October 2015

The main value of an Internet platform is in providing a common place for other market participants to find each other and easily conduct transactions. These companies create value in several ways: 1) improving resource use; 2) increasing competition; 3) reducing transaction costs; 4) reducing asymmetric information between buyers and sellers; and 5) bringing new buyers and sellers into the market. The danger is that, because these often enormous benefits are hard to quantify, policymakers will discount them and only look at the perceived market power of the platform.

Antitrust regulators still need to be watchful, but they cannot merely assume that a platform is behaving in an illegal manner and harming consumers just because it is doing something that they don’t like or understand. Instead, regulators need to make detailed, case-by-case determinations about whether total social welfare has been harmed. Standard antitrust orientations and tools may be of limited use. Given the value created and the existing market constraints, there are few reasons to fear that Internet platforms pose a unique challenge to markets and competition. Moreover, regulators already have sufficient legal powers to act against the most likely problems. The question is whether they will instead divert their attention to unlikely ones, and in the process risk reducing Internet platform innovation.

[Commentary] The Federal Communications Commission is proposing to "modernize" its definition of Multichannel Video Programming Distributor (MVPD) to include video services delivered over the Internet in addition to cable and satellite video providers. The proposal would apply to prescheduled streams of video programming, which the proposal refers to as "linear programming." It would thus not apply to on-demand services such as Netflix and Hulu. We should pause, but we should do more than that.

Indeed, this should be an opportunity for the FCC to take a fresh look at the current video regulatory regime, given the rapidly changing distribution and consumption patterns. If a thorough analysis does indicate that the right policy move would be to deregulate, the FCC should then determine whether it is possible to do so under current law. If it is not possible, the appropriate course would be new legislation. Under any circumstances, it is highly unlikely, if the existing regime doesn't yield net benefits, that extending it would be a good idea. The FCC should take the steps necessary to find out before hitting play on any new regulations.

[Lenard is president and senior fellow at the Technology Policy Institute]

[Commentary] The Vorlons have a saying: “Understanding is a 3-edged sword.” In this case, the three edges are the Wi-Fi dependent, the LTE dependent, and the Federal Communications Commission (FCC). Last time on Spectrum Game of Thrones (hereinafter “SGoT”) I spent 6500 words discussing the first two edges of the sword. The Wi-Fi dependent side has strong reason to suspect the LTE-U crowd of either reckless indifference or actual malice toward deployment of Wi-Fi based streaming services in the newly refurbished U-NII-1 band up in 5 GHz. Even if the Wi-Fi Dependents could trust the motives of the LTE-U crowd, what happens if everyone is wrong about the ability of the two technologies to co-exist? Under the current structure, the Wi-Fi dependents would be screwed, and they could do nothing about it. So the rational Wi-Fi Dependent must fight tooth and nail against deployment of LTE-U.

So, as we get to SGoT 2: Storm of Spectrum Swords, we come to another dramatic turning point. Will the Wi-Fi Dependents and the LTE-U Dependents see the wisdom of allowing the FCC assert authority over the land of Spectrumos? Can the FCC be persuaded to fulfill its destiny and its duty? And will the anti-Regulatory Zombies from beyond the Wall crash the party and devour both Wi-Fi and LTE-U because of their hatred of the FCC?

Tech companies are still reeling from a top European court's decision invalidating Safe Harbor, a trade agreement used by thousands of American companies to transfer European's data across the Atlantic. Microsoft president and chief legal officer Brad Smith argues that privacy is a human right and the Safe Harbor decision is an opportunity for stronger privacy regulations. Smith also warns that without policy changes, the invalidation could signal "a return to the digital dark ages" by setting the stage for a world where data is segregated by nation. But Smith lays out a four-step proposal to address what he calls the "privacy Rubik's cube" of balancing privacy rights, a global Internet and public safety within a legal framework that the company hopes will appease those on both side of the Atlantic.

The Microsoft plan is perhaps the most detailed road map released by a company in the wake of the Safe Harbor decision, and would require significant changes to law. The tone of the blog post and speed that such a plan was pulled together likely signals the real threat major tech companies feel from the ruling, which grew out of revelations about US government surveillance from former government contractor Edward Snowden.