Over the past year or so, many market-oriented critics of Google, like Scott Cleland and Richard Bennett, have criticized the company for aligning itself with Left-leaning causes and intellectuals. Lately, however, what I find interesting is how many leading leftist intellectuals and organizations have begun turning on the company and becoming far more critical of the America's greatest capitalist success story of the past decade. The reason this concerns me is that I see a unholy Right-Left alliance slowly forming that could lead to more calls for regulation not just of Google, but the entire search marketplace. In other words, "Googlephobia" could bubble over into something truly ugly.

Consider the comments of Tim Wu and Lawrence Lessig in Jeff Rosen's huge New York Times Magazine article this weekend, "Google's Gatekeepers." Along with Yochai Benkler, Lessig and Wu form the Holy Trinity of the Digital Left; they set the intellectual agenda for the Left on information technology policy issues. Rosen quotes both Wu and Lessig in his piece going negative on Google. Wu tells Rosen that "To love Google, you have to be a little bit of a monarchist, you have to have faith in the way people traditionally felt about the king." Moreover:

Last week I discussed Barbara Esbin's new PFF paper about the FCC's absurd investigation into how the cable industry is transitioning analog customers over to digital. This is an essential transition is the cable industry is going to free up bandwidth to compete against telco-provided fiber offerings in the future. The faster the cable industry can migrate its old analog TV customers over to the digital platform, the more bandwidth they can re-deploy for high-speed Net access and services. Mark Cuban helps put things in perspective:

1. the only thing that cable companies, and satellite for that matter have to sell is bandwidth and the applications they can run on that bandwith. More bandwidth means more digital everything.

2. For Basic Cable subscribers that get say, 40 analog channels, they are consuming 40 x 38.6mbs or 1.54 Gbs. Let that sink in. 1.54 Gbs of bandwidth. Compare that to how fast your internet access is. That more bandwidth than your entire neighborhood consumes online, by a lot.

Thats also the equivalent of 500 standard def digital channels. If you convert that to revenue per bit for cable companies, or cost per bit for basic cable consumers, the basic cable customers are getting the best deal in town. By a long shot.

Digital cable customers, not so much. Digital customers are paying multiples of analog customers for bandwidth. In reality, analog customers are getting an amazing deal, and the cable companies have been hesitant to convert them only because of the potential FCC backlash.

I'm as cynical as the next guy when it comes to cable rates and motivations, but the reality is that the longer analog remains, the fewer opportunities to leverage the freed up bandwidth to create next generation bandwidth hog applications. Will the cable companies charge us an a lot for that bandwidth, probably. But when we start to see applications built on top of 250mbs per second and more, it will have far more value to society than watching USA Network on your old analog TV. And Net Neutrality? Well if everyone had that 1.54gbs available to them, net neutrality would be a non issue. We wouldn't be arguing about access or pre-emption, we would be arguing about quality of service.

Once again we are reminded that all regulations have opportunity costs and in this case the FCC's actions could cost consumers the loss (or at least delay) of higher-speed broadband offerings in the near-term.

[Hat tip to Richard Bennett for the recommendation here..] I haven't had a chance to read through the entire thing yet, but this new study by Nemertes Research seems worthy of attention: "Internet Interrupted: Why Architectural Limitations Will Fracture the 'Net." From the exec sum:

In 2007, Nemertes Research conducted the first-ever study to independently model Internet and IP infrastructure (which we call "capacity") and current and projected traffic (which we call "demand") with the goal of evaluating how each changes over time. In that study, we concluded that if current trends were to continue, demand would outstrip capacity before 2012. Specifically, access bandwidth limitations will throttle back innovation, as users become increasingly frustrated with their ability to run sophisticated applications over primitive access infrastructure. This year, we revisit our original study, update the data and our model, and extend the study to look beyond physical bandwidth issues to assess the impact of potential logical constraints. Our conclusion? The situation is worse than originally thought!

We continue to project that capacity in the core, and connectivity and fiber layers will outpace all conceivable demand for the near future. However, demand will exceed access line capacity within the next two to four years. Even factoring in the potential impact of a global economic recession on both demand (users purchasing fewer Internet-attached devices and services) and capacity (providers slowing their investment in infrastructure) changes the impact by as little as a year (either delaying or accelerating, depending on which is assumed to have the greater effect).

This is a subject that my colleague Bret Swanson has written a great deal about, so I'm sure he'll be commenting on this study at some point. Even if you don't agree with the conclusion Nemertes reaches, as Richard Bennett notes, the report is well worth reading just the background information on public and private peering, content delivery networks, and overlay networks.

