I testified this morning in the House Energy and Commerce Committee's Subcommittee on Communications, Technology, and the Internet at a hearing titled, "An Examination of the Proposed Combination of Comcast and NBC Universal." Among those testifying were Comcast Chairman and CEO Brian L. Roberts, and NBC Universal President and CEO Jeff Zucker. Down below I have attached my brief remarks (we only had 5 minutes), but see the Scribd doc at the very bottom to also see the embedded charts. I also wrote a paper about the proposed deal back in December entitled, "A Brief History of Media Merger Hysteria: From AOL-Time Warner to Comcast-NBC" as well as this editorial for Forbes.

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Mr. Chairman and members of the Committee, thank you for inviting me here today. My name is Adam Thierer and I am the President of The Progress & Freedom Foundation (PFF).

Although we are still early in this process, there has already been a great deal of hand-wringing and even some dire predictions about the pending merger of Comcast and NBC Universal. I hope to put this proposed marriage in some historical context and explain why the deal certainly won't have the detrimental impact some critics fear, and also explain why it might even be one potential model for how to sustain traditional media going forward.

Beware Media Merger Hysteria

First, let's remember that we've been here before. Paranoid predictions of a media apocalypse have accompanied the announcements of many previous media mergers, from AOL-Time Warner to News Corp.-DirecTV to XM-Sirius.[i] In these cases and almost all others, however, the "sky is falling" claims proved to be greatly overstated.[ii] The only "harm" that one could reasonably claim came from those mergers was not to consumers or content providers, but to the merging firms themselves and their shareholders. That's because many mergers simply fail to create the sort of synergies and benefits originally hoped for and consequently die of natural causes over time.

Other firms, however, have found ways to make deals work and deliver important new services that previously were unimaginable or simply too expensive to offer alone.[iii] Regardless, the point here is that we'll never know what works unless we permit marketplace experimentation with new and innovative business models.

This is true liberty, when free-born men,
Having to advise the public, may speak free,
Which he who can and will, deserves high praise;
Who neither can nor will, may hold his peace;
What can be juster in a State than this?

Euripides, The Supplicants

For over two thousand years the principles underlying our First Amendment protections for free speech and free thought have been the hallmark of just and free societies. Indeed, the advance of civilization is one marked by progress on a path away from state control of speech and thought toward private autonomy in the area of ideas and their communication. It comes as no surprise that the most repressive regimes and movements included among their tenets the suppression of seditious or heretical thought, from the Inquisition of the late Middle-Ages to the most anti-democratic governments of the 20th Century.

By contrast, for over two hundred years, our Constitution has provided the most rigorous bulwark the world has ever known protecting the free dissemination of ideas. It certainly is not always a comfortable fit; the safeguards sometimes protect speech or speech-conduct that is repulsive to many. But there can be little doubt after more than two centuries of our Constitutional experiment that liberty and justice are served by more, not less, freedom of speech.

For that reason, the FCC's recently announced inquiry into "the future of media and information needs of communities in a digital age" should make the stomachs of civil libertarians everywhere queasy. Of course the Public Notice of the inquiry is dressed up in all of the usual public interest language. The Commission purports to be interested in protecting good journalism, promoting a diversity of information sources, and expanding the opportunities for a vibrant debate of public issues. We have no reason to doubt the sincerity of those representations, or of the FCC's claim that it will consider First Amendment concerns first and foremost as the inquiry proceeds.

A revealing dispute has erupted between Ben Sheffner of Copyrights & Campaigns and the not-so-competent Editors of the website Copycense, which humbly describes itself as "the online journal of code and content."

To shorten a longer story, Professor Edward Felten recently disclosed a summary of the results of a forthcoming "Sahi-Felten study" of files available to users of a "trackerless" BitTorrent-based file-sharing program. According to Professor Felten's summary, statistical analysis showed that 99% of the files available were infringing. Ben Sheffner then authored a blog post that described this summary as "[v]aluable information to keep in mind while debating net neutrality rules and IPS's right to manage their networks and fight piracy."

But Mr. Sheffner's observation outraged the allegedly pious data-prudes at Copycense. In an unsigned "Editorial" entitled Science vs. Advocacy, the crack team at Copycense thus sanctimoniously denounced Mr. Sheffner for daring to suggest that such imperfect "summary" data should ever affect important debates about network neutrality: Calling his post "reflexive" and "impetuous" they denounced his conclusion: "drawing such correlations at this point--with respect to the summary, the resulting paper, (which has not yet been vetted, reviewed, or published), or Felten's perceived or actual personal or professional biases--is premature and careless."

