August 2015

New Paper by PK President Demonstrates Importance of Existing Antitrust and Economic Regulation

Thanks to recent antitrust enforcement and communications regulation, consumers continue to reap the benefits of exploding Internet entertainment, as well as educational and business opportunities. By facing down the proposed merger between Comcast and Time Warner, and by establishing strong network neutrality rules, the Department of Justice and Federal Communications Commission have protected Internet users from discrimination and promoted broadband innovations that are critical to our democracy and essential to freedom of expression.

In a newly published article for the Harvard Journal of Law and Policy, Public Knowledge President Gene Kimmelman and Mark Cooper (Director of Research at the Consumer Federation of America) argue that these results could only be achieved through existing antitrust and economic regulations, and other similar results require effective application of both bodies of law in tandem to protect our democracy and achieve the full economic and social benefit that the Internet can deliver. Because the Comcast/Time Warner Cable review created a new standard in combined antitrust and Federal Communications Commission enforcement practices, law enforcement entities are well positioned to make sure the proposed Charter/Time Warner Cable merger lives up to the most exacting public interest test. Similarly, having already committed significant concessions related to open internet policies, it is clear that recent enforcement actions send a clear signal that the Obama Administration is dedicated to ensuring open affordable access to meaningful broadband services and a competitive Internet ecosystem that supports online video distribution and freedom of expression.

Verizon Drops Contracts and Subsidies for New Customers

Verizon announced that it will stop subsidizing phones for new customers, at the same time fully doing away with two-year contracts as well. Things have been headed that way both at Verizon and throughout the industry, but it is still notable that the company is now eliminating such sales entirely. T-Mobile stopped subsidized pricing a while ago. AT&T still offers the option to buy a subsidized smartphone with a two-year contract, but not through third-party retailers, and has been steering most customers toward its Next installment billing options. In the most recent quarter, two-thirds of customers opted for one of the installment plans. “I think it is one of those options that is going to go away slowly,” AT&T Mobile and Enterprise Solutions CEO Ralph de la Vega said. Existing Verizon customers will still have some options to get subsidized phones when they are ready to upgrade, but it’s a safe bet those options will narrow over time.

In addition to doing away with contract pricing, Verizon is simplifying its monthly rate plan options. Taking its cue from the fast food and clothing industries, Verizon is announcing a new set of rate plans with just four sizes: Small, medium, large and extra large. The new plans, which go into effect Aug. 13, aren’t necessarily cheaper nor are they more expensive. Instead, there are just fewer variables. Customers pay $20 a month for each smartphone and then choose one of the four sizes of data buckets. The new plans apply both to single lines and to those sharing their bucket of data among many devices. The small bucket, with one gigabyte of data, costs $30 per month, medium (3GB) is $45, large (6GB) is $60 and extra large (12GB) is $80. Customers who go over their monthly bucket will pay a rather hefty $15 per gigabyte for more data, so it pays to go for the baggy look in case you decide to binge one month.

Does New Jersey have a ‘media desert’ problem?

[Commentary] "Assessing the Health of Local Journalism Ecosystems: A Comparative Analysis of Three New Jersey Communities” -- funded by the Democracy Fund, the Geraldine R. Dodge Foundation, and the Knight Foundation -- took on the ambitious task of trying to locate every single news source in three New Jersey cities (as found online) and then assessed their quality by actually reading them for a one-week period. The report’s findings draw attention to a provocative idea: that lower income communities are drastically underserved when it comes to news, and have fewer news sources than wealthier ones to cover their concerns. The study also suggests that the fewer news sources in a community, the less likely there is to be news coverage of issues critical to informing that community.

The report helps bring attention to the idea of “media deserts.” Like “food deserts” in urban areas where nothing healthy can be found, a media desert or news desert is essentially an uncovered geographical area that has few or no news outlets and receives little coverage. Media deserts can leave “massive unfilled gaps … that create tremendous opportunities for political and corporate corruption to flourish and that undermine effective democratic participation,” according to the report, whose lead author, Philip M. Napoli, teaches in Rutgers’ School of Communication and Information. The report doesn’t definitively answer the question of whether wealthier communities are always better served. More work is needed. But the Rutgers report might help us get there. Its intention was not just to tell us about New Jersey but to create a methodology for looking at communities across the country to assess the health of their media ecosystems. So a measure that combines the availability of journalistic sources, the quantity of journalism output from these sources, and the extent to which this output is original, as presented here, offers a way to begin looking more comprehensively into the concerns raised in the report. The team will next look at a broad range of communities, with the hope of examining 50 to 100 communities across the US.

