American Enterprise Institute

[Commentary] The Supreme Court pondered whether or not Aereo is engaged in the impermissible public performance of copyrighted material or whether it was doing, well something else.

And that seems to be the rub; the court seemed to struggle with exactly how to categorize what Aereo is doing. More specifically, the Justices tried to do what all lawyers do: find an analogy that helps them fit the facts of the present case into the factual bucket of a prior case.

There are two, strong potential prior case candidates: Sony Corp. v. Universal (Betamax) and Cartoon Network v. CSC Holdings (CableVision). In the Betamax case, the Supreme Court decided that Sony did not violate the copyright laws by selling a video recording device to an individual who used the device to record video transmissions or play back material that may or may not have been illegally copied. The CableVision case -- decided by the Second Circuit and therefore not binding on the justices – involved the use of a remote storage digital video recorder or RS-DVR.

The Second Circuit relied heavily on its own CableVision case in deciding in favor of Aereo, but both the Tenth and Ninth Circuits rejected similar arguments. So now it’s up to the Supreme Court to figure out what exactly is Aereo. Is it Betamax or is it CableVision?

Like all Supreme Court oral arguments there was something for everyone. There did seem to be emphasis on Aereo’s lack of payment of royalties at any point of the distribution -- a different business model than CableVision or Netflix. This might be the easiest way for the justices to distinguish Aereo from the Second Circuit’s CableVision case.

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

[Commentary] Apparently one-third of Americans are pessimistic about tech -- and they’re more likely to be poor, less educated, and female. That’s approximately the same percentage of New Zealanders who abstained from voting in the last general election.

There’s a significant cross-over in the demographic as well -- the ‘missing million’ as they have come to be known in New Zealand are thought to be disproportionately poor and less educated, although the other defining characteristic is that they are younger than average.

So why is this demographic cross-over so interesting? Because a potentially curious electoral alliance between a far left political party -- Mana -- and a nascent ‘Internet Party’ led by an expatriate German Internet entrepreneur currently facing extradition to the United States to face breach of copyright charges -- the notorious Kim Dotcom -- might just determine the outcome of New Zealand’s September 20 general election.

At stake are the hearts, minds, and, most importantly, the votes, of the ‘missing million’ -- if only they can be stimulated out of apathy and induced to vote.

[Howell is general manager for the New Zealand Institute for the Study of Competition and Regulation]

[Commentary] The Federal Communications Commission’s apparent addition of another layer of complexity to its upcoming 600 megahertz spectrum auction is rather startling.

The new rules would restrict the amount of spectrum on which AT&T and Verizon could bid. If it looks like the spectrum available from the reverse auction is 60 megahertz, for example, the two firms might be able to bid on three of six blocks. If 70 megahertz is available, then four out of seven. Clear, right?

But it’s far worse than it appears because the new wireless technologies -- such as 4G LTE -- work best with wider spectrum bands. And the FCC’s proposed limitation would dramatically reduce the odds that AT&T or Verizon would actually get a wide enough band to make it worth their while to bid and spend scarce capital.

The FCC’s stated rationale for all this nano-management is to steer spectrum to non-AT&T-and-Verizon firms to compete with AT&T and Verizon in rural markets. But other recent policies, such as the mandated data roaming order that forces firms to share their networks at below market rates, have discouraged real facilities-based rural competition. And now the auction policy could reduce the available rural capacity of AT&T and Verizon upon whose networks the data roamers roam. There’s not even a guarantee -- far from it -- that the number three and four mobile firms, Softbank-Sprint and T-Mobile, will even make a bigger rural push. More likely the rural talk is a PR strategy designed simply to prevent their rivals from obtaining spectrum and to lower their own price of acquiring it -- likely to be used in urban and suburban areas.

[Swanson is president of Entropy Economics]

[Commentary] Opera Web Pass is a pay-as-you-go mobile broadband app targeted to customers who cannot afford, or otherwise refuse to purchase, costly monthly smartphone data plans.

The beauty of the Web Pass app is its flexibility. Consumers that have installed the Opera Mini app can use the app to purchase short-term data plans for weekly, daily, hourly, or even three-minute intervals, each at a different price.

Customers can choose unlimited web access, or can choose to purchase access only to specific sites such as Facebook or Twitter. And in a throwback to the NetZero model, Opera recently announced the debut of Opera Sponsored Web Pass, which grants the consumer a free web pass in exchange for watching a video ad before the session begins.

[Lyons is associate professor at Boston College Law School]

[Commentary] Americans have good feelings about Canadians -- and for good reason. The US and Canada have the world’s largest bilateral trading relationship, trading goods and services worth $2 billion every day.

