Tying Government's Hands on Tech, Telecom and the Web

At this year's Conservative Political Action Conference, Digital Liberty held a panel and reception to discuss the free-market approach to tackling tech and telecom policy issues. The panel covered a wide range of issues, including Internet regulation, spectrum, taxes, privacy, and property rights.

The event's special guest was FCC Commissioner Rob McDowell who gave an opening speech and then joined a panel with Ryan Radia of the Competitive Enterprise Institute, Scott Cleland of Precursor LLC, and Debbie Rose of the Association for Competitive Technology. Digital Liberty's Kelly William Cobb moderated. Check out a video of the panel below.

Why Europe’s New “Right to Be Forgotten” Rule Must Be Forgotten

In the end of January, the European Commissioner for Justice, Fundamental Rights, and Citizenship, Viviane Reding, said that the Commission proposed a new data protection regulation called “the right to be forgotten.” This rule, though sounding innocuous, is probably the “biggest threat to free speech on the Internet,” as law professor Jeffrey Rosen put it.

The right to be forgotten requires social networks, such as Facebook and Google, to comply with the requests of their users and delete items that these individuals have published on the Internet. If the companies refuse the users’ requests, the EU could fine these companies for up to 2% of their global income.

The right to be forgotten certainly goes against our First Amendment right to freedom of speech by handing government the power to force third party web companies to delete what individuals have stated about other individuals. Suppose you copy an image of me that I have placed on my Facebook account, and you repost it on your blog. Government forcing you to take down that picture – even though it is of me – is a violation of your First Amendment rights. Certainly, constitutional rights guaranteed in America do not apply in Europe. However, it runs counter to the borderless nature of a global Internet built on the free flow of information, in addition to posing a problem for Internet sites in fully complying with the new regulations across international borders.

In addition to free speech concerns, the rule sets up a high regulatory burden and conflicting standards for online privacy between America and Europe. The new regulatory burden placed on these companies is practically impossible to uphold. On this new rule, Marc Dautlich, partner of British law firm Pinsent Masons, stated that it “would mean that users could demand that social media networks such as Facebook erase any of their comments, not just from the network itself but the entire web, which would involve unprecedented co-operation with search engines to achieve.” Businesses will now also be forced to inform regulators and those affected by large-scale hacks to be informed immediately. Matt Warman of The Telegraph notes that this could impose an impracticable burden on firms and move to discourage further development of new, inventive services.

The right to be forgotten, though only meant to be enforced in the European Union, will undoubtedly have a global effect. Websites that operate transnationally will be forced to comply with these new regulations in order to avoid the risk of an outrageously excessive fine should any EU-based user requests be looked over. As Western nations fight to protect free speech online in China and Middle Eastern countries, the E.U.’s “right to be forgotten” renders these calls unprincipled and insincere. The “right to be forgotten” is extremely dangerous and has the potential to result in a much less free Internet.

Blame Government Rules for TV Blackouts

Last week, two hundred thousand Bostonians were nearly apoplectic over the threat of a TV blackout that could have caused them to miss their beloved Patriots playing in this year’s Super Bowl. A deal reached between DirecTV and Sunbeam Television, which owns the local broadcasting affiliate carrying the game, means it will go on. However, consumers directing their anger at content and cable providers are often unaware that most of the fault lies with government retransmission rules.

TV blackouts are unfortunately nothing new, the occasional result of negotiations between broadcasters and content providers, and the cable, satellite, and telcos that carry their signal (known as multichannel video programming distributors or MVPDs). Yet, negotiations between broadcasters and MVPDs are guided by a complex, onerous, and antiquated set of regulations that not only restrict these companies from entering into agreements in a free market, but can often cause negotiation breakdown.

