American Enterprise Institute

[Commentary] The European Court of Justice ruled against Google in a landmark case about the so-called “right to be forgotten.”

The Court took aim at a very real problem: the fact that an individual’s information can be made available online without his or her consent, and once there, may remain accessible indefinitely.

But its solution threatens to harm the flow of information online without actually protecting privacy in any measurable way. The ultimate effect of this decision is to undermine the Internet’s strongest value proposition: its ability to dramatically reduce information costs.

[Lyons is an associate professor at Boston College Law School]

[Commentary] With its proposed acquisition of DirecTV, AT&T is making a stake to be the nation’s premier pay TV provider on every screen -- TV, laptop, mobile phone and tablet. Its dream is seamless connectivity and streaming video from home to car to office and even to airplanes.

AT&T recognizes that most consumers don’t know, much less care, whether their connection is fiber, xDSL, LTE, or satellite. They just want a good service, preferably at a low price as possible.

Coming on the heels of another mega merger between Comcast and Time Warner Cable, the AT&T/DirecTV development is a textbook example of dynamic competition, characterized by high capital costs, technological change, and network effects. In dynamic markets, competition is created not by the number of providers but by the level of technology.

Only two players, albeit with different technologies, are needed to create dynamic competition. AT&T and Comcast have to go through increasingly burdensome and obligatory merger review from not only the Federal Communications Commission, but also the Department of Justice and the Senate Judiciary Committee.

If we care about innovation and investment, we should encourage these players to grow as big as possible for the simple reason that the larger they are and the larger their revenues, the larger the incentives for upstarts to disrupt them. The best outcome would be to approve both mergers as soon as possible and let the companies duke it out in the marketplace. The battle of superpowers is America’s forte. Let it flourish.

[Layton studies Internet economics at the Center for Communication, Media, and Information Technologies (CMI) at Aalborg University in Copenhagen, Denmark]

[Commentary] There is currently a sweeping debate in the EU about the need for a level playing field between telecommunications operators and Over-the-Top service providers (OTTs).

OTTs are agents that offer telecommunication services (such as telephony, texting, or TV) over basic data or Internet connectivity. Examples of widely known OTTs are WhatsApp, Skype, and Netflix.

At first sight, there are two basic ways to achieve a level playing field: 1) remove regulation on the telco sector, so that both OTTs and telco operators are unregulated, or 2) regulate OTTs in the same way as telco services. So, what kind of level playing field would most benefit consumers? In short, the lack of a level playing field has two basic effects: Transfer of wealth from regulated to unregulated activities, i.e. from telco operators to OTT providers.

Possible unsustainability of the regulated activities and, in consequence, of the whole value chain. This insight should be considered when deciding how to achieve the level playing field between telco operators and OTTs. Recall there are two basic options: 1) de-regulate the telco market or 2) apply the same regulation to OTTs and telcos. Both options will eliminate the transfer of wealth across the activities in the value chain, but only the first option is able to stop the second effect -- value chain unsustainability. In fact, a level playing field achieved through regulation of OTTs would encourage the transfer of wealth from the Internet value chain to other economic sectors.

In other words, telco operators would still lose value, not to other agents in the Internet sector, but rather to other completely different and possibly unconnected sectors. And OTTs would of course lose value. In sum, it seems that, from an economic theory perspective, the only level playing field compatible with telco, OTTs, and consumer interest in general is the unregulated level playing field.

[Herrera-González is Regulatory Economic Manager at Telefónica]

[Commentary] The United States is beginning to fight back against China’s relentless cyberattacks. For the first time, the US Department of Justice charged Chinese military officials with cyber-espionage against US companies.

The alleged victims of the cyberspying are Alcoa World Alumina, Westinghouse Electric, Allegheny Technologies, US Steel, United Steelworkers Union, and SolarWorld. The accused are Wang Dong, Sun Kailiang, Wen Xinyu, Huang Zhenyu and Gu Chunhui, all officers of Unit 61398 of the 3rd Department of the People’s Liberation Army.

