Daily Digest 6/22/2018 (Charles Krauthammer)

Internet retailers can be required to collect sales taxes in states where they have no physical presence, the Supreme Court ruled in a 5-4 decision. Brick-and-mortar businesses have long complained that they are disadvantaged by having to charge sales taxes while many of their online competitors do not. States have said that they are missing out on tens of billions of dollars in annual revenue under a 1992 Supreme Court ruling that helped spur the rise of internet shopping. On June 21, the court overruled that ruling, Quill Corporation v. North Dakota, which had said that the Constitution bars states from requiring businesses to collect sales taxes unless they have a substantial connection to the state. 

Writing for the majority in the 5-to-4 ruling, Justice Anthony Kennedy said the Quill decision had distorted the nation’s economy and had caused states to lose annual tax revenues between $8 billion and $33 billion. “Quill puts both local businesses and many interstate businesses with physical presence at a competitive disadvantage relative to remote sellers,” he wrote. “Remote sellers can avoid the regulatory burdens of tax collection and can offer de facto lower prices caused by the widespread failure of consumers to pay the tax on their own.”  In dissent, Chief Justice John Roberts agreed that the court’s rulings in this area had been “wrongly decided.” But he said there were insufficient reasons to overrule the precedents and that Congress should have been left to address the matter. “E-commerce has grown into a significant and vibrant part of our national economy against the backdrop of established rules, including the physical-presence rule,” the chief justice wrote. “Any alteration to those rules with the potential to disrupt the development of such a critical segment of the economy should be undertaken by Congress.”

State legislators and big-box stores had been unsuccessful for years in pushing Congress to give states the authority to require sales-tax collection. The US Senate passed a bill in 2013, but it died in the House, caught in a fight between anti-tax Republicans and Republicans who back the brick-and-mortar retailers. The June 21 opinion is likely to spur a new push for a federal law to limit states’ ability to require tax collection by small businesses and to restrain cross-border audits. This time, however, it will be Internet retailers and catalog businesses seeking guardrails on state action, and they’ll have the burden of mustering majorities in a Congress.

The New York State Supreme Court's appellate division has cleared the way for the state to continue pursuing a lawsuit against Charter Communications over broadband speed claims. The appellate court ruled that the FCC's 2015 Open Internet Order's transparency rules did not give the commission the power to preempt the state's lawsuit and said the state's claims are actionable. The ruling affirmed another appellate judge's rejection of Charter's argument that the state's claims in a lawsuit "based on allegations of false promises about broadband speeds involve an irreconcilable conflict between federal and state law that requires a finding of preemption." “This is great news for broadband users in New York, and it bodes well for state efforts to protect broadband users generally," said John Bergmayer, senior counsel at Public Knowledge. "Such efforts are especially important given the current FCC’s decision to abdicate many of its consumer protection responsibilities with respect to broadband.”

When the biggest platforms seem to be flailing or punting on problems, it’s often because they’re trying to address broad social issues with market solutions. They’re rediscovering, at scale and at great expense to their users, the ways in which a society is more than a bazaar, and the pitfalls of allowing human attention to be sold and resold as a commodity. If a platform is addressing a collective problem in a maddeningly strange way, consider that it might see itself, or only know to govern itself, like an eBay. If it can’t keep bad actors from using the service to exploit other users, that’s because it’s modeled after a system in which finding the highest bidder — or the biggest sucker — is gamely understood to be the point. EBay invited us onto an auction floor and dared us to compete with one another; millions did. Social-media companies found a more lucrative approach, with an even bigger payoff, by building the auction floor right under our feet.

Russian hackers likely scanned the election systems of all 50 states for vulnerabilities in 2016 — not just the 21 states confirmed as targets by homeland security officials in 2017, said Michael Daniel, the cybersecurity czar for former President Barack Obama, to the Senate Intelligence Committee. Daniel said that the federal government should invest more money in cybersecurity for state election systems. Congress recently took a first step by approving $380 million in state grants for election security. Daniel testified along with Victoria Nuland, who served as assistant secretary of state for European and Eurasian Affairs during the Obama administration. The committee is seeking to learn what the administration did — and could have done better — to respond to Russian interference in the 2016 election. 

Nuland and Daniel said the Russians appeared to change course after President Obama confronted Russian President Vladimir Putin at a G-20 Leaders' Summit in China in September 2016. President Obama warned Putin to stop meddling in the US presidential race. Still, the Kremlin's efforts picked back up again in October. "I think it may have led them (the Russians) to shift focus to social media rather than to continue going after election systems," Daniel said. Nuland said the US needs to work more closely with social media companies to expose false information that Russians and other foreign adversaries are putting out over social media.

Since the 2016 US presidential election, much attention has been focused on the role of bots in promoting political news on Twitter. But bots can play a role in spreading many other types of news and information as well. This study finds that suspected bots are far more active in sharing links to news sites focusing on nonpolitical content than to sites with a political focus. Some findings:

1. Suspected bots share a smaller proportion of links to popular news sites compared with other kinds of websites.
2. Suspected bots are no more likely to link to digital-native news sites than to legacy news organizations. 
3. When suspected bot accounts link to news on Twitter, posts are more likely to focus on nonpolitical than political content.
4. Suspected bots are more likely to link to political news sites that have an ideologically mixed or centrist audience than to sites that have a very liberal or very conservative audience.

