If a state feels a compelling need to enact some sort of net neutrality legislation, it would do well to follow Maine’s lead. Maine has adopted a strategy that seems to be harmless and presumably makes at least some people feel good. Its legislature rejected a bill that would actually have mandated real net neutrality restrictions and instead passed a resolution calling on the state’s Office of Public Advocate to monitor Internet access and report back (even though, as the resolution acknowledges, broadband is a federal responsibility). Of course, there is no lack of monitoring of Internet access currently, and if there were problems we would hear about them. So, the even better course for states to follow would be to abstain from passing anything at all. But if it makes people feel good, then the Maine strategy is the way to go.

Opponents of the proposed acquisition of DoubleClick by Google are raising privacy as one of their primary concerns. Indeed, shortly after the acquisition was announced, the Electronic Privacy Information Center (EPIC) and several other public interest groups filed a complaint with the Federal Trade Commission asking the agency to investigate how Google manages personal information and to block the acquisition unless the parties adopt a number of new information practices. The complaint alleges that “the increasing collection of personal information of Internet users by Internet advertisers poses far-reaching privacy concerns,” and that the conduct of Google and DoubleClick “has injured consumers throughout the United States by invading their privacy.” It would be nice to have some evidence for such a sweeping assertion, but the complaint provides none, perhaps because such evidence is difficult to find.

A few years ago, Paul Rubin (PFF adjunct fellow and professor of economics and law at Emory) and I investigated the Internet advertising market in a monograph titled Privacy and the Commercial Use of Personal Information. We found that:

• Both consumers and advertisers benefit from better targeting of advertising messages, which is made possible by the use of personal information. Better targeting means that consumers receive more messages that are of interest to them and, equally important, fewer messages that are not of interest. (Thus, to the extent that the acquisition of DoubleClick by Google will increase the amount of usable personal information available to the combined firm, it will facilitate more precise targeting of advertising messages. This is a benefit, not a cost, to consumers.)

• Notwithstanding the widespread perception that personal information is subject to misuse, there is little in the way of evidence, even anecdotal evidence, that consumers are being harmed by the legal use of personal information for advertising or other commercial purposes.

• Firms that violate consumer expectations about privacy face a loss of reputation that translates into losses in the marketplace. This happened to DoubleClick a number of years ago, when the company was planning to link online and personally identifiable information through its acquisition of another firm. Consumer opposition caused DoubleClick to cancel those plans, even though they might well have produced consumer benefits. The company’s stock price declined. The decline was short-lived, however, perhaps because a subsequent FTC investigation, also initiated by an EPIC complaint, found the company had not violated any FTC requirements.

• Regulatory measures of the type proposed by groups like EPIC that would limit the collection and use of information would have an adverse effect on competition and innovation. Such proposals would exacerbate, rather than alleviate, market failures and likely impose major costs on consumers and the economy. For example, entry by new competitors into markets (which provides great benefits to consumers) is facilitated when new entrants can acquire information about potential customers. Limitations on information use benefits existing firms at the expense of new firms.

We need to remember that the Internet is built on the free flow of information, and that this has great benefits for consumers. Proposals to interfere with that information flow, whether by interfering with a merger or otherwise, should be subject to careful scrutiny and implemented only if there is solid evidence that their benefits are greater than their costs.

PFF’s Digital Age Communications Act (DACA) project included a report on spectrum policy by a working group of experts that Larry White of NYU and I co-chaired. That report noted the “widespread dissatisfaction with the legacy command-control-system” and that “the costs associated with inefficient utilization of the spectrum under [that system] have become enormous.” The report went on to endorse a market system as the best way to “assure that spectrum is allocated to its best and highest-valued uses,” noting that “there is no serious contender for a system that can be expected to perform as well or better.”

An (almost) as articulate a case for a market-based system is contained in an article written by Reed Hundt when he was FCC Chairman (and coauthored by Greg Rosston who was also member of our DACA working group). (See IEEE Communications Magazine, December 1995). That article notes that “The key to this investment boom [then occurring in wireless] is the FCC’s decision to grant flexibility in the use of PCS spectrum. PCS licensees have the flexibility to provide the services most valuable to consumers in the same way companies throughout our economy provide the services consumers demand. This is a sea change in FCC policy, and it should be continued.”

