of the federal spending enterprise. It will make the diffuse cost of government a little more acute in the minds of many, positioning Americans to say specifically which spending should stop.

Change will not come instantly, and the legislation is not self-executing, but groups like the Data Transparency Coalition, a prime mover behind the legislation, appear poised to insist on full execution of the law. Implementation should not have the cost that the Congressional Budget Office estimated for it, and if it does, the billions saved thanks to availability of information to the public should justify the costs. If another “cost” of transparency is improvement of federal programs that should be eliminated, I think that beats the today’s status quo of having them on the books and failing.

The DATA Act is not a direct response to a 2008 Cato event asking the Obama administration to “Just Give Us the Data.” Indeed, the administration has been conspicuously unsupportive of transparency in this area, though transparency was a key campaign theme in President Obama’s first election. Cato studies in this area since then include “Publication Practices for Transparent Government” and “Grading the Government’s Data Publication Practices.” We’ll be repeating the grading study during the summer, though it’s doubtful the administration’s grades will improve by that time. We will use the data structures that the DATA Act requires in our Deepbills project, which shines light on Congress’s proposals, including its plans for spending.

Taming the Cyberlibertarians

New York Attorney General Eric Schneiderman made some interesting rhetorical choices in a New York Times op-ed yesterday taking after share economy leaders AirBnB and Uber. The challenge they present to outdated regulation leads him to call these businesses “cyberlibertarians” and “cybercowboys.” The latter awkward metaphor inhabits the title of the piece: “Taming the Digital Wild West.”

It’s an awkward metaphor because “Wild West” was an epithet leveled at the Internet itself in its early days. Thank heavens the forces of stasis didn’t prevent us from inhabiting this place—and here’s hoping they won’t prevent us from finding new terrain. How safe and impoverished we would be, both materially and spiritually, if we didn’t have the rollicking, wide-open Internet.

But the most interesting rhetorical choice is his effort to push community-enhancing job-creation into the “libertarian” corner of Times’ readers’ vistas. His hope, it appears, is that readers’ revulsion around the word “libertarian” (if not liberty itself) will overcome what they know about car- and room-sharing. People all over New York and the world are operating small businesses, and these small businesses bring them in close personal contact with others. They build wealth, and they build community.

Calling that “cyberlibertarian” may just cause some reflexive progressives and conservatives to take a fresh look at liberty. While we’re working toward miracles, maybe people will drop the “cyber” prefix, too!

(Disclosure: I’ve used both AirBnB and Uber with generally wonderful results.)

TV Broadcasters Should Have Same Rights As Everyone Else

Remember broadcast television? Amid the avalanche of new streaming services, DVRs, and Rokus, not to mention cable TV, some people may have forgotten—or, if they’re under 25, never known—that there are TV shows in the air that can be captured with an antenna. The Supreme Court certainly hasn’t forgotten, given that it maintains an outdated rule that broadcast TV gets less First Amendment protection than cable, video-on-demand, or almost anything else–a rule dating to the 1969 case of Red Lion Broadcasting Co. v. FCC.

That lower standard of protection comes from the belief that the broadcast-frequency spectrum is scarce, and thus that the Federal Communications Commission is properly charged with licensing the spectrum for the public “interest, convenience, and necessity.” But if newspapers or magazines were similarly licensed, the First Amendment violation would be obvious to all but the most hardened censor.

Hence the case of Minority Television Project v. FCC. Minority Television Project is an independent, noncommercial license-holding TV station in San Francisco. Unlike most noncommercial license holders, Minority TV receives no PBS money. Because it’s an over-the-air broadcaster, however, it must comply with the restrictions placed on the licenses by Congress and the FCC, including prohibitions on paid commercials and political ads. Minority TV challenged these restrictions as violating the First Amendment.

Applying Red Lion’s lower First Amendment standard, the district court, a panel of the U.S. Court of Appeals for the Ninth Circuit, and even the en banc Ninth Circuit (11 judges rather than the usual 3) all ruled against Minority TV. On petition for certiorari to the Supreme Court, Minority TV argues that Red Lion’s rationale for reducing broadcasters’ rights is outdated and should be overruled.

Cato has filed an amicus brief in support of Minority TV, agreeing that it’s time to give broadcast TV full First Amendment protection. Just as we argued in 2011’s FCC v. Fox Television Stations—where the Court chose to evade the question—it’s time to update our law to fit current realities. The way that people consume information and entertainment has changed dramatically since 1969. Rather than three broadcast networks, we have hundreds of channels of various kinds, and increasingly people are forgoing traditional TV altogether. The FCC can still license broadcasters—that system isn’t going away anytime soon regardless of the next mind-boggling innovation—but the conditions it places on those licenses have to satisfy strict First Amendment scrutiny, especially when they pertain to political speech.

The Supreme Court should take this case in order to update its treatment of broadcasters’ speech rights, including a requirement that the government offer a truly compelling justification any time it wants to restrict them.