American Enterprise Institute

[Commentary] Recently, the Administration released a report on big data that highlighted both the positive opportunities of big data collection and how it dangerously compromises privacy, but failed to address the challenge of consumers willfully forfeiting their personal information.

The report emphasized big data’s potential to enhance lives through large scale information gathering. In particular, it noted the ability to create more efficient economic outcomes by identifying ways that industry and individuals can better use their time and materials. But the report also acknowledged that the mass collection of personal information creates significant privacy and security concerns.

Basically, big data can be good, we just need to reconsider how and why we use it and find ways to maximize the outcome while managing the risks. The White House Big Data report failed to pursue one crucial question: if all this personal information is so valuable, why do people give it away so readily and freely? An individual’s personal information is one of his or her most valuable assets. Before blindly signing away their information to the multi-billion dollar industry of consumer data analytics, consumers ought to consider the full cost of their actions.

[Tews is Chief Policy Officer at 463 Communications]

[Commentary] Federal Communications Commission Chairman Tom Wheeler spoke forcefully at the annual NCTA Cable Show in Los Angeles. Most observers focused on his Open Internet remarks, but Chairman Wheeler also made waves by asserting an FCC power to overrule state laws that limit the ability of cities and towns to build their own networks.

In recent years, at least 20 states, after witnessing a number of failures of such municipal networks, enacted limits on such government owned network (GON) ventures. This list failures or aborted launches is long, and growing -- Chicago, Seattle, Tacoma, Utah’s UTOPIA, Minnesota’s FiberNet, the Northern Florida Broadband Authority, Burlington, Vermont, and Philadelphia and Orlando’s abandoned Wi-Fi networks, to name a few. So the financial case for GONs is not a strong one.

The bottom line is that until the FCC, states, and localities do a lot more to remove the remaining barriers to broadband investment, we shouldn’t be using scarce tax dollars to build duplicative networks.

[Swanson is president of Entropy Economics]

[Commentary] The Federal Communications Commission’s net neutrality rules are based on the false premise that American broadband services are sub-standard compared to those in other countries.

Advocates who buy this notion believe that network price and quality can only be improved by regulatory action that forces providers to make uneconomic investments. Before we can have a rational discussion about network policy, we need to get the facts straight.

Average broadband speeds in five of the top 10 are actually declining, while those in the US are improving. Chairman Wheeler’s Open Internet rules aim to preserve the goose that has laid these golden eggs while protecting America’s innovators and ordinary citizens from the hypothetical harms than can arise in markets with minimal competition.

In short, the proposed regulations permit a degree of experimentation with the pricing of technical services on the Internet provided that the common, baseline service continues to be adequate for the common, baseline set of applications.

The most common complaint emanating from the fainting couches occupied by (the mainly far left) net neutrality advocates is that the proposed regulations don’t go far enough to preserve the Internet as it has always been. This is an odd standard to apply to a technical system notable for its disruption of traditional industries such as music, journalism, travel, and retail.

Net neutrality advocates also worry that Internet Service Providers have incentives to exploit customers and harm innovation, fears inspired by every profit-maximizing business. But these incentives are counter-balanced by conflicting incentives to sign up more subscribers and to provide richer services.

[Commentary] Amongst all of the brouhaha circulating following the Federal Communications Commission’s network neutrality announcement, some of the most puzzling comments concern the purported ‘evils of price discrimination’ that will inevitably emerge if -- heaven forbid -- a network operator dares to charge one person a different price to move traffic over the Internet than another person.

The mere fact that discrimination could occur is deemed sufficient cause by many to justify its legislative prohibition. The ‘evils of price discrimination’ are almost always voiced by individuals fervently advocating for the necessity of universal and uncapped Internet access tariffs – often to the extent that metered Internet access should be legislated out of existence, so that the digital world can flourish unbounded and ‘free’, just as its instigators intended.

If one digs a little deeper, one would probably find that the vast majority of these ardent advocates currently purchase their (uncapped) fixed Internet connection in a ‘triple play bundle’ alongside their cable or IPTV subscription and some form of voice telephony service.