I will not summarize the droning Copycense account of a few of the many, many things that can inarguably go wrong during statistical analyses of sociological phenomena. Indeed, that would be pointless because Copycense itself actually concluded its sanctimonious sermon by agreeing with the substance of the conclusions that it had just denounced as "premature and careless":

"We can say with a strong level of confidence, however, that the way the current statutes are written, it would have been shocking if anything significantly less than 100% of the files on BitTorrent were technical infringements of copyright law."

How thoughtful of Copycense to admit that it knows better than to take seriously its own prudish fretting about theoretical defects that could arise from yet-to-be-reported nuances of the Sahi-Felten study. Even though Copycense currently lacks all the data that it claims to need in order to fully and completely assess all of the implications of this forthcoming study, Copycense still admits that even persons as erudite as its own Editors can, nonetheless, already "say with a strong level of confidence [that]... it would have been shocking if anything significantly less than 100% of the files on BitTorrent were technical infringements of copyright law."

Just FYI... This Thursday, February 4th at 9:30 am, the House Commerce Committee Subcommittee on Communications, Technology, and the Internet will hold a hearing titled, "An Examination of the Proposed Combination of Comcast and NBC Universal." It will be held in 2123 Rayburn House Office Building and the Committee members were kind enough to ask me to come up and say a few words. Here's the witness list:

Brian L. Roberts, Chairman and CEO, Comcast Corporation

Jeff Zucker, President and CEO, NBC Universal

Colleen Abdoulah, President and CEO, WOW! Internet, Cable, and Phone

Mark Cooper, Ph.D., Director of Research, Consumer Federation of America

Michael J. Fiorile, President and COO, The Dispatch Printing Company, Chair of the NBC Affiliates Board

Adam D. Thierer, President, Progress and Freedom Foundation

For those interested, the hearing will be webcast at www.energycommerce.house.gov. There's also another hearing Thursday on the same issue over in the Senate Judiciary Committee's Subcommittee on Antitrust, Competition Policy and Consumer Rights. It's titled, "The Comcast/NBC Universal Merger: What Does the Future Hold for Competition and Consumers?" and it will take place in the Dirksen Senate Office Building, Room 226 at 2:30 p.m. It too will be webcast live.

Incidentally, I wrote a paper back about the proposed deal back in December entitled, "A Brief History of Media Merger Hysteria: From AOL-Time Warner to Comcast-NBC" as well as this editorial for Forbes.

During a recent blog post on William Patry's self-parodying, dishonest, and hate-filled book Moral Panics and the Copyright Wars, ("Copyright Wars"), I argued that disputes between creative industries and technologists who create new means to access creative works tend to be notoriously complex because creators of new content and creators of new content-access technologies are producers of complementary goods.

Producers of complementary goods do not want to destroy each other, but they would love to commoditize each other. In other words, a producer of a complementary good should want to drive the price of any complements produced by others as close as possible to marginal cost in order to maximize the share of mutually-created value that it could potentially capture.

For a concrete example of what I was talking about, review Clash of the Titans, an interesting, opinionated, and perceptive account of the recent clash between Amazon.com and Macmillan over ebook pricing. It represents a thoughtful analysis of the complexities lurking behind these debates. Moreover, the issues outlined are relevant to debates about online pricing of all types of expressive works--music, video, news, periodicals, etc.

Thanks to Marginal Revolution for highlighting this post.

PS: Speaking of Patry's vile book Copyright Wars, I just belatedly perceived another of its many glaring ironies. Around a year ago, the unhinged Patry was putting the finishing touches upon its false and hate-filled claims, (e.g., "I cannot think of a single significant innovation in either the creation or distribution of works of authorship that owes its origins to the copyright industries."), in order to depict an ugly alternate reality in which copyrights had so failed to support the production of innovative works that they should be wholly repealed: "In other areas where a government monopoly, created to serve the public interest, is blatantly abused over a long period of time, it is taken away" (p.199).

Meanwhile, back on Earth, funding provided by copyright industries was empowering Director James Cameron to put the finishing touches on the years of work and the millions of dollars in R&D required to create the beautiful alternate reality depicted in his wildly popular film Avatar. A finer testament to the vacuity of Patry's rabid, unreasoned hate is scarcely conceivable....

The Annenberg School at the University of Southern California has released a paper by Geoffrey Cowan and David Westphal suggesting yet again that the government should more heavily micromanage, and fund, the news media. I am reluctant to belabor the particulars of the proposal (which must necessarily include increased regulation, direct and indirect funding for journalists and news organizations, and a variety of bureaucratic mechanisms to administer the government's oversight of media), but little of it is new and all of it is scary.

