Much ink is spilled over the expanding array of video marketplace choices that are competing for the attention of our eyeballs, but much less is usually written about the competition for our ears. As this excellent new Business Week article by Olga Kharif makes clear, competition and innovation in the audio marketplace has never been more vibrant. It's something I've pointed out here before and here's a chart I created for my Media Metrics report to highlight all the new competition for our ears. We've come a long way since the days of my youth, when transistor radios and vinyl records were the extent of audio competition!

Speaking of socializing media, acting FCC Chairman Michael Copps is someone who has devoted much of his life to regulating the media marketplace into the ground. If he had his way, federal bureaucrats would be controlling virtually every aspect of the media universe. Nothing would get done with Big Nanny's permission.

That's what makes his recent comments about the impact of media regulation so delicious.. and hypocritical. According to an article Bloomberg ran on Thursday, Copps is now saying that, with newspapers struggling to remain afloat, the FCC should now reconsider regulations that prohibit combined ownership of broadcast stations and newspapers. The agency should "visit this whole problem" before long, Copps apparently told Bloomberg.

"Visit this problem before long"?? Please! Congress and the FCC have had opportunities to "visit" and revisit this problem for many years now, but it has been Michael Copps and his merry band of media reformistas who have stopped every reform effort dead in its tracks. (See my essays "Congress Fiddles, Newspapers Burn" and "Media Deregulation is Dead" for more evidence of how these radicals hijacked media policy in this country.) As I documented in my 2005 Media Myths book, these charlatans have used hyperbolic rhetoric, shameless fear-mongering, and unsubstantiated claims in opposition to each and every sensible effort to reform our nation's outdated media ownership policies. Those laws and regulations have created artificial market structures and hindered the ability of media operators to find new business models that might throw them a lifeline in difficult times.

Consider the fact that it was just 14 months ago that then-Commissioner Copps issued this gem of a hysteria-ridden statement in response to the agency's last effort to ever-so-slightly loosen the newspaper-broadcast cross ownership rule:

I've got a new essay up over at the City Journal about John Nichols and Robert McChesney's proposal to have the government heavily subsidize failing media enterprises to "save journalism." It follows below:

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"Socializing Media in Order to Save It"
by Adam D. Thierer
City Journal March 27, 2009

With proposals to nationalize or heavily subsidize various segments of our economy more in vogue than ever, it was probably only a matter of time before someone suggested that America's media marketplace should be brought into the government fold. John Nichols of The Nation and the prolific neo-Marxist media theorist Robert W. McChesney have now provided the road map for media's march to serfdom. The cost to the American taxpayer would be at least $60 billion, but the cost for the First Amendment and our democracy would be incalculable.

Nichols and McChesney have coauthored several books and essays about media policy that view the world through the prism of class struggle, "manufactured consent" (á la Noam Chomsky), and the rest of the typical Marxoid tripe about history and economics. In their view, private, for-profit media cannot be trusted. As they stated in their 2003 call to arms, Our Media, Not Theirs: The Democratic Struggle Against Corporate Media, media-reform efforts must begin with "the need to promote an understanding of the urgency to assert public control over the media." "Our claim," they continue, "is simply that the media system produces vastly less of quality than it would if corporate and commercial pressures were lessened."

In a new Nation essay, "The Death and Life of Great American Newspapers," the authors bring their earlier work to its logical conclusion. Saving journalism, they argue, essentially requires that media become an appendage of the state. Journalism, they claim, is a "public good," which--like education and defense--requires constant government oversight and support: "A moment has arrived at which we must recognize the need to invest tax dollars to create and maintain news gathering, reporting and writing with the purpose of informing all our citizens." They propose that government devote $60 billion to "subscription subsidies, postal reforms, youth media and investment in public broadcasting." Think of it as a "free press 'infrastructure project,'" they say. "It would keep the press system alive. And it has the added benefit of providing an economic stimulus." (Isn't it amazing how everything stimulates the economy these days?)

In an interview yesterday, Acting FCC Chairman Copps said that the FCC should "reconsider restrictions on combined ownership of broadcast stations and newspapers as daily publications struggle with a plunge in revenue." This follows a letter from Speaker Pelosi to Attorney General Holder suggesting restrained antitrust review of transactions involving newspaper assets, and a proposal from Senator Cardin (D-MD) for a quasi-government bailout of newspaper firms.