According to the FBI, after gaining illegal access to the networks of the targeted companies, Sun Kailiang and his co-conspirators “then used their illegal access to allegedly steal proprietary information including, for instance, e-mail exchanges among company employees and trade secrets related to technical specifications for nuclear plant designs.” Sun, who held the rank of captain during the early stages of the investigation, was observed both sending malicious e-mails and controlling victim computers.

The FBI and department of Justice should be lauded for their investigative and legal work that fingered these members of the PLA. The PLA Unit involved is, among other activities, apparently mandated to steal US trade secrets for the benefit of primarily Chinese state-owned companies a competitive advantage. This is a good first step in the cyber dimension of Sino-American competition.

[Commentary] Believe it or not, Jimmy Fallon’s April 24 monologue on NBC’s The Tonight Show mentioned the Federal Communications Commission’s network neutrality proposal for the Internet was a rare guest appearance by the topic on broadcast and cable television.

A recent study from Pew Research Center revealed that television news programs covered net neutrality just 25 times between January 1 and May 12, which comes to less than 1% of all programs reviewed. And while the top 23 newspapers provided slightly more coverage than television, six of them carried nearly 70% of the 203 newspaper stories.

The consensus on Twitter doesn’t reflect reality. Many have grave concerns about the FCC overstepping when trying to enforce net neutrality. Classifying the Internet as Title II could end innovation in the Internet ecosystem, as it has done in the telecommunications sphere. And some point out that net neutrality, supported by so many large companies, is a pretty fine example of crony capitalism.

It’s possible that Washington is once again taking itself too seriously and making an inside-the-beltway mountain out of something the watchers of Jimmy Fallon consider a molehill. But there’s a more troubling possibility: that the story of how a critical decision affecting the way Americans access and pay for the Internet is being ignored by the media and left to 140-character explanations from self-appointed experts on #netneutrality. This issue is serious. It’s time to treat it as more than a hashtag.

[Commentary] In the wake of the Snowden leaks, much attention has been given to the extent to which it is possible for unauthorized individuals -- including governments -- to gain access to electronic information.

It is becoming increasingly clear that statutory privacy laws and website codes pay only lip service to their promises to protect individuals’ and firms’ information. From the perspective of an economic contract, they are very difficult to enforce because it is extremely difficult -- or prohibitively costly -- to identify when breaches have occurred.

It is relatively straightforward to protect one’s physical property by putting boundaries around it to keep others out – the economic characteristic known as exclusivity. We can physically isolate the disks on which information is stored and invest in sufficient resources to exclude others up to the expected value we expect to gain by controlling the information. If the disk is illegally appropriated by another, this is obvious, because it is a ‘rival’ good. Either the legitimate owner has it or it is illegitimately in the possession of another.

The problem with digital goods – such as the information on the disk – is that they are neither rival nor easily excludable, especially when they become ‘unbundled’ from the ‘carrier medium,’ for example when transported from place to place over the Internet.

This makes them particularly problematic. But in the race to provide a raft of new means of preventing unauthorized access to electronic data, is enough attention being paid to impediments to authorized users’ legitimate access to cloud-based data?

[Howell is general manager for the New Zealand Institute for the Study of Competition and Regulation and a faculty member of Victoria Business School, Victoria University of Wellington, New Zealand]

[Commentary] The substance of Title II common carrier regulation is very real, and it could deal a huge blow to the Internet economy.

Title II means price regulation. It means asking Washington and the state utility commissions for permission to launch new products, change existing ones, or deploy new technology, and to approve marketing and advertising programs. It means hundreds of other rules that were written for the monopoly telephone network 80 years ago but that would now apply to the vastly different Internet environment.

Title II would threaten the healthy system of Internet interconnection and peering that evolved without government oversight. Title II would bring back tariffs, intercarrier compensation, and a host of other bureaucratic do’s and don’ts. Meanwhile, because heavily regulated companies tend to be experts at operating in such a confusing environment, competition from new entrants would falter.

