June 2014

Internet Governance: Regulators Regulate, Innovators Innovate

The Internet governance debate is devouring headlines, and has been for months as governments seek to expand their roles -- for various reasons -- in overseeing the domain name system (DNS). Meanwhile, the Internet Corporation for Assigned Names and Numbers (ICANN), the technical coordinating body for the DNS, is furiously working to maintain its historic role as the caretaker of such an important resource. And Congress, on occasion, raises its hand and weighs in on any number of subjects, from Whois usage down to specific approaching new generic top-level domains (gTLDs).

The steps we take now and in the coming months and years to level that playing field, and provide a real and competitive landscape, without the heavy hand of over-regulation will go a long way toward determining the success of the program and fulfilling its promise to the market.

It’s therefore essential that ICANN not only understand the danger of over-regulating the very program it created to foster innovation, but that it help governments and others understand the dangers of doing so. Artificial constraint, arbitrary rules, last-minute changes, misunderstandings of the market -- all of these will endanger the success of the gTLD program and other innovations to follow.

Ex-NSA Chief Pitches Banks Costly Advice on Cyber-Attacks

As the four-star general in charge of US digital defenses, Keith Alexander warned repeatedly that the financial industry was among the likely targets of a major attack. Now he’s selling the message directly to the banks. Joining a crowded field of cyber-consultants, the former National Security Agency chief is pitching his services for as much as $1 million a month.

The audience is receptive: Under pressure from regulators, lawmakers and their customers, financial firms are pouring hundreds of millions of dollars into barriers against digital assaults. Gen Alexander, who retired in March from his dual role as head of the NSA and the US Cyber Command, has since met with the largest banking trade groups, stressing the threat from state-sponsored attacks bent on data destruction as well as hackers interested in stealing information or money.

“It would be devastating if one of our major banks was hit, because they’re so interconnected,” Gen Alexander said. Gen Alexander, 62, said he was invited to give a talk to the Securities Industry and Financial Markets Association, known as Sifma, shortly after leaving the NSA and starting his firm, IronNet Cybersecurity. He has met with other finance groups including the Consumer Bankers Association, the Financial Services Roundtable and The Clearing House.

Interconnection: Towards a New Regime

[Commentary] Internet interconnection usually doesn’t make for big news. At an event hosted by the Congressional Internet Caucus Advisory Committee, David Clark, noted Internet engineer and MIT researcher, presented preliminary results from a joint MIT -- University of California at San Diego study on the causes and locations of congestion within the core of the Internet.

The researchers were cautious and reiterated that their results are preliminary, but the conclusions of their abstract read as follows:

Our data does not reveal a widespread congestion problem among the US providers.
Most congestion we see can be attributed to recognized business issues, such as interconnection disputes involving Netflix. These issues are being resolved, if slowly.
Congestion does not always arise over time, but can come and go essentially overnight as a result of network reconfiguration and decisions by content providers as to how to route content.

There are some key take-aways from this new data.

First, it is worth noting the point made in Dr Clark’s presentation that there are numerous reasons a broadband user could have a frustrating experience with their broadband, and interconnection congestion is only one of them.

More importantly, congestion in the core of the network is rare and where it does occur it is because of real disparities between capacity and demand and not problems with the technology.

One arrangement that likely makes the most economic sense for a service that uses extreme amounts of bandwidth like Netflix would be to directly interconnect with last-mile networks. Direct interconnection would likely lower their costs and certainly improve their customer’s experience. Note that this is exactly what Netflix did.

Antitrust vs. net neutrality: Consumer welfare in focus

[Commentary] The House Judiciary Committee has heard testimonies on “Net Neutrality: Is Antitrust More Effective than Regulation in Protecting Consumers and Innovation?” I, however, would characterize the question a la a Seinfeld episode (paraphrasing): “Are you just saying you want to have Internet freedom for the little guy or do you really want to have Internet freedom for the little guy?”

If you want to protect the little guy, then this committee hearing was for you. The answer to the question posed -- given the empirical evidence -- is yes, antitrust is more effective than regulation at protecting consumers and innovation -- at least when the proposed regulation is “net neutrality.” Why is antitrust so much better than regulation at ensuring innovation in the Internet ecosystem? The reason is simple: unlike regulation, which specializes in control by the few -- a few commissioners, the few well-connected lobbyists, a few politically favored corporations -- antitrust is the law of the people.

For all their talk about wanting to preserve the Wild West of the Internet, net neutrality proponents seem to think consumers don’t know what they want until they’re told -- and free music is not what they really want. This convoluted and patronizing consumer welfare analysis is antithetical to antitrust.

Antitrust does not judge the legitimacy of consumer desires; it merely ensures that corporations do not censor your demands through anticompetitive practices.

[Boliek is an associate professor of law at Pepperdine University School of Law]

Media mega-mergers under the microscope

Megamergers are heading back to Congress with lawmakers set to probe AT&T’s $49 billion bid to buy DirecTV, the second mammoth media deal to come under scrutiny in 2014.

The hearing comes with many lawmakers expressing growing skepticism about the trend toward consolidation following earlier hearings on the proposed Comcast and Time Warner Cable deal. That sentiment could boil over when the AT&T and DirecTV executives come to Washington for a set of double-header hearings in the House and Senate.

“On the one hand you’ve got to look at each of these mergers on their own individual merit but you can’t ignore the broader landscape,” said John Bergmayer, senior staff attorney at the consumer interest group Public Knowledge.

“Yes, you have to just look at the facts of this one but you also have to bear in mind an ever more concentrated communications market,” added Bergmayer, who has been critical of the deal and is slated to testify in the House. Both AT&T and DirecTV say they are missing a crucial component in the suite of services that their subscribers are looking for.