For example, the so-called “sports blackout” rule prevents MVPDs from carrying a game if it’s not broadcasted on local television. Non-duplication and syndicated exclusivity rules force MVPDs to carry the content from a local station, instead of importing the same program from elsewhere should negotiations break down. “Must carry” rules actually allow content creators to force cable companies to carry their programming. On the other side of the coin, the compulsory licensing regime has MVPDs pay government-set royalties for content copyright licenses, so that they don’t have to negotiate with each copyright holder. The list of rules goes on, and taken together they are used by government and companies on both sides to leverage power in negotiations.

The Next Generation Television Marketplace Act (PDF), introduced late last year by Rep. Steve Scalise (R-La.) and Sen. Jim DeMint (R-S.C.) would tackle much of the problem with the current retransmission consent and compulsory copyright regime. The bill repeals many of the rules that guide broadcaster and MVPD negotiations. It also tears down government price regulations and mandates that cable companies offer a mandatory “basic tier” of channels. In an era of on-demand programming, especially from web and other non-cable providers, this is a particularly outdated law. The law would also repeal cross-media ownership limitations that prevent companies from simultaneously owning radio and TV stations or newspaper and broadcast stations. This will allow industries struggling for capital, like newspapers, to seek investments from within the larger media industry.

The FCC has already undertaken steps toward eliminating the “sports blackout” rule. Yet, this hardly goes far enough to end government’s role in causing content and MVPD negotiations to break down and spill out into consumer view. As we argued in comments to the FCC last year, the current regulatory system needs a complete rewrite.

The last time most of these laws were touched was 1992, when consumers had fewer cable providers and programming options. Today there is strong competition amongst cable, satellite, and telecom companies, and amongst content distributors like broadcasters, cable channels, and web companies like Netflix and Hulu. It’s time to bring content delivery into the modern era, scrap outdated rules, and allow companies to negotiate in a free-market.

President Obama Acknowledges the Spectrum Crunch, but When Will Government Act upon It?

In the State of the Union, President Obama addressed a number of issues with our current infrastructure. Among them, he noted the following: “So much of America needs to be rebuilt. We've got crumbling roads and bridges. A power grid that wastes too much energy. An incomplete high-speed broadband network that prevents a small business owner in rural America from selling her products all over the world.” One way to help this small business owner? Allow for the auctioning of unused spectrum.

Almost two years ago, the White House and the FCC promised to nearly double the amount of available spectrum for mobile broadband. This promise has not yet been fulfilled, largely due to inaction from Congress and the Obama administration’s FCC. In order to bring wireless services to the last remaining unserved areas of the country, it is imperative that government acts now to allow private companies to engage in voluntary incentive auctions, thus freeing up more available spectrum.

Unfortunately, the president’s rhetoric doesn’t match his actions. In the president’s American Jobs Act of 2011, he proposed a new tax on spectrum. By making it more costly to obtain a spectrum license, this would only worsen the looming spectrum crisis. The tax would take more money away from spectrum license holders, deterring their ability to build out wireless networks and provide new services to the American public. Furthermore, the broadband providers would then be forced to transfer some of these new costs to consumers, increasing prices for working families. New taxes are not the answer to the spectrum crunch.

Allowing for voluntary auctions will increase both available spectrum and revenue. According to a Congressional Budget Office estimate, a well-structured spectrum auction can raise as much as $25 billion, before some money is spent on a public safety network. Many have proposed that the revenue gained by auctioning this unused spectrum could be used to pay for the payroll tax extension, helping alleviate some of the burden on both small businesses and working Americans during this tough economy.

The upcoming payroll tax extension provides an ideal vehicle to authorize new spectrum auctions, as debt ceiling and deficit reducing packages did before it. However, any legislation should tie the FCC’s hands to ensure that the Commission does not impose any needless conditions and restrictions on the auction process. This includes letting every company have a fair shot at bidding for spectrum.

President Obama has addressed the need for more spectrum and now Congress and his FCC need to act upon this. It is imperative that voluntary incentive auctions are authorized soon in order to end the looming spectrum crisis and work toward closing the nation’s deficit. The payroll tax extension provides an ideal vehicle to get this done.