The paper is premised on the notion that the government has for many years and in many ways subsidized and/or regulated the news media, and it concludes that enhancing those efforts will forestall the decline of news and information media. The paper fails, however, to: 1) grapple with the question of whether those earlier efforts helped or hindered the media; 2) address the fundamental question of whether there is some systematic reason that news and information services cannot survive on their own merits; and 3) provide a satisfactory answer to the question of whether government entanglement with the media is consistent with a free society.

On a technical level the paper provides a short and somewhat selective history of postal subsidies and tax incentives that have one way or another benefited various forms of publication over the past two centuries. It also covers in cursory fashion federal regulations that have had an impact on purveyors of news and information. Again, the question it never asks or answers, however, is whether the government's meddling on the periphery of the news business was helpful or harmful -- it merely assumes the former. Superficially, this does not seem an unreasonable assumption. But as much as a crutch can help one stand, it can also slow one down in a race. I, at least, am not at all convinced that the government's "assistance" to the media has been a positive force over time. Indeed, some of the media's current problems may well result, at least in part, from past government policies that were intended to benefit the media or to otherwise improve the quality of news and information services provided to the American people.

The left-leaning Air America Media radio network announced it was ceasing operations immediately today. It had been struggling for many years and appeared headed under many times before before being bailed out by various people. No doubt, many conservatives will rush to claim that the death of Air America is a sign that the political right is resurgent in America and that progressive viewpoints no longer have an audience. But I would beg to differ.

Don't get me wrong, I was no fan of Air America. But the reality is that over-the-air terrestrial radio is an aging media platform that generally appeals to a more conservative-leaning and religious-oriented audience. That's the primary reason conservative pundits like Rush Limbaugh and Sean Hannity are so dominant on the dial. Meanwhile, however, progressive voices have flocked to cyberspace and established a strong foothold here with an amazing array of blogs and websites dedicated to advancing their vision. Although conservatives have made some amazing strides online in recent years, they are still struggling to catch up with the likes of The Huffington Post, Daily Kos, and so on.

So, while many on the Right will be licking their chops today giddy with delight about the demise of Air America, the real question is: will they be able to catch up to the Left in cyberspace? Because Rush, Sean and talk radio ain't gunna be around forever.

Of course, as a libertarian who has never once voted for a Democrat or Republican in my life, I really don't give a damn who wins. We fans of real freedom -- across-the-board economic and personal freedom, that is -- have no media platform to call our own.

by Adam Thierer & Berin Szoka, Progress Snaphot 6.1

Stephanie Clifford of the New York Times posted a very interesting article this week summarizing a recent "on-the-record chat" the Times staff had with Federal Trade Commission (FTC) chairman Jon Leibowitz and FTC Bureau of Consumer Protection chief David Vladeck. The interview [discussed by Braden here] is profoundly important in that it reveals an alarming disconnect regarding the relationship between "privacy" regulation and the future of media, which were the subjects of their discussion with Times staff. Namely, Leibowitz and Vladeck apparently fail to appreciate how the delicate balance between commercial advertising and journalism is at risk precisely because of the sort of regulations they apparently are ready to adopt. Because the value of online advertising depends on data about its effectiveness and consumers' likely interests, and because advertising is indispensable to funding media, what's ultimately at stake here is nothing short of the future of press freedom.

The "Day of Reckoning" Is Upon Us

Leibowitz and Vladeck spend the first half of The Times interview wringing their hands about "privacy policies," the declarations made by websites and advertising networks about their data collection and use practices (for which the FTC can and must hold them accountable). But the two feel that privacy policies don't adequately inform consumers. Chairman Leibowitz claims that online companies "haven't given consumers effective notice, so they can make effective choices." And Mr. Vladeck states that advise-and-consent models "depended on the fiction that people were meaningfully giving consent." But he and the FTC seem ready to abandon the notice and choice model because the "literature is clear" that few people read privacy policies, Vladeck told the Times. He and Leibowitz continue:

"Philosophically, we wonder if we're moving to a post-disclosure era and what that would look like," Mr. Vladeck said. "What's the substitute for it?" He said the commission was still looking into the issue, but it hoped to have an answer by June or July, when it plans to publish a report on the subject. Mr. Leibowitz gave a hint as to what might be included: "I have a sense, and it's still amorphous, that we might head toward opt-in," Mr. Leibowitz said.