[Nikki Usher is an assistant professor at George Washington University's School of Media and Public Affairs]

The Consequences of a Washington Internet Power Grab

[Commentary] As commissioners with the Federal Communications Commission and Federal Trade Commission, respectively, we are disturbed to see our agencies on a collision course that could disrupt the country’s thriving Internet providers and businesses, with little or no added benefit for consumers. As the Internet brings greater efficiencies and benefits to the U.S. economy, some regulators are seeing their traditional fiefdoms and regulated industries dissolve. This helps explain the FCC’s recent meddling in Internet policy. Emboldened by a deeply questionable interpretation of its authorizing statute, the agency is elbowing into Internet privacy and security, most notably through its so-called Open Internet rules, which went into effect June 12. Better known as net neutrality, these rules declare that retail broadband Internet access is a “telecommunications service” to be regulated under Title II of the Communications Act of 1934, which governs common-carrier services. The FCC’s ventures may perversely supplant long-established FTC review, at least with respect to broadband providers’ practices. In other words, one cop on the beat is being shoved aside by another that is less savvy and knowledgeable about the current Internet marketplace and related privacy and security issues.

As time passes, Internet-related companies will face new uncertainty as the FTC’s body of precedent is replaced with the FCC’s to-be-determined role. The Internet is far too important to US economic growth and productivity to be saddled with unnecessary regulations from any agency. Accordingly, the FCC should refrain from imposing its Byzantine privacy regime on broadband and Internet providers. If it doesn’t, Congress may need to re-emphasize the roles it has set for agencies regarding privacy and data security issues. Meanwhile, we two commissioners -- one from the FCC and one from the FTC -- will continue to execute our individual duties to protect consumers while striving to minimize needless burdens on providers.

House Commerce Committee Reps Pan FCC Auction Item

House Commerce Committee Chairman Fred Upton (R-MI) and House Communications Subcommittee Chairman Greg Walden (R-OR), a pair of Republican Representatives who helped come up with the broadcast incentive auction legislation, were among those critical of the Federal Communications Commission's auction procedures framework, which was approved Aug 6 without the support of the two Republicans on the commission. They called it a result that short-changed everyone, including taxpayers, and would be hard to characterize as in the public interest.

Chairman Upton and Chairman Walden said they were troubled by what they called the FCC's decision to "elevate its political desires above the engineering and economic expertise of the industries expected to contribute spectrum and capital to this auction." Among the FCC's decisions were to repack TV stations into wireless spectrum and spectrum being set aside for unlicensed devices, and to reserve some of the best spectrum -- the least subject to interference from repacked TV stations -- into a reserve that the largest carriers -- AT&T and Verizon -- may not get to bid on at all. "Three years ago, Congress put its faith in the FCC to tackle a monumental task: an incentive auction that benefits broadcasters, wireless broadband, and consumers. It appears that faith was misplaced," the pair said in a statement following the vote. "It is beyond belief that the FCC would go down the path of accepting inferior licenses for broadcasters and wireless providers when it doesn’t have to. Once the FCC has reached a level of band pollution that it considers acceptable, their system simply stops trying to make it better," they said. They argued that devalued licenses, marooned broadcasters and displaced unlicensed and wireless mic users appeared to be "acceptable collateral damage" in the FCC majority's view.

Reckoning nears in TV’s fraught relations with providers

If the explosion in cable cord-cutting and on-demand video has turned the steady television business into the Wild West, September may be high noon at the Federal Communications Commission. The FCC has until Sept. 4 to kick off a critical review of its retransmission consent rules, which govern how TV stations owned by companies like CBS and Fox cut deals to share their programming with pay-TV companies like Time Warner Cable or DirecTV.

Once a relatively straightforward part of the TV business, the so-called "retrans" deals have ignited into a firestorm over the last several years, with cable firms saying the broadcasters are demanding too much money and local TV stations alleging that pay-TV companies are inflating disputes in order to win regulatory reforms. Cable and satellite companies have sought for years to change the rules, but have found only tepid success on Capitol Hill. But a congressionally mandated review of a key part of the regulations has cable firms licking their chops, not in the least because the FCC is run by a former cable trade group CEO, FCC Chairman Tom Wheeler, with whom broadcast executives have never felt especially close. At stake, both sides argue, are their bottom lines. If retrans fees do not taper or decrease, consumers will end up paying billions of dollars more in monthly bills, cable firms argue. And if the FCC upends the current system, broadcasters say they’ll have less to invest in some of the most popular content on TV, in addition to local news programming.

