Topic: Telecom, Internet & Information Policy

ACTE Endorses REAL ID Repeal

Joining the National Conference of State Legislatures, the Association of Corporate Travel Executives has endorsed S. 717, the Identification Security Enhancement Act of 2007. This bill would reinstitute a negotiated rulemaking process regarding identity security that was established in the 9/11-Commission-inspired Intelligence Reform and Terrorism Prevention Act.

XM-Sirius Rent-Seeking

The FCC’s review of the XM-Sirius merger is a perfect example of the type of quagmire that’s inevitably created when a government agency is given broad, discretionary authority over private businesses. Various special interest groups have proposed that the merger be subjected to a laundry list of requirements. Lefty groups want an open device mandate. A rent-seeker entrepreneur named Chester C. Davenport wants the merged entity to set aside 20 percent of its spectrum for minority-controlled broadcasting. There are a variety of other proposals to require the firm to lease spectrum to unaffiliated entities. Clear Channel is demanding that it be subjected to the same “indecency” regulations that now plague terrestrial radio.

There are good arguments against each of these proposals, and there are some plausible arguments for some of them as well. But what I find most problematic about the situation is the way the proposals are handled. We have a constitutional system of government in which Congress is supposedly in charge of writing laws, the executive branch is in charge of executing them, and the courts are in charge of interpreting them. This ensures that laws are written by the most politically-engaged branch—Congress—and interpreted by the most impartial branch—the courts.

But in this case, as in many others, Congress has effectively given the FCC its blessing to wear all three hats. It can dream up new “conditions” (read: regulations) for the merger focusing on virtually any subject that strikes its fancy. The conditions are specific to one company, so there’s ample scope for favoritism and arbitrary decision-making. And once the conditions have been announced, and XM-Sirius have been blackmailed into “accepting” them, the FCC effectively wears executive and judicial hats as well. Yes, supplicants before the FCC can and do appeal decisions to federal courts, and the FCC is sometimes overruled. But the courts tend to give the FCC relatively wide deference in its policy decisions, and firms that practice regularly before the FCC may be reluctant to too aggressively defend their prerogatives in the courts for fear of souring their relationship with the FCC going forward.

The fundamental problem (aside from the courts’ failure to require that lawmaking powers be limited to Congress as required by the Constitution) is the FCC’s baroque process for apportioning spectrum. The right way to handle it would be for XM, Sirius, and every other broadcaster to have a property right in the spectrum they use, which would entitle them to do as they please with that spectrum (as long as it didn’t interfere with other broadcasters) or to lease or sell the spectrum to anyone else. In a world with genuine property rights, spectrum would find its way to owner with the highest-valued use, and anyone who wanted to enter a market like satellite radio would be able to do so simply be purchasing spectrum rights in the appropriate bands. The FCC’s role would be limited to keeping track of who held which license and verifying that spectrum uses did not create interference with one another.

My suspicion is that in such a world, satellite radio would prove economically infeasible because the spectrum would be more valuable in other uses. But I don’t know, and the FCC’s soviet-style spectrum allocation process is certainly not a good way to figure it out. The FCC should approve the XM-Sirius merger without conditions. But the more important lesson is that, Congress should be moving toward genuine property rights in spectrum, so that the 21st-century wireless market ceases to be micro-managed by an anachronistic 20th-century bureaucracy.

Once we have a real market for spectrum, Congress may choose to enact general regulations governing the use of that spectrum. But the current system, in which the FCC has the arbitrary power to single out individual companies for arbitrary restrictions on virtually any subject the FCC’s commissioners happen to be concerned with, is deeply flawed. It’s not fair to companies that have the misfortune of attracting the FCC’s scrutiny, and it’s not good for consumers, who are deprived of the benefits of a robust and competitive market for spectrum.

Upcoming Event: See South Carolina Governor Mark Sanford Make Sense of the REAL ID Act

Last week, Minnesota Governor Tim Pawlenty (R) vetoed a transportation bill that included a provision objecting to the federal REAL ID Act. The bill would have required the federal government to pay 95 percent of the cost of issuing national IDs before Minnesota would participate. Claiming political machinations were afoot, Pawlenty said that he preferred “something more reasonable like 50 or 60 percent.” One wonders what principle of federalism, liberty, or privacy could possibly support his willingness to accept a 50% unfunded surveillance mandate.