This clearly foreshadows the regulatory endgame we have long suspected was coming. When the FTC released its "Self-Regulatory Principles for Online Behavioral Advertising" eleven months ago, we asked: "What's the Harm & Where Are We Heading?" Their answers to both questions have become clearer with each new calculated comment--all apparently intended to slowly "turn up the heat" on the advertising industry so that the proverbial frog will stay in the pot until the water finally boils. Leibowitz's FTC has simply dodged the "harm" question with a four-part strategy:

"It was then, and is now, the largest merger in American business history," notes Tim Arango of the New York Times about the AOL-Time Warner mega-merger, which happen ten years this month. And yet, as he points out in his essay, "How the AOL-Time Warner Merger Went So Wrong," things didn't end up going so well for this marriage:

The trail of despair in subsequent years included countless job losses, the decimation of retirement accounts, investigations by the Securities and Exchange Commission and the Justice Department, and countless executive upheavals. Today, the combined values of the companies, which have been separated, is about one-seventh of their worth on the day of the merger.

To call the transaction the worst in history, as it is now taught in business schools, does not begin to tell the story of how some of the brightest minds in technology and media collaborated to produce a deal now regarded by many as a colossal mistake.

Arango goes on to interview several of the principals involved in the deal to get their take on why things unfolded so miserably and, ultimately, came to an end this year. I highly recommend the essay because it should serve as a cautionary tale to those worrywarts who are constantly predicting that the sky is going to fall if we allow a truly free media marketplace--including freedom for firms to structure themselves as they wish. Reality usually plays out quite differently. As I argued in my recent paper, "A Brief History of Media Merger Hysteria: From AOL-Time Warner to Comcast-NBC,"

The point here is not that media mergers are inherently good or always make sense. Indeed.. mergers sometimes prove to be huge blunders. But the hysteria sometimes heard before media mergers are consummated rarely bears any relationship to reality once the deals move forward. Media markets are extremely dynamic and prone to disruptive change and technological leap-frogging. Mergers are often one response to that turbulence... Given how difficult it is to predict the future course of events in this chaotic sector, humility--not hubris--is the sensible disposition when it comes to media merger policy.

North Dakota Senator Byron Dorgan has announced that he will not seek re-election to in 2010. To be candid, I will not be one of those sorry to see him retire.

The Associated Press identifies Senator Dorgan as a "moderate." I have no idea the basis for that assessment but, to the contrary, and in my experience, he was one of the most reactionary members of the Senate on media issues. Like a few of the FCC Commissioners past and present, Byron Dorgan seems unable or unwilling to come to terms with the revolution that has occurred in the media markets as a result of digital technology.

While most of us worry about how serious media enterprises will survive in an age when audiences are badly fragmented, serious journalistic efforts cannot find paying customers, and high quality entertainment programming has effectively become a loss leader for anyone still investing in it, Senator Dorgan spent his time in the Senate trying to obstruct any and every attempt to modernize the FCC's outdated broadcast ownership rules. Indeed, in his efforts to keep the FCC's media rules mired in the 1970s, Senator Dorgan was not above empty rhetorical flourishes, and one in particular stands out in my memory.

Most notably at one Senate hearing, Senator Dorgan related the story of a train wreck that occurred near Minot, North Dakota, and the supposed failure of the local radio station (which was owned by Clear Channel, a national radio concern) to respond to calls from local public safety authorities. In Byron Dorgan's version of the event, Clear Channel didn't really care about Minot and its residents, and the station was not staffed at the time of the incident but was instead broadcasting using "voice tracking" (essentially, canned programming recorded elsewhere or at another time).

If one spends just a few minutes to get to the underlying facts, though, one would find that the incident didn't quite happen that way. In fact, as the then-CEO of Clear Channel explained in a letter to Senator Dorgan, the station did have full-time staff on duty at the time of the incident, but the local police were unable to get through to the station because they used an outdated emergency phone number rather than the automated emergency response system (which had been in place for several years). As a result, the police calls were forwarded to the station's switchboard, which was then, of course, being flooded by calls from residents reporting the accident or seeking information.

As for their supposed indifference to the community, other station personnel began reporting for work on their own accord as they learned of the wreck. In an effort to ascertain the extent of the accident and to discuss an appropriate emergency message for residents, station personnel made their own efforts to contact local public safety officials. Unfortunately, police and fire phone lines also were flooded with calls from residents, so the station was not able to get through. Finally, and after the fact, a station engineer discovered that the Minot police had changed the emergency broadcast frequency they used without notifying the station. Thus, if anything, the tale of the Minot train wreck is a tale of incompetent local public safety officials, not one of the dangers of so-called "Big Media."

But the Minot train wreck made a good story and, in Washington politics, that's all that matters sometimes. Let's hope we've heard the last of it now that Senator Dorgan has elected to retire.