Yesterday I engaged in a lively luncheon debate about Net neutrality regulation with Ben Scott of Free Press at a Catholic University Law School event on "Implementing the National Broadband Plan." To open the debate, I made a very quick 5-Part Case against Net Neutrality Regulation. I argued that the the objections to a Net neutrality regulatory regime can be grouped into 5 major categories: (1) Legal; (2) Economic; (3) Engineering; (4) Practical; and (5) Philosophical / Principled. Down below you will find my working notes to see how I then elaborated on each objection in a bit more detail. And then Ben and I engaged in some spirited banter for the next 45 minutes.

Unfortunately, it doesn't appear that the video of our debate is online just yet, but once it is I will post it here. However, the folks from NextGenWeb asked me to shoot a short 2 1/2 min video clip after the debate summarizing my remarks. If you can stand the sight of my big fat head in your browser for that long, here ya go:

The 5-Part Case against Net Neutrality Regulation

The objections to a Net neutrality regulatory regime can be grouped into 5 major categories: (1) Legal; (2) Economic; (3) Engineering; (4) Practical; and (5) Philosophical / Principled. Each objection will be briefly summarized below:

By Berin Szoka & Adam Thierer

This morning, The Progress & Freedom Foundation (PFF) and the Electronic Frontier Foundation (EFF) filed joint comments with the Federal Communications Commission (FCC) in the inquiry "Empowering Parents and Protecting Children in an Evolving Media Landscape." (MB Docket No. 09-194) As Adam summarized here before, the stated purpose of this FCC Notice of Inquiry is to:

seek information on the extent to which children are using electronic media today, the benefits and risks these technologies bring for children, and the ways in which parents, teachers, and children can help reap the benefits while minimizing the risks [and] to gather data and recommendations from experts, industry, and parents that will enable us to identify actions that all stakeholders can take to enable parents and children to navigate this promising electronic media landscape safely and successfully.

In our joint comments with Lee Tien and Seth David Schoen of EFF, we warned that the FCC should tread carefully when considering taking action on areas described in their inquiry. The agency simply has no authority to act on many of the topics discussed throughout the NOI, and it should not attempt to preempt successful private sector solutions. Congress never authorized the Commission to regulate Internet media, nor asked the agency to consider doing so. In fact, Congress plainly declared that the Internet should be kept "unfettered by Federal or State regulation."

Today I am attending, and speaking at, a terrific event in downtown DC sponsored by the Catholic University Law School on"Implementing the National Broadband Plan: Perspectives from Government, Industry, and Consumers." It's being held at the offices of the law firm of Wiley Rein LLP. Edward Lazarus, Chief of Staff to FCC Chairman Julius Genachowski kicked off the event with a nice keynote address talking about the broad goals of the FCC's coming National Broadband Plan. Lazarus broke the ice by joking with the crowd -- which is heavily made up of communications industry lawyers -- that "The FCC is doing everything it can to provide full employment for telecom lawyers. Whatever else we are failing at, we are succeeding at that." Again, it was a joke, so I don't want to make too much out of it, but... No, strike that, I do want to talk about that for a minute! Because this is actually a very important question: Exactly how much bureaucracy and deadweight loss to the economy (in the form of more lawyering and lobbying) is going to accompany the National Broadband Plan?

Two years ago, I posted an essay on "Lawyers, Lawsuits and Net Neutrality Regulation," in which I attempted to highlight the uncomfortable fact that Net neutrality regulation will likely lead to a bureaucratic nightmare at the FCC and a lawyer's bonanza once the lawsuits start flying in court. Of course, now we have Net neutrality regulations and a National Broadband Plan pending at the FCC, so the potential for bloated bureaucracy will only grow larger. Do you think I am exaggerating? Well, here are some facts to consider from our recent experience in the field of "telecom reform." In the years following passage of the Telecom Act, entire forests fell because of the thousands of pages of regulatory and judicial interpretations that were handed down trying to figure out what that word meant. In fact, let's take a quick tally of the paperwork burden the FCC managed to churn out in just three major "competition" rules it issued in an attempt to implement the Telecom Act and define the "cost" of unbundled network elements ("UNEs"):