A much clearer vision will be on display next week when Governor Mark Sanford (R-SC) joins Senator Jon Tester (D-MT) here at the Cato Institute to discuss the REAL ID Act. South Carolina has barred itself from participating in the national ID system created by the Act, and Governor Sanford defiantly refused to ask the Department of Homeland Security for an extension of the compliance deadline earlier this year.

Senator Tester represents a state that has been similarly defiant. He is an original cosponsor of legislation that would repeal the REAL ID Act and restore the identification security provisions of the Intelligence Reform and Terrorism Protection Act, which REAL ID repealed.

The event is called The REAL ID Rebellion: Whither the National ID Law?, next Wednesday, May 7th, at noon, and it will be Webcast.

Voter ID Case Decided

The Supreme Court has rendered its decision in Crawford v. Marion County Election Board. This is the case challenging Indiana’s voter ID requirement.

Briefly, the plaintiffs in the case did not establish sufficient proof of the burden on voting that the ID requirement would have. This was a facial challenge to the statute, and there was no plaintiff who had actually been dissuaded or prevented from voting. Sayeth the court:

[O]n the basis of the record that has been made in this litigation, we cannot conclude that the statute imposes “excessively burdensome requirements” on any class of voters.

There was also no evidence that Indiana has ever been victimized by impersonation at the polling place, which a voter ID requirement would help thwart, but in a facial challenge to a law like this, courts will defer to the state’s interests in deterring and detecting voter fraud, and in safeguarding voter confidence.

Advocates of voter ID will interpret this as a ringing endorsement, but it’s an unsurprising result. Hopefully, they won’t pursue a national voter identification requirement. In a recent TechKnowledge column inspired by the case, “Voter ID: A Tempest in a Teapot that Could Burn Us All,” I wrote:

A national registration system for voting would quickly be repurposed and used for many other kinds of regulatory control. There is no shortage of proposals for national registration and control of citizens. Should the voter ID tempest in a teapot boil over, the tiny specter of voter fraud could thrust a mandatory national ID into the hands of law-abiding citizens.

The Constitution gives Congress power to regulate the elections that select its members and, to a lesser degree, the president. But Congress does not have to use that power to its fullest extent. States recognize their own interests in fair elections, and they should experiment among themselves with ways to secure elections while making sure the vote is available to all qualified people.

Howley on E-Verify

Kerry Howley has a great article on the supposedly common-sense proposal to create a massive federal database of eligible workers as a disincentive to illegal immigration:

While undocumented workers probably contribute more in federal taxes than they consume in federal services, no one doubts that they pose some fiscal burden to border communities where they arrive. Still, you’d have to take an improbably extreme view of these costs to deem the SAVE Act fiscally rational. According to the Congressional Budget Office (pdf), the act would decrease federal revenues by $17.3 billion between 2009 and 2018 as formerly tax-paying workers go underground. The costs of expanding E-verify and a bunch of other goodies stuffed into SAVE (thousands more border agents, a program to recruit former members of the armed forces to join the border patrol, more SUVs and unmanned aerial vehicles, hundreds of full time immigration investigators, expanded immigration detention centers) come to $23.4 billion in discretionary spending during the same period. And that doesn’t touch the cost to individual employers, who are being slapped with a huge regulatory burden in the midst of impending recession.

No presidential candidate has come out in favor of Schuler’s bill, most likely because the bill includes no avenue for undocumented workers who wish to become legal. Herein lies the ambitious stupidity of SAVE: If the bill works as intended, it will instantly turn the population of 12 million undocumented workers with no way of becoming legal into 12 million unemployed undocumented workers with no way of becoming legal. For a political constituency constantly worried about “anarchy,” this does not appear to be an ideal situation.

The SAVE Act may or may not come to a vote this session, but employment verification will almost certainly be a part of future compromise legislation on immigration reform. That’s worrying. Walls offend us aesthetically and symbolically; they’re clumsy and primitive and cruel. But they’re also easy to tear down; far easier than a slowly metastasizing system of total employment surveillance, of growing databases and expanding bureaucracies.