They've all now suddenly discovered that the business model for daily newspapers is under strain and may not be sustainable? Was it the New York Times slouching toward bankruptcy that got their attention, or the failure of the Seattle Post-Intelligencer? And what about those claims, made little more than a year ago, by Commissioner Copps that the newspaper business was robust and newspaper profits were double the S&P average?

The sad truth is, the newspaper business has been heading toward a cliff for the last ten years; only willful ignorance can explain the failure of these people who have so recently come to be concerned about the fate of journalism to acknowledge the threat. Time will tell whether their new-found concern has come too late, or whether they have poisoned the political well too thoroughly for any effective policy change.

Indeed, had some of these same people, including Commissioner Copps, worked with then-Chairman Powell six years ago to forge consensus around changes to the structural ownership rules, both the newspaper business and the local broadcasting business (the next shoe to drop, one might well imagine) would be much better positioned to survive and thrive in the new, highly competitive, media marketplace. Instead, they railed about media consolidation and stoked irrational fears of mass mind control by "big media."

In civil society, one might expect an acknowledgment of past error, touched with a hint of shame, and even perhaps an apology for some of the less genteel things that were said of Chairman Powell during the 2003 ownership proceeding. This is Washington, though, where gentlemanly behavior is too much to hope for.

This summer, in the FCC's Comcast Order, three Commissioners made a claim that immediately rang false:

"Although once relegated to serving, in most cases, the savviest Internet users with unsavory or even unlawful purposes, BitTorrent and other peer-to-peer technologies, such as Gnutella, have entered the mainstream."

This claim was not supported by the "supporting" third-hand data cited. All file-sharing programs have some lawful uses, and some closed or filtered programs are certainly used mostly for lawful purposes, (when they are used), but I am aware of no data supporting a claim that the "mainstream" uses of, for example, the Gnutella protocol are now savory and lawful. For example, in Grokster, evidence showed that 97% of the files actually selected for downloading by program users were or were highly likely to be, infringing.

Fortunately, Illinois State University's Digital Citizen Project has been gathering empirical data about how many file-sharing programs are actually used. When I checked back in at its website, I noted that the Project has released another recent study, Dimensions of P2P and digital piracy in a university campus, by Alexandre M. Mateus and Jon M Peha ("Dimensions").

In the wake of the recent dispute between Warner Music Group and YouTube, much nonsense has been spouted about "fair use" on commercial user-generated-content (UGC) sites. Examples are here and here.

By contrast, the ABA Journal offered a more thoughtful review, but it too overlooked a critical aspect of the evolving relationships between copyright owners and operators of UGC sites like MySpace or YouTube.

Disputes like Warner/YouTube are inevitable (and healthy), but they should not obscure a larger truth: during the past two years, copyright owners and UGC site operators have been cooperating closely and effectively. I have written about the Copyright Principles for UGC Services, and YouTube has pursued similar cooperative measures using internally developed technologies. These efforts are innovative and commendable, and all involved deserve great credit.

Two closely related factors can explain why cooperation and efforts at licensing have predominated in this particular context:

• First, the § 512(c) safe-harbor for hosting sites prescribes an array of conditions that are intended to make it difficult, particularly in the long run, for a "harbored" hosting service to rely heavily upon infringing or questionable content to generate traffic to its site.

• Second, most major UGC-site operators are trying to build profitable commercial businesses. Their commercial nature significantly affects eligibility for many copyright limitations or exceptions, including fair use.

Nor can one guarantee that firms will undertake the investment necessary to produce complex technological innovations knowing that any competitive advantage derived from those innovations will be dissipated by the sharing requirement.

...

Increased sharing by itself does not automatically mean increased competition. It is in the unshared, not in the shared, portions of the enterprise that meaningful competition would likely emerge. Rules that force firms to share every resource or element of a business would create not competition, but pervasive regulation, for the regulators, not the marketplace, would set the relevant terms.

...

A totally unbundled world--a world in which competitors share every part of an incumbent's existing system, ... is a world in which competitors would have little, if anything, to compete about.