FCC can prevent crisis by moving on Spectrum now

Americans for Tax Reform president Grover Norquist and executive director of Digital Liberty, Kelly William Cobb, wrote an op-ed yesterday in The Hill about the spectrum crunch. You can view the op-ed below:

Congress and the Federal Communications Commission are mired in a debate over how to free more spectrum for wireless broadband. Meanwhile, it’s been nearly two years since the White House and FCC promised to double the amount of spectrum we currently have for mobile broadband. It’s time for government to stop standing in the way of solutions to the looming spectrum crisis.

Americans are beginning to feel the spectrum crunch already in densely populated cities. While most may blame their cell phone company for slow or unresponsive service, the true fault is government. Wireless carriers spend over $20 billion dollars per year just to upgrade and maintain wireless networks. But maintaining roads only has a residual impact on traffic when what are needed are more lanes. With spectrum, the government has been slow to provide.

The last major spectrum auction was back in 2008. Yet, the FCC is sitting on spectrum it can auction today, including the D Block. Meanwhile, they helped kill the AT&T/T-Mobile merger aimed at using spectrum more efficiently to expand coverage and capacity. And they’ve slowed AT&T's purchase of Qualcomm spectrum. Here’s to hoping they don’t stall Verizon’s purchase of unused spectrum from cable companies.

When the company LightSquared announced plans to launch a brand new, $14 billion 4G wireless network combining satellites and cell towers, the FCC cheered. They praised the company for expanding broadband to underserved areas and bringing an innovative new form of wireless service. With the FCC’s initial blessing, the company acquired spectrum and began building out its new network years ago.

Yet, when the GPS industry and federal departments complained that LightSquared’s network could interfere with some GPS devices, the Commission quickly quieted, cowered, and slowed the company’s plans. The GPS industry used influence with bureaucrats in the federal government to curb progress, even leading to the Pentagon and other agencies leaking a preliminary report on spectrum interference in an effort to tarnish LightSquared’s public image. While progress has been made by setting up a working group between stakeholders, the Commission has largely bowed to this outside pressure. Instead, they should be working to facilitate a solution.

To read more about LightSquared and how Congress and the FCC are dragging their feet on spectrum, click here.

Senators Call for Spectrum Handouts with Bureaucrat Written Rules

Congress’s return resumes the discussion on how best to auction more spectrum for wireless broadband, and differences between the House and Senate have yet to be resolved. This week, a small, bipartisan quartet of Senators wrote a letter expressing concern with the House plan, complaining that it restricts the Federal Communications Commission from imposing conditions on spectrum auctions and requires auctions for unlicensed spectrum.

Speaking to fellow Members of Congress, their letter states: “We must suppress our desire to be overly prescriptive to derive some predetermined outcome.” Yet, “overly prescriptive” rules to “derive a predetermined outcome” are exactly what they and the FCC want. An unconditional green light to the Commission to auction spectrum will result in restrictions on which companies can bid for spectrum, along with regulations and mandates on how the spectrum can be used. The FCC consistently pushes rules focused on achieving outcomes during spectrum auctions with mixed or failed results. This is exactly how Net Neutrality came to be, and how the FCC botched the D Block and devalued the C Block spectrum auctions in 2008.

Oddly enough, the Senators admit prescribing outcomes is their goal when they subsequently bash the idea of auctions open to all parties, stating it “could have a deterring effect on fostering competition and maximizing auction proceeds.” This both shows their anti-market hand and their myopic view of competition. Instead of more relevant metrics of competition, such as price wars, price drops, attrition rates, and wireless access, the Senators and their allies at the FCC look only at the number of companies holding spectrum.

They also take issue with House concerns that government should not purchase spectrum only to hand it over for unlicensed use. Unlicensed spectrum, which has led to the advent of technologies like WiFi and wireless microphones, can certainly facilitate new innovations and economic growth, in addition to bringing consumers great new products and Internet-based services. The House bill would authorize the FCC to auction new unlicensed spectrum, but the four Senators call such auctions a “rush to fill the Treasury’s coffers with revenue.”