Do these advocates realize the double standard they exhibit when calling for the prohibition of one form of price discrimination while at the same time benefiting from price discrimination that underpins the entire business case of their digital experiences? Because ‘flat rate’ Internet access and triple play bundles are simply other forms of price discrimination. If price discrimination is illegal then surely these too must be banned?

[Howell is general manager for the New Zealand Institute for the Study of Competition and Regulation]

[Commentary] The Supreme Court pondered whether or not Aereo is engaged in the impermissible public performance of copyrighted material or whether it was doing, well something else.

And that seems to be the rub; the court seemed to struggle with exactly how to categorize what Aereo is doing. More specifically, the Justices tried to do what all lawyers do: find an analogy that helps them fit the facts of the present case into the factual bucket of a prior case.

There are two, strong potential prior case candidates: Sony Corp. v. Universal (Betamax) and Cartoon Network v. CSC Holdings (CableVision). In the Betamax case, the Supreme Court decided that Sony did not violate the copyright laws by selling a video recording device to an individual who used the device to record video transmissions or play back material that may or may not have been illegally copied. The CableVision case -- decided by the Second Circuit and therefore not binding on the justices – involved the use of a remote storage digital video recorder or RS-DVR.

The Second Circuit relied heavily on its own CableVision case in deciding in favor of Aereo, but both the Tenth and Ninth Circuits rejected similar arguments. So now it’s up to the Supreme Court to figure out what exactly is Aereo. Is it Betamax or is it CableVision?

Like all Supreme Court oral arguments there was something for everyone. There did seem to be emphasis on Aereo’s lack of payment of royalties at any point of the distribution -- a different business model than CableVision or Netflix. This might be the easiest way for the justices to distinguish Aereo from the Second Circuit’s CableVision case.

[Boliek is an associate professor of law at Pepperdine University School of Law]

[Commentary] Apparently one-third of Americans are pessimistic about tech -- and they’re more likely to be poor, less educated, and female. That’s approximately the same percentage of New Zealanders who abstained from voting in the last general election.

There’s a significant cross-over in the demographic as well -- the ‘missing million’ as they have come to be known in New Zealand are thought to be disproportionately poor and less educated, although the other defining characteristic is that they are younger than average.

So why is this demographic cross-over so interesting? Because a potentially curious electoral alliance between a far left political party -- Mana -- and a nascent ‘Internet Party’ led by an expatriate German Internet entrepreneur currently facing extradition to the United States to face breach of copyright charges -- the notorious Kim Dotcom -- might just determine the outcome of New Zealand’s September 20 general election.

At stake are the hearts, minds, and, most importantly, the votes, of the ‘missing million’ -- if only they can be stimulated out of apathy and induced to vote.

[Howell is general manager for the New Zealand Institute for the Study of Competition and Regulation]

[Commentary] The Federal Communications Commission’s apparent addition of another layer of complexity to its upcoming 600 megahertz spectrum auction is rather startling.

The new rules would restrict the amount of spectrum on which AT&T and Verizon could bid. If it looks like the spectrum available from the reverse auction is 60 megahertz, for example, the two firms might be able to bid on three of six blocks. If 70 megahertz is available, then four out of seven. Clear, right?

But it’s far worse than it appears because the new wireless technologies -- such as 4G LTE -- work best with wider spectrum bands. And the FCC’s proposed limitation would dramatically reduce the odds that AT&T or Verizon would actually get a wide enough band to make it worth their while to bid and spend scarce capital.

The FCC’s stated rationale for all this nano-management is to steer spectrum to non-AT&T-and-Verizon firms to compete with AT&T and Verizon in rural markets. But other recent policies, such as the mandated data roaming order that forces firms to share their networks at below market rates, have discouraged real facilities-based rural competition. And now the auction policy could reduce the available rural capacity of AT&T and Verizon upon whose networks the data roamers roam. There’s not even a guarantee -- far from it -- that the number three and four mobile firms, Softbank-Sprint and T-Mobile, will even make a bigger rural push. More likely the rural talk is a PR strategy designed simply to prevent their rivals from obtaining spectrum and to lower their own price of acquiring it -- likely to be used in urban and suburban areas.

