I recently joined 15 other economists to sign a statement explaining how proposed net neutrality regulations were likely to do more harm than good. Some of the luminaries who signed include Professors William Baumol, Alfred Kahn, Vernon Smith, and other distinguished folks.
To be sure, some economists find merit in net neutrality, but most recognize that our history with price and other regulations in telecommunications is a sorry one that has largely hindered competition and harmed consumers. Given this history and the rapid pace of change in the industry, new market structure and price regulations seem like a poor public policy choice.
During a Tech Liberation Front blog happy hour last week (you can listen to the "live-from-the-bar" podcast here!), I got into a debate with some of my TLF colleagues about the future of physical versus non-physical media. I was making the argument that the impending death of physical media at the hands of intangible, digital storage has been greatly exaggerated. One of the points I made was that some people just love to "kick the tires" of their media and have something to look at and store on a shelf, whether it be a CD, a DVD, photo albums, a book or anything else. Even though I'm increasingly an all-digital storage guy like most of my TLF colleagues, there are still a lot of people out there who think different than us and prefer the old way of doing things. (I wrote about all this at greater length here.)
But there's another reason that physical media has a future: A lot of people just don't give a damn about digital technology and the Internet at all. Really, it's true! Just check out the results from this recent survey by Park Associates:
A little under one-third of U.S. households have no Internet access and do not plan to get it, with most of the holdouts seeing little use for it in their lives, according to a survey released on Friday. Park Associates, a Dallas-based technology market research firm, said 29 percent of U.S. households, or 31 million homes, do not have Internet access and do not intend to subscribe to an Internet service over the next 12 months.
The second annual National Technology Scan conducted by Park found the main reason potential customers say they do not subscribe to the Internet is because of the low value to their daily lives they perceive rather than concerns over cost. Forty-four percent of these households say they are not interested in anything on the Internet, versus just 22 percent who say they cannot afford a computer or the cost of Internet service, the survey showed. [emphasis added]
Distorting Numbers in the Debate over Parental Controls
The Parents Television Council (PTC), a media activist group that routinely petitions Congress and the FCC for greater content regulation, recently released a new poll which they say proves that the V-Chip and parental control technologies have been a failure.
Their poll finds that only 11% of those surveyed said they used the V-chip or their cable box parental controls to block unwanted content from their television during the past week. And that result is virtually unchanged from a poll they took last September asking the same question. Therefore, the PTC concludes that recent efforts by broadcasters and cable companies to spend hundreds of millions of dollars educating families about these parental control tools have been a failure. And, unsurprisingly, the PTC feels that this again shows the need for government regulators need to step in and do more national nannying for us.
As I'll make clear in a moment, the V-Chip and current television ratings are certainly not perfect. And I have no doubt that household usage of these tools is quite low for reasons I'll get into. But let me first address what appears to be a rather glaring methodological deficiency of this PTC poll which makes it difficult to take seriously.
The COPA Decision, Part 3: Implications for Age Verification and Social Networking
Today's decision in the U.S. District Court for the Eastern District of Pennsylvania again striking down the Child Online Protection Act of 1998 has important implications for the ongoing debate over age verification for social networking websites.
As I mentioned in an essay earlier this week, several state attorneys general (AGs) are currently pushing legislation to mandate age verification of minors before they would be allowed access to social networking sites. Already, age verification proposals have been introduced in Connecticut, Georgia and North Carolina. More proposals are likely on the way. AGs and other policy makers argue that age verification is necessary to protect kids from cyber-predators and other online dangers.
Today's COPA decision bolsters many of the findings in my paper. "Requiring users to go through an age verification process would lead to a distinct loss of personal privacy," Judge Lowell Reed Jr. says on page 55 of the decision. And his other conclusions are also relevant to the debate over social networking regulation.
As I noted in the first part of this essay, The Child Online Protection Act of 1998, which was passed by Congress in 1998 in an effort to restrict minorsâ€™ access to adult-oriented websites, has again been struck down in the courts. The decision is fairly devastating for the government, which had been hoping to prove to the court that private Internet filtering technologies are ineffective in blocking objectionable material. The government had also hoped to prove that age verification technologies were available that might be used to block access by minors to various websites. The court rejected both of these arguments.
Here's a quick summary of the court's major findings on these two important issues:
The Child Online Protection Act of 1998, which was passed by Congress in 1998 in an effort to restrict minorsâ€™ access to adult-oriented websites, has again been struck down in the courts. (Decision here) Judge Lowell Reed Jr., senior judge of the U.S. District Court for the Eastern District of Pennsylvania, ruled that:
COPA facially violates the First and Fifth Amendment rights of the plaintiffs because: (1) at least some of the plaintiffs have standing; (2) COPA is not narrowly tailored to Congress' compelling interest; (3) defendant has failed to meet his burden of showing that COPA is the least restrictive, most effective alternative in achieving the compelling interest; and (3) COPA is impermissibly vague and overbroad. As a result, I will issue a permanent injunction against the enforcement of COPA.