The Race to Dominate Digital Health Heats Up

The battle to own digital health will escalate with Google expected to introduce a new service to collect data from fitness trackers and apps. The tech giant’s addition to its mobile operating system, likely to be described in greater detail at the I/O conference in San Francisco, follows Apple’s unveiling of HealthKit, Samsung’s SAMI announcement and WebMD’s launch of Healthy Target. Each is a play to become the consumer platform for health, a one-stop hub for a person’s own biometric data as well as personalized insights and health content.

It’s the latest in a long line of fierce wars for the mobile customer, which have ranged across phone specs, developer loyalty, navigation services, music, media and more.

Health offers the next opening to differentiate operating systems, the next opportunity to tie consumers into ecosystems and the next source of information that can be tapped for consumer insights. To succeed, companies will have to figure out how to deliver something of real, perceivable value (which would seem like an obvious statement but for the litany of copycat devices cluttering the market today).

Better monitoring sensors should lead to more useful health data. For one, a real-time feed of medical data into clinics and hospitals means doctors can be alerted and respond in the event of alarming divergences. Devices that can collect increasingly reliable data at home, including glucose levels, could also be a significant boost for telemedicine, saving people the cost and hassle of going into the physician’s office.

Now throw in genomic data, thanks to plummeting prices of DNA sequencing.

The even bigger promise here is that collecting increasingly complete medical profiles from millions and millions of people, healthy and sick and somewhere in between, will offer fresh insights into the causes and cures for devastating diseases. Everyone will effectively be enrolled in a medical study on a length and scale that we’ve never seen.

Come on, Silicon Valley, you can do better than this

[Commentary] A new messaging app, called Yo, has created a sensation in Silicon Valley. It is being hailed as the next big thing. The amazing breakthrough? Sending the word “Yo” to a contact with just one click. This app received justifiable ridicule from Comedy Central’s Stephen Colbert and many others.

But some technology industry moguls are taking it seriously. Marc Andreessen wrote on Twitter that people who make light of it are missing the point; that Yo is “an instance of ‘one-bit communication’ -- a message with no content other than the fact that it exists.

My concern is that the adulation and funding that the Yo app has received will send a terribly wrong message to entrepreneurs all over the world, encouraging them to misdirect more investment into building more silly apps and other equally meaningless, mindless projects. Silicon Valley, which could be taking the lead in ridding humanity of its ills, is focused on scoring big hits by solving problems so small they can be said to be non-existent.

The venture-capital system, which fuels the technology industry’s growth, is geared towards rolling the dice in the hope of receiving returns of five to 10 times the invested capital within five or seven years. Such home runs are rare, and this has sent the system into decline, but little has changed. It’s still the silly apps that get the funding and attention.

Viacom, 60 Cable Firms Part Ways in Rural US

For roughly two months, about 900,000 households in small towns across the US haven't been able to watch Nickelodeon, MTV or Comedy Central, as a result of a blackout of the Viacom-owned channels by some 60 small cable operators. So far, there is little evidence any more than a handful of the households care.

After bracing to lose as many as a 10th of their customers, the operators have lost less than 2% of their collective subscribers, according to an industry group that represents the operators.

Viacom isn't worried either, saying it expects "no financial impact" from losing what is only about 1% of total pay-TV households. As a result, with the cable operators unhappy about the price Viacom wants for the right to carry the channels, executives say the blackout is likely to be permanent.

Several have replaced the Viacom channels with others.

The situation signals a shift in the often-tense relations between pay-TV operators and entertainment companies. With video choices increasing, operators are starting to push back at program cost increases by dropping channels altogether.

The markets in the current dispute are mostly rural and suburban, in states including Oklahoma, Minnesota, Iowa and Idaho, where Viacom's portfolio of young-skewing channels with edgy programming popular in urban centers may not carry as much sway.

Is the Firefox Mobile Operating System a Droid Killer?

Mozilla’s move into the mobile OS market makes it less of an ally and more an adversary to Google and Apple. Android dominates this market, accounting for about 78 percent, compared with 18 percent for second-place Apple’s iOS, according to market researcher IDC.

But neither was designed specifically for the lower-tech smartphones that mobile carriers are trying to sell in developing markets. By simplifying data management and cutting energy use, Firefox OS aims to attract people with less money and unpredictable access to networks and electricity.

Its influence is beginning to spread: Telefónica began rolling out Firefox phones in Spain and seven Latin American countries in 2013; Deutsche Telekom now sells them in Poland, Greece, Hungary, and Germany and will add Croatia, Macedonia, Montenegro, and the Czech Republic in 2014.

In May, Carlos Slim’s América Móvil unveiled its own line in Mexico, and in June Mozilla said that within a few months Firefox phones will be on sale in India for $25.

Mozilla’s alternative isn’t likely to win over iOS and Android phone users in the US or Japan, who aren’t counting pennies on devices or data plans. But it could pose a serious threat to Apple and especially Google in the emerging markets where most sales growth lies.

For carriers, independence from those companies means they don’t have to negotiate subsidies or software license agreements. It also gives them more flexibility to modify handsets; Deutsche Telekom added privacy protections that its European customers want. And Firefox doesn’t burden carriers’ networks by sending back user data to the OS maker’s home servers for analysis or sale.

Ten Days in Kenya With No Cash, Only a Phone

Graeber traveled from New York to Nairobi to learn how to pay for things with a phone -- and to understand why Kenya has gained a reputation as the mobile payments future.

Almost everyone in the country uses M-pesa (M, for mobile; pesa is payment in Swahili) to transfer money from one phone to another via encrypted short message service, or SMS. In all, there are about 18.2 million active customers in a nation twice the size of Colorado.

Benton

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