In her latest column, Media Post media market guru Diane Mermigas wonders how long it will be before we see a traditional over-the-air (OTA) broadcast TV network (like ABC, NBC, CBS, or Fox) dump their old broadcast business altogether and just move all their properties to cable and satellite TV. And, in response to Mermigas, Cory Bergman of Lost Remote argues, as I did last week, "the real future of TV is not linear cable, but non-linear video delivered seamlessly via IP to multiple devices, including your TV set. But mass adoption of this approach is still several years away."

Bergman is right. It would be foolish to think any traditional network is going to rely exclusively on IP-based distribution any time soon; they see it as more of a compliment (or another product window). But Mermigas may be on to something in predicting that broadcast networks may soon be looking to get out of the OTA television business altogether and essentially become "a glorified general entertainment cable network."

The strain on their dysfunctional paradigm is emanating from a devastating recession and the ongoing digital revolution. Both are permanently altering the rules of play for the networks. A case can be made for at least one of the Big 4 broadcast networks emerging as a glorified general entertainment cable network within the next several years. The economic advantages: more steady ad revenues and consistent subscriber fees as content is distributed cross-platform.

It would be a bold move that a free-spirited company such as News Corp. might already be contemplating for its Fox Broadcast TV Network, or NBC Universal for its peacock network. Industry analysts increasingly wonder how an independent CBS can prattle on under the crumbling old rules. In a world of exploding access and choices, the prime-time ratings (even with Live plus 3 configurations) spell diminishing returns. For Disney, ABC's general entertainment status is on par with ESPN in sports; the new multi-platform model is in place except for formally moving the ABC TV Network to the cable side of the ledger.

The FCC's Enforcement Bureau, at the direction of Chairman Martin, recently sent letters to 13 cable operators (who cumulatively serve more than 86 percent of the nation's cable customers) asking for information concerning cable prices and analog-to-digital channel movements and customer notification procedures. The letters requested extensive sensitive cable programming and cost data going back to 2006. A Comcast spokeswoman reportedly said the company estimated it would have taken over 1,500 man hours just to assemble the information for 2008. How long did these companies have to respond to the FCC's request? Fourteen days. Why, what's the rush? And when did cable programming rates become one of the agency's highest priorities?

In a short paper released yesterday, "Der Undue Prozess at the FCC: Part Deux," I identified at least four flaws in the FCC's investigation:

(1) the FCC has very limited authority to regulate cable rate levels; (2) to the extent lack of advance notice of channel moves is at issue, local franchising authorities (LFAs), not the FCC, are statutorily empowered to carry out enforcement activities; (3) the FCC has no rules either prohibiting cable operators from migrating cable programming channels from analog to digital transmission or requiring corresponding per-channel rate reductions; and (4) to the extent the FCC is required by Congress to collect data on the multichannel video programming distributor (MVPD) market and cable pricing generally, the agency is directed to do so by means of its annual video competition and price survey reports.

Thus, not only is the digital cable probe being conducted in a manner that calls into question the fundamental fairness of agency processes (with guilt virtually presumed), it seems to be pursuing goals hard to fathom. What the cable industry is doing in migrating its legacy analog cable services to digital transmission is unambiguously pro-consumer, and the FCC's probe will undoubtedly slow its progress. It is difficult to conceive of how consumers will benefit from this diversion of public and private resources as the nation approaches the critical switch-over from analog to digital television broadcasting just three short months from now. The public interest would be better served if the FCC would "stick to its knitting" and faithfully carry out its statutory mission. No more, and certainly no less.

The focus of the investigation, not explicitly stated in the letters but shared liberally with the press, is on cable rates changes operators may have made to their pricing and tiers of service, and suspicions that the cable industry is somehow using consumer confusion about the transition to digital television broadcasting to move subscribers to more expensive digital tier cable service. Of course, the FCC has previously recognized the benefits of cable's migration to digital transmission, and cable operators are required by FCC rules to send monthly notices to all of their customers about the digital broadcast transition. And, with less than 90 days before full-power television broadcast stations cease transmitting analog signals and switch to digital-only transmissions, there is much serious government work do be done to ensure that Americans who rely on over-the-air television can continue to receive signals on their analog TV receivers after the February digital cut-over. Why, then, is the FCC devoting its resources to investigating matters over which it has little or no regulatory authority? What is the agency really after?

One of the first to report on the probe, Amy Schatz, identified its purpose as: "FCC Opens Investigation Into Cable-TV Pricing." According to Todd Shields, Chairman Martin has said: "Listen, if I can think of anything that'll help lower prices for cable customers, I would move forward on it." But by seeking information concerning negotiated fees from wholesale programming suppliers, one suspects yet another back-door attempt to regulate such wholesale prices with an eye toward accomplishing the FCC Chairman's cable Holy Grail: a la carte programming offerings.

