January 2014

[Commentary] While Congress has had its share of legislative successes in the communications arena, it is important to recognize that Congress has also had its share of legislative failures -- primarily because Congress did not think through the underlying economics of the problem carefully before enacting legislation. By failing to understand thoroughly such important items as reasonable expectations of market structure, the effect of the legislation on stakeholder incentives, and by failing to account for the potential for technological change, many of the legislative initiatives contained in the Telecommunications Act of 1996 ultimately fell flat.

As we contemplate a communications law re-write, there are three broad inter-related principles that Congress should always keep in mind:

1. First, before passing any legislation, it is important for Congress to understand the underlying economics of the problem. This analysis must include, inter alia, reasonable and realistic expectations of market structure.
2. Second, any successful legislative paradigm must make sure that the incentives of all the stakeholders are aligned. Otherwise, as we saw with the regional Bell operating companies in unbundling and pay-TV providers in CableCard, sabotage against the paradigm will run rampant.
3. Finally, as Carl Shapiro and Hal Varian brilliantly state in their book Information Rules: “Technology Changes. Economic laws do not.” Accordingly, legislating on the basis of a specific technology makes little sense; instead, legislating on the basis of broader service or platform categories is probably the better approach, with an eye always on the underlying economic incentives of the participants.

[Commentary] It has been two years since the defeat of the Stop Online Piracy Act or “SOPA.” The defeat of SOPA marked a bit of a watershed in American politics, as the legislation was stopped not by traditional means such as a Presidential veto or even a backroom hold by a senior legislator, but by a massive grassroots up-swell (complete with self-imposed blackouts of many popular web pages) who feared a purported government takeover of the Internet.

Putting aside for the moment that a good deal of the objections to SOPA were based on sophistry and outright dis-information (indeed, a close reading of the manager’s amendment would have revealed that SOPA contained multiple legal safeguards before any takedown could occur), the hard fact remains that on-line piracy continues to run rampant, and we still have very poor tools to deal with the problem. So as Congress undertakes its review of our nation’s copyright laws, it should keep the following in mind: First, theft of intellectual property reduces social well-being, even if we count the benefits to the thief and assume theft requires no resources. Second, Congress’s actions to mitigate theft, if effective, probably won’t be very popular.

For the citizens of Seattle, the dream of ubiquitous high-speed Internet has died what many hope will be a temporary death.

The city’s deal with Gigabit Squared fell apart and one of the company’s founders has stepped down, leaving the city with $52,000 of the company’s debt. Meanwhile, remaining telecommunications companies struggle to provide service to the city thanks to a seemingly arbitrary right-of-way rule. So what happened with the seemingly great partnership between the city of Seattle, the University of Washington and Gigabit Squared? The city of Seattle means well, Robert Kangas, leader of Upping Technology for Underserved Neighborhoods (UPTUN), a technology advocacy group in Seattle, said, but it doesn't always do what’s best for broadband adoption in the city. Some of its rules are holding back build-outs that could have already been finished months ago, he said, adding that Gigabit Squared was not a wise investment.

The city went all-in with Gigabit Squared, forging new partnerships and granting the company access to its unused or “dark” fiber network that would have facilitated connectivity in some parts of the city. But there were already Internet companies before Gigabit Squared, or at least one company, in the city that had the means and desire to expand broadband for residents. CenturyLink has been asking the city for the last two years for permission to expand its fiber network in the city, but the city has a right-of-way rule, designed to prevent urban clutter, that has made it practically impossible for them to do so.

Microsoft wants to keep its customers’ data from the prying eyes of US spies and cops. But the company may not be able to honor its pledge.

Data-policy experts said Microsoft, as a US company, is obligated to turn over data demanded lawfully by the National Security Agency or a US law-enforcement agency, no matter whether Microsoft’s computers are in Seattle, Dubai or Taipei. “What matters more than where the data is, is where the system administrators are and who can order them to do things,” said Chris Soghoian, a privacy researcher at the American Civil Liberties Union. “As long as (a company) has a presence, the data is vulnerable.”