[Swanson is president of Entropy Economics]

[Commentary] Opera Web Pass is a pay-as-you-go mobile broadband app targeted to customers who cannot afford, or otherwise refuse to purchase, costly monthly smartphone data plans.

The beauty of the Web Pass app is its flexibility. Consumers that have installed the Opera Mini app can use the app to purchase short-term data plans for weekly, daily, hourly, or even three-minute intervals, each at a different price.

Customers can choose unlimited web access, or can choose to purchase access only to specific sites such as Facebook or Twitter. And in a throwback to the NetZero model, Opera recently announced the debut of Opera Sponsored Web Pass, which grants the consumer a free web pass in exchange for watching a video ad before the session begins.

[Lyons is associate professor at Boston College Law School]

[Commentary] Americans have good feelings about Canadians -- and for good reason. The US and Canada have the world’s largest bilateral trading relationship, trading goods and services worth $2 billion every day.

American Enterprise Institute’s Jeffrey Eisenach has studied the US and Canadian wireless markets in detail, and his report prepared for the GSMA, the world’s mobile operators’ and standards association, notes the findings. Canadians use twice the voice and data as Europeans, resulting in lower unit costs for mobile. Canadian wireless providers invest 2.3 times more than providers in the EU. Together the US and Canada deploy 4G/LTE wireless networks faster than the EU, resulting in 75% higher speeds. Canadian LTE adoption exceeds the EU by a factor of 8, and the gap is growing.

It’s even more impressive to consider that while the US and Canada comprise just 6% of the world’s 7 billion mobile subscriptions, the two countries have half of the world’s LTE connections. The similarities and proximity between the US and Canada create value for both countries, particularly in the digital domain. A number of American Internet companies leverage Canada’s proximity and language to boost revenue.

[Layton studies Internet economics at the Center for Communication, Media, and Information Technologies (CMI) at Aalborg University in Copenhagen, Denmark]

[Commentary] Humility is not a Washington strong suit, and so the Senate Commerce Committee questioned Comcast and Time Warner Cable, often skeptically, over the former’s proposed $45 billion acquisition of the latter.

Lawmakers want US broadband to be successful -- but not too successful. They want ever expanding networks of ever greater capability but don’t want the firms that build these expensive networks to prosper. They want lower prices for consumers but don’t like the economies of scale that can help deliver such value. Because Comcast and Time Warner Cable do not operate in the same geographic markets today, there will be no reduction in broadband provider competition.

But even that question misses the larger point, which is that this is a market where competitive products and technological innovations spring up unexpectedly, often overlap, and show no signs of stopping. Cable firms compete against satellite firms (DirectTV and Dish), telecommunications firms (Verizon FiOS and AT&T U-verse), and broadcast TV, with possible new challengers like Aereo. In broadband Internet services, the cable firms compete with the telecom, satellite, and wireless companies. For services like voice, they compete with the telecom and mobile firms, and also with applications like Skype and WhatsApp. Web content from Netflix, YouTube, Amazon, and many others, meanwhile, challenges the traditional cable TV model. Even traditional cable channels like HBO and ESPN are moving toward the Web.

We could also add the dimension of “interconnection” to the equation. Although cable gets only a tiny amount of revenue from interconnection deals, such as the recent Comcast-Netflix hook up, the DOJ and FCC are likely to scrutinize this arena.

Each of these dimensions overlaps with the others and is itself constantly shifting. The cable firms are adapting to all these changes, but no one knows what any part, or the whole, will look like just months from now. So it’s difficult to make the case that our general hands-off attitude toward regulation of the Net isn’t bearing fruit. And it’s unlikely that a merger of two entities who don’t compete will change the upward trajectory of the digital economy.

[Swanson is president of Entropy Economics]