As I explain, this is an all-too familiar scenario, as once again the FCC's regular processes and procedures appear to have been perverted to ends not within the agency's delegated authority.

What is disturbing is the process the FCC's Chairman is using to pursue what might otherwise be a perfectly legitimate inquiry into a range of industry-wide practices in connection with the migration towards all-digital operations. This is no ordinary FCC enforcement action and it is difficult to conceive of how this use of agency resources will further two of the FCC's most pressing current goals: ensuring a smooth transition to digital television transmission and encouraging the speedy deployment of ever higher-speed broadband Internet services. In fact, the probe is more likely to slow progress on each front as enormous resources are diverted to producing and reviewing information relevant mostly to activities that lie outside the scope of the FCC's regulatory jurisdiction.

More importantly, consumers cannot possibly benefit, in the long run, when the government conducts its business using questionable procedures in a manner that strongly suggests a lack of impartiality, fairness and predictability, because there can be no confidence that the results of such actions will be fair and reasonable. If the cause of this government investigation is just, its outcomes can only gain, not lose, by scrupulous adherence to the rule of law.

Questionable processes, in short, are likely to produce questionable results. Let's hope that the next FCC Chairman (or Chairwoman) recognizes the critical importance of procedural fairness, regularity and predictability in administrative agency actions and restores the primacy of the rule of law to guide them.

The whole paper is posted here.

So, while the rest of you are still watching your Saturday morning cartoons this weekend, I'll be working hard to defend the First Amendment at the Federal Society's 2008 "National Lawyers Convention." I am speaking on a panel there on Saturday morning entitled "The FCC and the First Amendment" and will be going up against Federal Communications Commission Chairman Kevin Martin and Gregory Garre, the Solicitor General of the United States. The primary focus of our discussion will be the FCC v. Fox case that was recently heard by the Supreme Court. It should be an interesting conversation.

It looks like registration for the event is now closed, but I'll try to blog about it afterwords. Not sure if they are taping it or not, but if I find a video or transcript I'll post it later.

_________

"The FCC and the First Amendment"

Saturday, November 22nd / 10:45 a.m. - 12:15 p.m. / East Room

• Mr. Miguel A. Estrada, Gibson, Dunn & Crutcher, and Former Assistant to the United States Solicitior General


• Hon. Gregory G. Garre, United States Solicitor General


• Hon. Kevin J. Martin, Federal Communications Commission


• Mr. Adam D. Thierer, The Progress and Freedom Foundation


• Moderator: Hon. Brett M. Kavanaugh, United States Court of Appeals, District of Columbia

Matthew Slaughter of Dartmouth's Tuck School, one of today's best thinkers on trade and globalization, says the consequences of any Big Three Auto bailout go far beyond the initial price tag.

First, it would hurt foreign direct investment in the U.S. and thus the insourcing of U.S. jobs:

In 2006 these foreign auto makers (multinational auto or auto-parts companies that are headquartered outside of the U.S.) employed 402,800 Americans. The average annual compensation for these employees was $63,538.

At the head of the line of sustainable auto companies stands Toyota. In its 2008 fiscal year, it earned a remarkable $17.1 billion world-wide and assembled 1.66 million motor vehicles in North America. Toyota has production facilities in seven states and R&D facilities in three others. Honda, another sustainable auto company, operates in five states and earned $6 billion in net income in 2008. In contrast, General Motors lost $38.7 billion last year.

Across all industries in 2006, insourcing companies registered $2.8 trillion in U.S. sales while employing 5.3 million Americans and paying them $364 billion in compensation.

Second, Slaughter says, a Big Three bailout could hurt U.S.-headquartered multinationals:

these companies employ more than 22 million Americans and account for a remarkable 75.8% of all private-sector R&D in the U.S. Their success depends on their ability to access foreign customers. . . .

This access to foreign markets has been good for America. But it won't necessarily continue. The policy environment abroad is growing more protectionist. . . .

Will a U.S.-government bailout go ignored by policy makers abroad?

No. A bailout will likely entrench and expand protectionist practices across the globe, and thus erode the foreign sales and competitiveness of U.S. multinationals. And that would reduce these companies' U.S. employment, R&D and related activities. That would be bad for America.

Rising trade barriers would also hurt the Big Three, all of which are multinational corporations that depend on foreign markets. In 2007, GM produced more motor vehicles outside North America than in -- 5.02 million, or 54% of its world-wide total.

Finally, a bail-out further endangers the dollar:

Will a federal bailout that politicizes American markets bolster foreign-investor demand for U.S. assets?