Quarantining the Internet from Title II was one of the best economic policies of the last generation. Unleashing Title II on the Internet could spread an epidemic of confusion and litigation across an Internet environment that over decades has developed millions of fruitful technical and commercial connections outside (and often oblivious to) the old Title II regime. In short, Title II would threaten Internet innovation at its very foundation.

[Swanson is president of Entropy Economics]

[Commentary] While many technology policy debates are characterized by a lack of reason, at least one area of vital national interest proceeds in a rational and transparent fashion: the process to update America’s Communications Act. Reps Fred Upton (R-MI) and Greg Walden (R-OR) lead the process with a series of opportunities for public comment.

While sharing has a role in spectrum policy, the US should certainly not give up the valuable efforts to auction relinquished spectrum for licensed use.

Indeed, the UK trades 84 percent of its spectrum, and where necessary, the government has seized spectrum from uncooperative government agencies. The Base Realignment and Closure (BRAC) project facilitated the difficult process of closing bases in phases following the Cold War. The US needs to take the same approach with spectrum, also known as “BRAC the spectrum”.

It is no small goal for which auction revenues are being raised the First Responder Network, FirstNET, a national communications network for public safety. As 9/11 and Hurricane Katrina revealed, the current patchwork of emergency communications in the US needs to be upgraded to a national state of the art network, and the cost is in the tens of billions of dollars. Spectrum license revenue could directly contribute to that effort and help fortify public safety.

Communications regulation needs to be transitioned from the current silo-based, sector specific paradigm to a modern, technology-neutral, competition-oriented approach. Most of the functions of the Federal Communications Commission are duplicative of functions performed by other agencies. Functions and resources should be rationalized effectively and redeployed to the appropriate agencies, or bundled into a specific agency for the management of spectrum.

[Layton studies Internet economics at the Center for Communication, Media, and Information Technologies (CMI) at Aalborg University in Copenhagen, Denmark]

[Commentary] The revelation of the Heartbleed flaw has “prompted a full roar in the world of Internet security,” in the words of Washington Post media blogger, Eric Wemple.

Whatever the potential technical perils for Internet security, the Heartbleed episode has already produced significant policy repercussions.

Importantly, it has forced the Obama Administration to reveal details of its internal cybersecurity decision making hitherto kept out of sight. It has highlighted – though certainly not resolved – the difficult dilemma of balancing the intelligence imperative of keeping America safe against the commitment to protect the openness and security of the Internet. And finally, the Obama Administration’s decision to pull many final Heartbleed-like judgments into the White House raises serious questions about its actual ability to control the vast sweep and scope of such operations.

[Commentary] I’m developing the idea of creating a Federal Spectrum Service, a government chartered for-profit corporation, to serve as the owner of all federal spectrum.

The FSS would control all federal spectrum use and manage it according to a ten-year plan for reducing the federal spectrum footprint in two stages. In the first stage, the FSS would be required to reduce the federal spectrum footprint by 50%, and in the second stage it would be required to reduce it by 50% once again. The spectrum thus liberated would be auctioned for public use.

Once this mission is accomplished, the FSS would cease to exist unless Congress explicitly re-authorized it to continue in some form. The FSS would have the power to meet this mandate, as it would assume immediate ownership and control of all federal systems that use spectrum directly, either as transmitters or receivers. Therefore, the FSS would be able to replace current systems with new ones that would use spectrum more efficiently and to auction the spectrum it frees up for public uses.

As a single entity with control of federal spectrum use, the FSS would not be affected by agency infighting and the fragmentation of spectrum expertise across the panoply of agencies. If the FSS finds the PCAST Report’s sharing recommendations sensible, it would be able to test them by having agencies share spectrum with each other.

While all of the liberated spectrum would be auctioned, it wouldn’t all necessarily go to the highest bidder. The proceeds from auctioning federal spectrum would easily pay for the equipment upgrades that would make even more spectrum available.