The Obama administration's recent budget calls for a ten-year extension of the tax credit for private-sector research and development expenses.  See the White House press release.  That is welcome news.

The exact details of the credit are, like all other things tax-related, rather complicated, but it costs the Treasury about $7.5 billion per year.  Also complicated is the history of the tax credit:  For the nearly thirty years that the tax credit has existed, it has been often granted annually, and sometimes retroactively.  It has expired some thirteen times in its existence; sometimes Congress steps in to provide retroactive credit, and sometimes there is no credit at all.  A useful timeline of the R&D tax credit appears on page 3 of this report.  Most recently, it was not until October 2008, as part of the emergency economic stimulus, that the tax credit was provided retroactively for fiscal year 2008.

President Obama notes that every dollar of the tax benefit "stimulates as much as an additional dollar of private R&D spending in the short run and two dollars in the long run.  Every $1 of R&D adds $2 of benefit to our economy and society as a whole."  A little online research will show that some detractors cast doubt on those numbers and see the credit as an unreasonable subsidy to large corporations.  An economic analysis of the exact benefits of the R&D tax credit is beyond the scope of this blog entry; it seems safe to assume, however, that the tax credit spurs a substantial amount of R&D.

Using tax policy to spur R&D seems eminently reasonable.  The alternative to private sector R&D is, of course, public sector R&D or directed research grants.  That's a tricky thing for this or any government to do well.  Where public money should be allocated is highly politicized and highly charged.  Public investment in R&D forces the government to make big bets on the direction of technology.  But technology is by its very nature highly unpredictable.  I would rather have a thousand companies themselves bet on the direction of technology than the government by fiat.

The way in which the tax credit has been doled out in past years, however, gives credence to some of the detractors of the R&D tax credit.  A tax credit meant to serve as an incentive for R&D spending should actually provide that incentive.  Retroactive tax breaks arguably fail to provide any incentive.  This concept comes up all the time in connection with intellectual property rights:  Should patent terms or copyright terms be allowed to be extended retroactively?  See, for example, the Supreme Court's 2003 decision in Eldred v. Ashcroft regarding copyright term extension.  Retroactive payouts do not increase incentives to invent; they reward people who have already done so.

Research labs do not spring up overnight, and they do not disappear like Cinderella's carriage at the stroke of midnight New Year's Eve.  Any reasonable reliance on a tax credit for R&D necessarily will span several years.  Accordingly, the tax credit itself should also span several years.  That way, the private-sector can make reasonable and informed decisions.  The Obama budget should be commended for doing just that.

During the recent ICANN Board meeting in Mexico City, the Board authorized the creation and funding of an Implementation Recommendation Team (IRT). This team was to be comprised of "an internationally diverse group of persons with knowledge, expertise, and experience in the fields of trademark, consumer protection, or competition law, and the interplay of trademarks and the domain name system to develop and propose solutions to the overarching issue of trademark protection in connection with the introduction of new gTLDs." This IRT is tasked to produce a report for consideration by the ICANN community at the Sydney meeting.

The IRT consists of 24 members:

• Chairwoman Caroline G. Chicoine; and
• Seventeen members; and
• Six ex officio members: Four IPC-elected officers and two-GNSO elected Board Directors (Bruce Tonkin and Rita Rodin Johnston). 

I've previously proposed a number of rights-protection mechanisms that IRT should consider. Today, I offer a few suggestions that I hope will guide IRT as they embark on their important work tomorrow. In particular, I hope they'll implement some of my suggestions intended to make the IRT process more transparent-so the rest of the global Internet can follow along with their important work and provide constructive input where possible.
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Earlier this week, Senator Kyl introduced a new patent reform bill of his own.  This one will compete with the bill introduced by Senators Leahy and Hatch a few weeks ago.  I wrote about my first impressions of the Leahy-Hatch bill here.

Dennis Crouch at Patently-O has noted that the Kyl bill is more patent-holder friendly than the Leahy-Hatch bill.  That it is.  The bill stirs up a lot of issues that I had considered resolved by now.  To the extent that the Kyl bill garners some support on the Judiciary Committee, it calls into question how quickly the Senate will be able to pass any patent reform measure this session.