Not likely. Instead, America runs the risk of creating the kind of "political-risk premium" that investors have long placed on other countries -- and that would reduce demand for U.S. assets and thereby the value of the U.S. dollar.

Read the whole thing. Bailing out Detroit means bailing on free trade and American innovation.

I've spent a lot of time in recent years trying to debunk various myths about online child safety or at least put those risks into perspective. Too often, press reports and public policy initiatives are being driven by myths, irrational fears, or unjustified "moral panics." Luckily, the New York Times reports that there's another study out this week that helps us see things in a more level-headed light. This new MacArthur Foundation report is entitled Living and Learning with New Media: Summary of Findings from the Digital Youth Project. This white paper is a summary of three years of research on kids' informal learning with digital media. The survey incorporates the insights from 800 youth and young adults and over 5000 hours of online observations. The information will eventually be contained in a book from MIT Press ("Hanging Out, Messing Around, Geeking Out: Living and Learning with New Media.")

From the summary of the study on the MacArthur website:

"It might surprise parents to learn that it is not a waste of time for their teens to hang out online," said Mizuko Ito, University of California, Irvine researcher and the report's lead author. "There are myths about kids spending time online - that it is dangerous or making them lazy. But we found that spending time online is essential for young people to pick up the social and technical skills they need to be competent citizens in the digital age."

Importantly, regarding the concerns many parents and policymakers have about online predation, Ms. Ito told the New York Times that, "Those concerns about predators and stranger danger have been overblown." "There's been some confusion about what kids are actually doing online. Mostly, they're socializing with their friends, people they've met at school or camp or sports."

In the report, according to the summary, the researchers "identified two distinctive categories of teen engagement with digital media: friendship-driven and interest-driven. While friendship-driven participation centered on "hanging out" with existing friends, interest-driven participation involved accessing online information and communities that may not be present in the local peer group." The specific findings of the study are as follows:

Tim Lee has been taking some heat here from Richard Bennett and Steve Schultze about various aspects of his new Net neutrality paper. I haven't had much time this week to jump into these debates, but I did want to mention one important portion of Tim's paper that is being overlooked. Specifically, I like the way Tim took head-on some of the silly free speech arguments being put forth as a rationale for net neutrality regulation. As Tim notes in the introduction of the paper:

Concerns that network owners will undermine free speech online are particularly misguided. Network owners have neither the technology nor the manpower to effectively filter online content based on the viewpoints being expressed, nor do profit-making businesses have any real incentive to do so. Should a network owner be foolish enough to attempt large-scale censorship of its customers, it would not only fail to suppress the disfavored speech, but the network would actually increase the visibility of the content as the effort at censorship attracted additional coverage of the material being censored.

I think that's exactly right and, later in his paper (between pgs 22-3), Tim nicely elaborates about the "Herculean task" associated with any attempt by a broadband provider to "manipulate human communication." Not only is it true, as Tim argues, that "no widescale manipulation would go unnoticed for very long," but he is also correct in noting that the public and press backlash would be enormous.

Again, I agree wholeheartedly with all these sentiments, but I think Tim missed another important angle here when discussing the unfounded fears about corporate censorship and the misguided attempts to use free speech as a justification for imposing net neutrality regulations.

Richard Bennett and Matt Sherman explain why it's a bad idea. (And here are a few of my old rants on the issue.)

Bennett:

If we've learned anything at all about from the history of Internet-as-utility, it's that this strained analogy only applies in cases where there is no existing infrastructure, and probably ends best when a publicly-financed project is sold (or at least leased) to a private company for upgrades and management. We should be suspicious of projects aimed at providing Wi-Fi mesh because they're slow as molasses on a winter's day.

I don't see any examples of long-term success in the publicly-owned and operated networking space. And I also don't see any examples of publicly-owned and operated Internet service providers doing any of the heavy lifting in the maintenance of the Internet protocols, a never-ending process that's vital to the continuing growth of the Internet.

Sherman:

Pursuing a public utility model while also desiring competition are fundamentally contradictory goals. Utilities are designed not to compete. Do you, or does anyone you know, have a choice of providers for water, sewage or electricity?

My second question would be: is there anyone in the technology world who sees public utilities as a model for innovation? A 1.5 megabit connection (T1) was an unimaginable luxury when I started in tech in the mid-90's. It was for well-funded companies only. Today, it is a low-end consumer connection and costs around 80% less. Has your sewage service followed a similar trajectory?

A public utility is designed to be "good enough" and little more. There is no need, and little room, for differentiation or progress. Your electricity service is essentially unchanged from 20 years ago, and will look the same 10 years from now. Broadband, on the other hand, requires constant innovation if we are to move forward -- and it has been delivering it, even if we desire more.