* Local Competition Order (1996): 737 pages, 3,283 footnotes
* UNE Remand Order (1999): 262 pages, 1,040 footnotes
* UNE Triennial Review (2003): 576 pages; 2,447 footnotes

So, do I need to remind everyone of my ongoing rants about Jonathan Zittrain's misguided theory about the death of digital generativity because of the supposed rise of "sterile, tethered" devices? I hope not, because even I am getting sick of hearing myself talk about it. But here again anyway is the obligatory listing of all my tirades: 1, 2, 3, 4, 5, 6, 7, 8 + video and my 2-part debate with Lessig and him last year.

You will recall that the central villain in Zittrain's drama The Future of the Internet and How to Stop It is big bad Steve Jobs and his wicked little iPhone. And then, more recently, Jonathan has fretted over those supposed fiends at Facebook. Zittrain's worries that "we can get locked into these platforms" and that "markets [will] coalesce [around] these tamer gated communities," making it easier for both corporations and governments to control us. More generally, Zittrain just doesn't seem to like that some people don't always opt for the same wide open general purpose PC experience that he exalts as the ideal. As I noted in my original review of his book, Jonathan doesn't seem to appreciate that it may be perfectly rational for some people to seek stability and security in digital devices and their networking experiences--even if they find those solutions in the form of "tethered appliances" or "sterile" networks to use his parlance.

Every once and awhile I find a sharp piece by someone out there who is willing to admit that the see nothing wrong with such "closed" platforms or devices, or they even argue that those approaches can be superior to the more "open" devices and platforms out there. That's the case with this Harry McCracken rant over at Technogizer today with the entertaining title, "The Verizon Droid is a Loaf of Day-Old Bread." McCracken goes really hard on the Droid -- which hurts because I own one! -- and I'm not sure I entirely agree with his complaint about it, but what's striking is how it represents the antithesis of Zittrainianism:

Every Tuesday, Washington, DC's local NPR station (88.5 WAMU) carries a "Tech Tuesdays" program as a regular part of The Kojo Nnamdi Show. This week's show, which was guest hosted by Marc Fisher of the Washington Post, was on "Regulating the World Wide Web: A View from Abroad." It was a wide-ranging and very interesting discussion about the future of Internet governance and regulation, featuring:

• Evgeny Morozov: Yahoo! Fellow at the Institute for the Study of Diplomacy at Georgetown University; Fellow, Open Society Institute; and author "Net Effect" blog on ForeignPolicy.com


• John Morris: General Counsel, Director of the Internet Standards, Technology and Policy Project, Center for Democracy and Technology


• Olivier Tesquet: Reporter, Slate.fr (France)

Listen here. It's worth your time.

In an alert entitled Widespread Data Breaches Uncovered by FTC Probe, the Federal Trade Commission has warned the public that the FTC has had to notify "almost 100 organizations that personal information, including sensitive data about customers and/or employees, has been shared from the organizations' computer networks." FTC Chairman Jon Leibowitz warned, "we found health-related information, financial records, and drivers' license and social-security numbers--the kind of information that could lead to identity theft."

This probe represents a welcome change in both the attitude and the approach of the FTC. This probe shows that the FTC is now taking the risks created by distributors of file-sharing programs seriously, and it is assessing them by doing what distributors themselves refuse to do: by actually studying what is happening on file-sharing networks. Had the FTC adopted the attitude and the approach now taken by Chairman Leibowitz back in 2004--when Congress first asked the FTC to investigate whether distributors of file-sharing programs had actually eliminated defects in their programs that were known to cause inadvertent sharing--years of misery, national-security violations, leaked risk-assessments that could increase the lethality of terrorist attacks on American cities, corporate data-breaches, gross breaches of personal privacy, widespread piracy, identity theft, and medical identity theft could have been avoided.