Our own Jim Harper has justifiably called the e-verify program Franz Kafka’s solution to illegal immigration. According to the Social Security Administration’s own estimates, almost 18 million Social Security records contain errors, many of them pertaining to US citizens. If even a small fraction of those problems find their way into the e-verify program, we’d be looking at millions of American citizens suddenly forced to “prove” to federal bureaucrats that they’re “eligible” to have a job. Giving the federal government the power to decide which US citizens are allowed to work for a living seems to me like a much bigger threat to our freedoms than anything illegal immigrants have done.

NCSL Calls for Repeal of REAL ID

The National Conference of State Legislatures wants the REAL ID Act gone. It supports S. 717, the Identification Security Enhancement Act of 2007, which would repeal the REAL ID Act and reinstitute a negotiated rulemaking process on identity security that was established in the 9/11-Commission-inspired Intelligence Reform and Terrorism Prevention Act.

It’s not a foregone conclusion that an organization like this would reject a behemoth of a project like building a national ID and surveillance system. The NCSL isn’t a small-government organization, and it could just as well have lobbied for billions of dollars in funding.

Microsoft Volunteers to Be the Poster Child for DMCA Reform

One of the big challenges of writing about tech policy is the difficulty of explaining the subjects I write about for a general audience. This was a particular challenge a couple of years ago when I wrote a Cato Policy Analysis about the anti-circumvention provisions of the Digital Millennium Copyright Act—just typing that out is a chore. I wish I could have pointed to this story as an example, because it brilliantly illustrates my argument.

A few years back, Microsoft developed a copy-protection scheme called PlaysForSure (it will become clear shortly how ironic that name was) that was supposed to prevent music customers from engaging in Internet piracy with music they bought from online music stores. Microsoft licensed the format to a variety of different companies and aggressively promoted it as an alternative to Apple’s iTunes-iPod ecosystem. Unfortunately, Microsoft failed to close the gap with Apple, so in 2006 Microsoft unveiled a new product line called Zune, effectively discontinuing development of PlaysForSure. Zunes are incompatible with PlaysForSure music. If you built up a music library in the PlaysForSure format, it would, um, not play for sure (or at all) on a Zune music player.

Up to this point this is just an ordinary business story, and nothing for libertarians to be concerned about. Companies drop old product lines all the time, and sometimes that means customers are stuck with compatibility headaches. But there’s just one problem: not only will Microsoft not help you play your PlaysForSure music on a Zune, but it’s illegal under the DMCA for anyone else to develop software to convert PlaysForSure music to a format that could play on Zunes, iPods, or any other format. Such software would be considered a “circumvention device”—ostensibly a piracy tool—and could bring civil and criminal penalties. If you were stupid enough to buy music in PlaysForSure format, you’re stuck with the dwindling number of PlaysForSure-compatible music programs still left on the market. You can burn your music to CDs, and then re-rip them to an open format, but this is a time-consuming process if you have a large music library, and it will lead to some degradation in the quality of the music.

As if all that weren’t enough, Microsoft yesterday announced the next step in its campaign to make the DMCA look ridiculous: this fall, it will be switching off the license servers that allow customers to “authorize” new computers and operating systems to play music from customers that bought music from its now-defunct MSN Music store. This means that if you have a library of music from the MSN Music store, and you buy a new computer or upgrade your operating system, there will be no legal way to take your music library with you.

If Congress hadn’t enacted the DMCA, this wouldn’t be a big deal. Third parties could develop software utilities that would automatically convert peoples’ PlaysForSure-formatted music collections into an open format like MP3, which would allow it be played on almost any computer or music player. Customers wouldn’t have to worry about whether their computer had been “authorized,” or whether the company they’d purchased the music from was running the necessary “license server.”

The most frustrating thing about this is that forcing consumers to jump through these hoops hasn’t made a dent in illicit file sharing. To this day, the music industry sells most of its music in the copy-protection-free CD format. Anyone can buy a CD, rip it to MP3 format, and upload it to the Internet. And music downloaded from peer-to-peer networks comes free of copy protection. Which means that the hassles imposed on consumers by the DMCA and copy protection formats like PlaysForSure haven’t slowed down piracy at all. All they’ve done is created unnecessary headaches for customers who were foolish enough to obey the law and pay for the music they downloaded.