Fiorina to Apple, Google: Work with the feds

Carly Fiorina, the former tech CEO running for President, called on companies such as Apple and Google to cooperate more closely with federal investigators. There should be “more collaboration required between private sector companies and the public sector,” Fiorina said during Aug 6’s first presidential debate for Republican candidates outside the top 10. Silicon Valley and the Obama Administration are battling over whether law enforcement officials should have guaranteed access to encrypted customer data at major tech firms. The FBI and White House have called for some type of legal framework that would ensure access to encrypted communications and information.

They argue that officials are being stymied from getting evidence, even when armed with a warrant, during criminal and national security investigations. But most prominent tech CEOs, such as Apple’s Tim Cook, have made high-profile pitches for strong, universal encryption, in which even the company does not have the ability to look at its customers' communications. Security researchers and technologists have backed up their calls, arguing any guaranteed way in weakens worldwide encryption. Fiorina, who headed tech giant Hewlett-Packard from 1999 to 2005, fought back against that narrative. “I absolutely would call on them to collaborate and cooperate,” she said. Fiorina also claimed that a long-stalled cybersecurity bill, the Cybersecurity Information Sharing Act (CISA), could have prevented some of the recent cyberattacks that have plagued the government and private sector.

OPM officials hindering scrutiny of hacked computer systems, watchdog says

The Office of Personnel Management’s inspector general has accused the agency’s information technology office of trying to thwart scrutiny of how well OPM protected the security clearance and federal employee personnel files that were hacked and how well it responded to those breaches. Inspector general Patrick E. McFarland said that OPM’s Office of the Chief Information Officer, or OCIO, has “hindered and interfered with” his office’s oversight and “has created an environment of mistrust by providing my office with incorrect and/or misleading information.” In a memo to acting OPM director Beth Cobert, McFarland said that while his independent office traditionally has had a positive relationship with the OCIO, recent events make him “question whether the OCIO is acting in good faith.”

In particular, the memo said that the IG delayed a planned audit of a contractor when officials pointed out that another audit recently had been done, even though they knew by then that the contractor already had been breached -- a breach that has been described as providing the key to unlocking the OPM personnel files. The CIO’s office also “failed to timely notify” the IG of the hack of the personnel records, which “impeded our ability to coordinate with other law enforcement organizations and conduct audit oversight activity,” it said.

Why the FTC is showing up at hackers’ biggest conferences

The Federal Trade Commission, the de facto federal watchdog for consumers' privacy and data security, knows it needs help. FTC Commissioner Terrell McSweeny and the agency's chief technologist Ashkan Soltani are in Las Vegas (NV) to talk with hackers and security researchers attending the Black Hat and DEF CON conferences. The agency wants their input as it navigates the increasingly complicated digital world in which consumers now live, Commissioner McSweeny says.

Commissioner McSweeny, a former senior aide to Vice President Biden who worked at the White House and the Justice Department before joining the FTC in 2014, sat down to talk about the agency's efforts to recruit more technologists and how the Internet of Things could make the FTC's data security mission even more important. Asked how he would describe the FTC's role in the cybersecurity arena, Commissioner McSweeny said, "Where the FTC comes in is that we protect consumers from unfair and deceptive practices. In the modern, wired context where consumers are connected and online, this means we try to make sure that privacy promises that are made to consumers are honored. It means that if apps or other types of technology are marketed in a deceptive way, we can take action. If consumers' data isn't secured properly that is unfair, it can cause an injury that consumers can't really avoid, those are the cases we can bring."

Chris Christie actually wants to expand the NSA’s spying powers

Sen Rand Paul (R-KY) and Gov Chris Christie (R-NJ) traded barbs over the National Security Agency's bulk collection of US phone records. In the heat of the Republican presidential debate, Gov Christie got the last word in -- but who actually came out of the exchange on top? Gov Christie's vigorous defense of the NSA's spying powers might give him traction in the short run. But in the long run, the outlook isn't good. As Americans have learned more about the intelligence community's ability to hack, snoop and monitor -- in some cases affecting millions of people at a time -- the less they like it.

"I will make no apologies ever for protecting the lives and safety of the American people," said Gov Christie. "We have to give more tools to our folks to be able to do that, not fewer, and then trust those people and oversee them to do it the right way." That line drew a round of applause from the audience. But Gov Christie might not have the rest of the electorate on his side. The latest survey on the issue by the Pew Research Center, in May, finds that 54 percent of Americans disapprove of the government collection of communications data. That figure actually rises to 56 percent among Republicans and 57 percent among independents.