To follow on Solveig's blog, it is important to emphasize that Steve Titch's study of Provo, Utah's municipal broadband system - iProvo - is just the latest in a series of studies (including some of our own) that have reached essentially the same result. Namely, these systems are not in the interests of the taxpayers who are their involuntary shareholders. As is typical of these systems, iProvo is in competition with private providers - in this case, Comcast and Qwest - notwithstanding the claim that government needs to step in because the private sector isn't doing it. This competition makes it virtually impossible for the municipal systems to achieve the combination of penetration and price necessary to cover costs, as the experience of iProvo and virtually all similar experiments shows. The result is some combination of higher taxes and higher electricity rates (iProvo is being cross-subsidized by the municipal utility), for no real benefit. The Reason study indicates that most of iProvo's 5,000 customers had broadband before and that the rates being charged are not substantially lower than those being offered by the incumbent cable and telephone companies. Hopefully, the growing accumulation of evidence will dissuade other municipalities from going down this path.

The Department of Commerce has (finally) given its stamp of approval to the renewal of VeriSign's contract to provide .com registry services. This is a good thing. However, the language accompanying the renewal seems quite regulatory. For example, there is now explicit public interest language in the criteria for renewal of the contract. Such standards are quite common for regulated industries, but obviously not for competitive industries where competition takes care of the "public interest". We have consistently cautioned against adopting a regulatory model for domain name registry services and urged ICANN to adopt pro-competitive policies, most recently in a paper by PFF Adjunct Fellow Bruce Kobayashi and testimony I delivered on ICANN Internet Governance. The most important contract should be the one between VeriSign and its customers, who should have sufficient choices to discipline the market. If that is the case, detailed contracts between a registry and its "regulators" - whether the Department of Commerce or ICANN - are at best superfluous and more likely harmful.

What, if anything, should be inferred from the United States' 12th place ranking in the new OECD broadband statistics released earlier this month? There are some who suggest that our failure to move up in the rankings indicates that the U.S. needs some sort of industrial policy to stimulate broadband deployment.

We held our conference in Sao Paulo today on "Intellectual Property in the Digital World - The Importance for Brazilian Development". Thanks in large part to our partner, ABPI (the Brazilian Association for Intellectual Property), the conference was, I think, a resounding success. There was a lot of interesting and sometimes spirited discussion, particularly during the session on the patentability of software. Of most significance was the request by Congressman Julio Semeghini that Gustavo Leonardos (the president of ABPI) help in organizing a congressional hearing on the issues discussed at our conference. This is the type of extended policy discussion that could be really beneficial for Brazil. The conference also heard a suggestion by Congressman Julio Lopes that the patent office should be moved to the Ministry of Justice. The purpose of this proposal - which appears to be clearly a long shot - is to move the patent approval process to a less political environment where the law could be more neutrally applied.

Reliability in electricity is like motherhood and apple pie. It's hard to be against it. This is why the provisions in the Energy Policy Act of 2005 that give FERC new authority to regulate in the name of reliability were very broadly supported. There were, however, a few of us lonely souls who suggested this might not be such a good idea, because virtually anything can be done in the name of reliability. Now, while the ink is barely dry on the President's signature, we see confirmation for our concerns. FERC Commissioner Nora Mead Brownell, going boldly where others might fear to tread, said in an interview last week: "This is a chance to change the world." She added, "People will be surprised how comprehensive" the upcoming notice of proposed rulemaking on reliability will be. Of course, rather than promulgating a costly new regulatory regime in the name of reliability, we should be moving toward a more competitive system in which power producers have market-based incentives to provide the right level of reliability. Sadly, we don't seem to be moving in that direction. Hopefully, Commissioner Brownell's comments do not reflect the views of her colleagues on the Commission. We will stay tuned.

Paul Rubin and I have an op-ed piece with the above title in today's San Jose Mercury News. The bottom line: new identity-theft legislation may entail large costs for virtually no benefits and should be approached with a great deal of caution.

We can all have opinions about where various markets are going and which technologies will be successful, but opinions that are backed up by real money have more credibility. That is why it was heartening, especially for those of us who have been watching the ups and downs of broadband over powerline (BPL) over the years, to see that Google, Goldman Sachs and Hearst - three presumably sophisticated investors - are investing $100 million in Current Communications, a small company that is a leader in BPL. Current is the company that is partnering with Cinergy to provide BPL in Cincinnati (the biggest BPL project now underway) and also partnered with Pepco in the pilot project in Potomac, Md. If successful, BPL will obviously be another broadband pipe and particularly beneficial for rural areas.