I thus congratulate Chairman Leibowitz, the new Administration, and the FTC for their new attitude and new approach towards the serious problem of inadvertent sharing. As they build upon this initial success, I hope that they will keep the following points squarely in mind:

First, inadvertent sharing is a far more serious threat to ordinary families than it has ever been to "organizations." As Chairman Leibowitz correctly noted "health-related information, financial records, and drivers' license and social-security numbers" are "the kind of information that could lead to identity theft." They are also the kind of information likely to be stored on most ordinary home computers. Indeed, there is no way to contain the threat that inadvertent sharing poses to both sensitive governmental and corporate data unless ordinary consumers and families are also protected--the recent disclosure of ongoing investigations by the House Ethics Committee makes this brutally clear.

Second, inadvertent sharing of sensitive personal files is but the most obvious manifestation of a far larger problem: inadvertent sharing of any type of file--including copyrighted music, movies, images, games, or software--that would be illegal or dangerous to "share" with thousands or millions of anonymous strangers. Right now, far too many families are inadvertently sharing not only more than the 1,700 copyrighted songs that put Jammie Thomas-Rasset on the wrong end of a 1.9-million-dollar jury verdict, but also entire collections of family photos that file-sharing pedophiles are using to identify and target attractive children (p.11).

Third, historically, inadvertent sharing has been "inadvertent" only from the perspective of users of file-sharing programs--and those who suffer as a result of their mistakes. By contrast, from the perspective of many distributors of file-sharing programs, inadvertent sharing appears to be frighteningly deliberate: for example, the distributors of the file-sharing program LimeWire have repeatedly deployed "features" that were known to dupe many users of such programs into inadvertently sharing tens of thousands of personal files--including their entire collections of music and movies.

The FTC's new probe into inadvertent file-sharing should be welcomed and applauded. It could turn out to be the beginning of the end of a seemingly deliberately created crisis that should have been remediated eight years ago--when the computer-science study Usability and Privacy first warned all competent developers of file-sharing programs about reality and the consequences of inadvertent sharing.

Three years ago this month, Columbia University Law School professor Tim Wu released a controversial white paper in conjunction with the New America Foundation entitled, "Wireless Net Neutrality: Cellular Carterfone and Consumer Choice in Mobile Broadband." It contained a litany of accusations regarding supposed corporate shenanigans in the mobile marketplace, including: intentional crippling of features and functionality; refusal to allow 3rd party attachments or intentional curtailment of a market for 3rd party application developers; and various concerns about "discrimination" of one sort or another.

Over at the TLF, the group responded quite forcefully. I think every one of the TLF contributors piled on this study in one way or another. (ex: Hance, Jerry, James, Tim Lee, me x 2, + a podcast). I called his proposal "a declaration of surrender" since Prof. Wu was essential calling the game early and raising the white flag on mobile competition. Further, I argued he was essentially asking for "the forced commoditization of cellular networks" which "would necessitate at return to the rate-of-return regulatory methods of the past." Others were a bit more kind to him, but we were all pretty skeptical of his gloomy claims. However, each of us here also argued that the wireless market (especially the applications side of the market) was still developing and that we'd have to check back in a few years to see how well the hands-off approach worked out.

Well, thankfully, we now know for certain that Tim Wu's was much too lugubrious in his outlook and far too quick to call for regulatory intervention to solve a non-crisis. On the occasion of the 3rd anniversary of the release of Prof. Wu's paper, CTIA-The Wireless Association filed a short paper with the FCC taking stock of just how far the mobile marketplace has come in just three short years. The results are really quite remarkable, as CTIA's letter notes:

At a recent policy discussion luncheon in Washington, Craig Moffett, Senior Analyst, Bernstein Research, was asked how Wall Street would view a movement by the Federal Communications Commission to "re-classify" broadband Internet access services as "telecommunications services" subject to the full panoply of Title II common carrier regulation. His response: "investors would run for the hills." Such an action, Moffett explained, would be very destabilizing for the industry. Yet, that is exactly what several groups have asked the FCC to do in the context of developing its National Broadband Plan. The stated reason for this action is that reclassification from the lightly regulated "information service" category to the heavily regulated "telecommunications service" category "would expand the range of opportunities for more aggressive regulatory steps geared to promote widespread deployment and adoption of advanced telecommunications services." In other words, we can aggressively regulate our way to network investment and deployment.