This decision perpetuates the unbroken chain of Internet censorship cases that the government has lost since the Communications Decency Act of 1996 was overturned over ten years ago. After the CDA was rejected by a lower court and the Supreme Court, Congress passed COPA in 1998. COPA provided an affirmative defense to prosecution if a website operator could show that it had made a good faith effort to restrict site access by requiring a credit card, adult personal identification number, or some other type of age-verifying certificate or technology. But COPA was immediately challenged and has gone to the Supreme Court for review twice and, most recently, it has been stuck in the U.S. District Court where the government was again defending its constitutionality in a 4-week trial last Fall.
Thus, almost 10 years after its initial passage, the legislation remains stuck in jurisprudential limbo after endless legal wrangling about its constitutionality. Untold millions have been spent by the government litigating this decision, and they may not be done yet. If the Department of Justice appeals this latest ruling, the law might again be considered by the Third Circuit Court of Appeals and then make another return trip to the Supreme Court for an unprecedented third review by the highest court in the land.
If all the money that has been spent litigating this case had instead been spent on media literacy and online safety campaigns, it could have produced concrete, lasting results. But our government appears obsessed with pursuing regulatory mandates and legal appeals instead.
(Note: In part 2 of this essay, I will discuss what the latest court decision had to say about the effectiveness of filtering and age verification).
Bob Pepper, the senior managing director of global advanced technology policy at Cisco Systems, has penned an outstanding editorial on Net neutrality regulation in TechNewsWorld.com. When Bob served as the FCC's chief of policy development he was, in my opinion, the most brilliant and thoughtful regulator I ever had the chance to work with in my life. He had an appreciation of the benefits of markets that is still on display in this excellent editorial:
Looking ahead, Internet users and content/applications providers will continue to require more choice and flexibility in terms of service selection, service quality and price points. In contrast, new net neutrality regulation could have the perverse effect of degrading all levels of service or freezing in place the current state of providers and services. Companies would find it more difficult to differentiate themselves, offer new services, and enter new markets, a situation that would be anti-competitive and counterproductive for consumers.
Perhaps even worse, greater regulation would almost certainly squelch risk-taking, investment and inventiveness over the long term, as companies would lose incentives to form new ventures, alliances and services and explore new ways to create value consumers would want. Indeed, net neutrality regulation takes us down the wrong path of reduced competition, less consumer choice and greater government involvement and oversight.
To a large extent, the Internet has become so popular, successful and useful because it enriches and empowers people at the individual level. That spirit must not be jeopardized by ill-advised, untimely government regulations. Instead, it must be preserved as we go ever deeper into a new era of high-bandwidth applications and exciting new broadband services.
I hope Bob's old colleagues over at the FCC are listening!
On Thursday the FCC may open a notice of inquiry on network neutrality. It's unclear what new information there is to gather on the issue, since neither proponents nor opponents have withheld their opinions or analyses.
Nevertheless, hopefully a careful review of the issue -- including the unimpressive history of price regulations in telecom (which is the essence of net neutrality) -- will help convince the FCC that conduct should remain under the watchful eye of antitrust authorities rather than subject to precautionary regulations that could prove quite costly to the economy and harmful to consumers.
A few weeks ago I was discussing "Campaign Finance Laws in the You Tube Age" and was wondering aloud whether current campaign finance regulations were sustainable in an age of user-generated content and viral videos. The Washington Postponders that same question today in highlighting the impact of clever mock campaign ad mash-ups like this one about "Big Sister" Hillary Clinton, which already has roughly 1.5 million hits:
The Post story notes that "this ad's reach really blows up any notion that candidates and mainstream media outlets can control the campaign dialogue. Especially online." That's exactly right, but they don't go on to ask the next logical question about how Congress and the FEC are going to deal with the growing flood of online campaign ads and commentary during coming election cycles. Remember, stuff like this can be regulated when aired on traditional television and radio outlets in the days leading up to an election. I just don't see how current campaign finance regs and the Internet can co-exist in the long run. There's just no way regulators are going to be able to keep pace with all the activity out there.
Indeed, although I set out to write my entire paper about age verification, I ended up spending the first third of the paper just debunking myths about social networking websites and online predation. That's because I found that this debate is being driven almost entirely by myths and irrational fears.