Smaller cable operators are getting an assist from the American Civil Liberties Union in their effort to block the Sinclair-Tribune deal.  In a filing with the Federal Communications Commission, the ACLU pulled out all the stops, invoking viewpoint diversity and the legal underpinnings of media ownership regulation to argue the deal should be rejected. It also spent some some time defending cable operators from what it said were the threats from the deal. It said that in addition to being able to drive smaller, particularly rural, broadcasters out of business, the merger would allow Sinclair to "step up" its "take it or leave it" retransmission offers to small cable operators that will raise prices for consumers and "crowd out" cable operators who can't afford the price of doing business with Sinclair. 

MoffettNathanson analyst Craig Moffett says that AT&T-Time Warner's court victory should not be seen as a green light for vertical mergers (ones combining distribution with content), particularly ones involving an ISP and a content company, say Comcast-Fox for instance. Moffett argues that the Department of Justice tried the wrong case by focusing its argument on the combination of the Turner linear networks and distributor DirecTV (owned by AT&T) and the alleged impact on Turner's independent distributors--increased consumer prices to consumers. Had DOJ instead drilled down on the potential foreclosure harm from the combination of Turner programming assets and an ISP, he suggests, the outcome could have been very different.

"The DOJ focused entirely on the risks that would arise from joint ownership of DirecTV and Turner’s cable networks (recall that they even proposed divestiture of one or the other as a preemptive remedy)," said Moffett. "And, therefore, so did Judge [Richard] Leon. Neither ever even raised the issue of whether there might be a more material competitive harm arising from the combination of Turner programming and an ISP." He said that was even more surprising given that the ruling came down the same week the FCC's network neutrality rules were rolled back--activist groups certainly suggested a combined AT&T-Time Warner was a net neutrality threat. "The theoretical harm here is obvious," he says. "A wireless or wired ISP, now unfettered by net neutrality regulations, could, in theory, advantage its own content over the content of others, either by zero rating (that is, not counting owned-and-operated content against monthly data caps), by prioritizing (the old fast lanes/slow lanes chestnut), or even by adopting a regime of content exclusivity."

For tech executives, the Trump administration's child separation policy provided a moment of clarity when the choice to speak out was relatively easy. But after Trump's executive order, companies were once again struggling to figure out how to respond. The executive order itself turned down the heat for the moment — but also raised more questions than it answered. This has been an all-too-common experience, according to insiders at several of the tech companies. Figuring out when to speak out has been a challenge since the president took office. For the most part, companies have spoken loudest on matters that affect their company's business or employees directly. Nuance has been a challenge in an increasingly soundbite-driven political environment. Some of the most effective attempts have been the concrete actions tech companies have taken, from joining lawsuits to refusing to take part in government efforts. But, one tech executive said, that's tough in a world where "what gets people excited is who says what first." It's not just outside pressure that tech companies are dealing with, though there is plenty of that. Employees also often push their leaders to live up to the change-the-world idealism they believe their companies represent. Companies also have to balance how much to challenge an administration that still controls issues ranging from trade conditions to antitrust regulation to merger approval. That's why big government contractors and heavily regulated companies don't pipe up as much.

Under a new reorganization plan from the Trump administration, federal agencies would have less than four years to digitize all their paper processes. The White House released its overarching plan to reorganize the federal government, and, as with most of the administration’s management plans, it emphasizes technology’s role in the future of government. The plan calls for digitizing all of the federal government’s recordkeeping by Dec. 31, 2022, at which time the National Archives and Records Administration would stop accepting paper records from agencies.

Additionally, the White House reorganization plan would force agencies to assess the strength of their cyber workforce and quickly fill the gaps they find. The Trump administration tasked the Homeland Security Department and Office of Management and Budget with creating a governmentwide approach for recruiting and retaining skilled cybersecurity personnel. The order, which came as part of the White House reorganization plan, aims to address the growing shortage of top cyber talent at federal agencies. “The workforce shortage compounds the government’s challenges in responding to a constantly evolving threat environment and achieving its many IT-dependent missions,” the report said. “The government lacks a comprehensive, risk-derived understanding of which cybersecurity skillsets the federal enterprise needs to develop and which positions are most critical to fill.”

As long as Federal Communications Commission nominee Geoffrey Starks is able to supply his post-confirmation hearing paperwork quickly, Senate Commerce Committee Chairman John Thune (R-SD) wants to include Starks' nomination on a June 27 markup and then move it on the floor paired with the nomination of current FCC Commissioner Brendan Carr for a second term. "I think the FCC [nominations] should move quickly," said Chairman Thune. Starks enjoyed a drama-free confirmation hearing June 20. The highlight reel, in brief: He endorsed the use of Title II of the Communications Act, historically reserved for common carriers, in the FCC's 2015 net neutrality rules. He also suggested a nationalized 5G network would be a bad idea and defended the "democratizing" rules governing children's broadcast TV programming. He talked about the "race to 5G" and praised the Senate's "outstanding" AIRWAVES spectrum bill, S. 1682. And as Starks said in his written testimony, he has a particular passion for telemedicine.