I have previously written on this topic and noted that the purpose of regulation is to curtail companies from taking actions that they might otherwise take to gain some benefit, such as increase the return on the capital they have invested in their networks. Aggressive regulation will necessarily adversely impact network operator's future desire to continue to invest in their networks, just as it will adversely affect the desire of their investors to continue to invest in the communications infrastructure sector. As Dr. Larry Darby has observed, the concern is not that heavy handed regulation will completely stop network investment, but rather that "such rules will suppress investment that otherwise would be made, and that the differences might be substantial." In contrast, regulatory stability combined with actions based on empirical evidence and sound legal analysis that do not blow with the winds of the day is what is required to support the substantial long-term investments necessary to fund network industries like communications.

Whatever the merits or short-comings of the FCC's four separate decisions to classify all broadband Internet access services (cable modem, wireline Internet, broadband over powerline, and wireless Internet services) as information services, subject only to its limited Title I "ancillary jurisdiction," it may be too late in the day to go back, like SNL's Emily Latella, and say to the courts: "Never mind!" These decisions were made upon adequate factual records, consistent with the manner in which the services are provided, the wording of the statutory definitions, and the de-regulatory thrust of the provisions added to the Communications Act by the Telecommunications Act of 1996. The cable modem classification was upheld by the U.S. Supreme Court in the Brand X decision as a reasonable interpretation of the statute. There is no evidence that the manner of provisioning these services to the public is different today and the statutory definitions and policies under-girding these decisions are unchanged as well. A sector subject to a regulator using the logic of Humpty Dumpty would hardly be attractive to investors.

The FCC's National Broadband Plan team has previously placed a price tag for providing universal broadband service to all residents of the country at anywhere from $20 to $350 billion for a single network, depending on the speed of the connection delivered and other variables; double that--$700 billion--to support two networks if the competitive provision is deemed necessary. The American Recovery and Reinvestment Act budgeted $7.2 billion to support broadband deployment and adoption efforts. Private companies have invested hundreds of billions of dollars in the past decade to upgrade and expand their distribution networks and for the provision of Internet services and applications, and will need to continue to invest on a massive scale to meet the growing bandwidth demands of the future. The Government Accountability Office has recognized that we must continue to rely largely on private investment to fund network expansion and upgrades to achieve our broadband goals.

It is axiomatic, therefore, that a proposal that would send investors "running for the hills" should be categorically excluded from consideration as part of both the NBP and from the execution of the FCC's general statutory responsibilities, which include encouraging the deployment of advanced telecommunications capabilities such as high speed Internet service. A destabilized communications network sector will simply be unable to deliver the "100 Squared" vision recently articulated by the FCC's Chairman. The FCC would violate, not further, its statutory duties if its actions cause private capital to flee the communications infrastructure sector. At a time of record federal deficits, the chance that the federal government will cover a $350 billion shortfall, let alone the $700 billion shortfall, or that the universal service fund can do so, is somewhere between "Slim" and "None," and Slim just walked out of the building.

Good new video up over at ReasonTV about the perils of Net Neutrality regulation. Worth watching:

By Adam Thierer & Berin Szoka
Progress & Freedom Foundation Progress Snapshot No. 6.5, Feb 2010 [.pdf]

Advertising is increasingly under attack in Washington. In fact, we're busy finishing up a paper with the working title: "The New Assault on Advertising: What it Means for the Future of Media & Culture." Among other things, the paper inventories the many ways in which policymakers in Washington and elsewhere are stepping up regulation of commercial advertising and marketing efforts-and highlights the common themes that unite them. Unfortunately, the report is already over 50 pages long and we keep finding new threats to discuss!

This regulatory tsunami could not come at a worse time, of course, since an attack on advertising is tantamount to an attack on media itself, and media is at a critical point of technological change. As we have pointed out repeatedly, the vast majority of media and content in this country is supported by commercial advertising in one way or another-particularly in the era of "free" content and services.[1]

An Attack on Advertising Will Hurt Consumers

But there's a more important reason to fear Washington's new war on advertising: It will hurt consumer welfare. That's because advertising provides important information and signals to consumers about goods and services that are competing for their attention and business--and that scarcest of all things in the modern world, consumers' attention.