The Senators argue handing out spectrum for free is the “truest form of ‘free markets’.” But, as any free-marketer knows, nothing in any market is ever truly free. Why should taxpayers in effect compensate broadcasters for their spectrum only to hand it out to other companies for “free”?

More on the benefits of unlicensed spectrum, the "free rider" problem, and auction revenue after the jump...

New Year, New Shot to Eliminate Antiquated State Telecom Laws

Last year saw a slew of states review telecommunications laws designed for a bygone era. Tennessee phased out special charges for in-state long distance calls that subsidized phone companies. Florida and Kansas now allow companies subject to price regulations to better compete with new, less regulated providers.

Increased competition has resulted from convergence in the industry, as providers once broken into segregated markets (e.g., cable TV, local and long distance phone, wireless, etc.) now all offer similar broadband phone and video services, or at least a pipe to get them. However, state laws have been slow to change, regulating some legacy companies differently than new entrants, their competitors in the market.

One area that demands state attention is so-called “carrier of last resort” (COLR) laws, which force some telecom companies to maintain and offer service in a given state or area. The antiquated regulations reflect a time when consumers had very few or only one monopoly option for phone service. However, competition today means not only lower prices, but also a multitude of technologically diverse phone and TV providers.

Government requirements that companies maintain networks in areas without paying customers or provide guaranteed service at prices that are not financially viable in a highly competitive market translate into higher costs for all consumers. In short, you the consumer pay higher prices because the state requires your telecom provider to maintain a costly, but unused network.

Perhaps the first state with a shot of ending these types of rules is New Jersey, which is considering the Market Competition and Consumer Choice Act (S. 2664). The measure would relieve companies in areas with at least two other phone providers from these and other onerous requirements – a moderate, but very important step forward.

New Jersey has a shot to vote on the bill in the coming days, before the legislature kicks off their new session on January 10. The Market Competition and Consumer Choice Act should be toward the top of their immediate to-do list. And here’s to hoping states with equally outdated, costly, and burdensome laws consider similar reforms in 2012.

Competition, Convergence, and the Verizon-Cable Deal

Verizon’s decision last week to purchase a chunk of 4G spectrum from cable companies is a huge development for both the future of television and wireless. The move frees up spectrum desperately needed for consumers, increases competition in the wireless industry, and emphasizes just how much “anytime, anywhere” is the future of TV and content consumption.

Under the deal, Comcast, Time Warner Cable, and Bright House Networks will sell $3.6 billion worth of spectrum in the 700 MHz range – ideal for mobile broadband – to Verizon. This brings a notable amount of unused spectrum onto the market, covering over 80 percent of the population (with 259 million POPs).

There is a growing shortage of spectrum in the U.S. as wireless data demand grows by over 250 percent a year. Americans use more data than almost every other nation, yet we are on the verge of capacity constraints that are already felt in dense urban areas. For comparison, British consumers have 3.5 times the available spectrum as Americans, and the Japanese have well over 2 times as much.

The deal also brings a new level of convergence and competition to the wireless industry. Comcast, Time Warner Cable, and Bright House Networks will all have the ability to purchase wholesale access to Verizon’s network under their own names as part of the agreement. Consumers can soon expect to see “Comcast Wireless” competing against Verizon, each offering wireless and wired Internet service, along with their own video content. This further blurs the lines between “wireless” and “wired” broadband, despite the fact that our antiquated FCC continues to view, study, and regulate each as separate service.

All of this acknowledges a well-known change in how Americans consume content. The disruption in traditional television that began with “on demand” cable and Internet streaming options is now the norm. Verizon customers can use wireless options to view FiOS content. Cable providers can now bundle in wireless options, without the lack of specialization and enormous cost of building out a new network. Consumer demand for “anytime anywhere” content viewing is driving convergence and the desegregation of business models and services.

Click "read more" for the full piece.