American Enterprise Institute’s Jeffrey Eisenach has studied the US and Canadian wireless markets in detail, and his report prepared for the GSMA, the world’s mobile operators’ and standards association, notes the findings. Canadians use twice the voice and data as Europeans, resulting in lower unit costs for mobile. Canadian wireless providers invest 2.3 times more than providers in the EU. Together the US and Canada deploy 4G/LTE wireless networks faster than the EU, resulting in 75% higher speeds. Canadian LTE adoption exceeds the EU by a factor of 8, and the gap is growing.

It’s even more impressive to consider that while the US and Canada comprise just 6% of the world’s 7 billion mobile subscriptions, the two countries have half of the world’s LTE connections. The similarities and proximity between the US and Canada create value for both countries, particularly in the digital domain. A number of American Internet companies leverage Canada’s proximity and language to boost revenue.

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

[Commentary] Humility is not a Washington strong suit, and so the Senate Commerce Committee questioned Comcast and Time Warner Cable, often skeptically, over the former’s proposed $45 billion acquisition of the latter.

Lawmakers want US broadband to be successful -- but not too successful. They want ever expanding networks of ever greater capability but don’t want the firms that build these expensive networks to prosper. They want lower prices for consumers but don’t like the economies of scale that can help deliver such value. Because Comcast and Time Warner Cable do not operate in the same geographic markets today, there will be no reduction in broadband provider competition.

But even that question misses the larger point, which is that this is a market where competitive products and technological innovations spring up unexpectedly, often overlap, and show no signs of stopping. Cable firms compete against satellite firms (DirectTV and Dish), telecommunications firms (Verizon FiOS and AT&T U-verse), and broadcast TV, with possible new challengers like Aereo. In broadband Internet services, the cable firms compete with the telecom, satellite, and wireless companies. For services like voice, they compete with the telecom and mobile firms, and also with applications like Skype and WhatsApp. Web content from Netflix, YouTube, Amazon, and many others, meanwhile, challenges the traditional cable TV model. Even traditional cable channels like HBO and ESPN are moving toward the Web.

We could also add the dimension of “interconnection” to the equation. Although cable gets only a tiny amount of revenue from interconnection deals, such as the recent Comcast-Netflix hook up, the DOJ and FCC are likely to scrutinize this arena.

Each of these dimensions overlaps with the others and is itself constantly shifting. The cable firms are adapting to all these changes, but no one knows what any part, or the whole, will look like just months from now. So it’s difficult to make the case that our general hands-off attitude toward regulation of the Net isn’t bearing fruit. And it’s unlikely that a merger of two entities who don’t compete will change the upward trajectory of the digital economy.

[Swanson is president of Entropy Economics]

[Commentary] The technology press has been awash in stories recently about the so-called Heartbleed bug that releases sensitive user data from any service using the OpenSSL encryption library.

To hold companies accountable for Heartbleed, we would need not product liability or restrictions on contract liability waivers, but rather, some sort of tort liability for service operators. Internet services can grow very popular very quickly. Consequently, increased liability could result in a structural shift in the Internet ecosystem.

Large, established companies such as Facebook or Google would likely become more averse to security risks, making them more cautious and shy about innovation. Small startup companies, on the other hand, who are constantly at risk of failing, would not have the resources or incentives to increase security and would take the risk of innovating without investing in security. Therefore, smaller companies would get an increasing advantage over their slower-moving, larger rivals who delayed new innovation in order to minimize security risks. Such a market, where low-security startups represent an increasing share of the computing industry, would be inherently more hazardous.

Ideally, large companies would voluntarily collaborate to improve the security of common shared infrastructure like OpenSSL or Linux. However, no intervention along these lines is likely to more than a moderate benefit. We don’t have robust ways to measure security improvements, or how security-critical any piece of code is. As a result, we aren’t going to be able to construct robust incentives here. Ultimately, the right lesson to draw from the Heartbleed bug is that we do not yet know the right technical or social mechanisms for building large software systems securely and economically.

[Rabkin is a researcher interested in techniques for building and debugging complex software systems]

[Commentary] Wikileaks has posted a draft outcome document created by the Executive Stakeholder Committee of the NetMundial Internet Governance conference to be held in Brazil April 23 – 24.

Before the first multi-stakeholder invited to attend had taken a seat, the organizer had already decided what principles they were going to agree to and a road map for implementation. The main challenge of the document is this: while the principles may seem reasonable, even laudable, the roadmap for implementation has many challenges and potential hidden agendas. The Internet as a “Human Right”, access to information, free flow of data, freedom of association, expression, privacy, accessibility, etc., all sounds like principles we want to embrace.

And a governance process encouraged to be “open, participatory, multi-stakeholder, technology-neutral, sensitive to human rights and based on principles of transparency, accountability and inclusiveness”, sounds like a good idea we should be able to support. But now I’m wondering who will have the capacity to implement all this pro-free rhetoric?

Most likely, that job would fall to governments around the world. It would be up to them to let us know when we have hit our Internet Governance metric. Many of the items in the leaked outcome document are good aspirational goals. It’s deciding on the path to achieve them that will be the major challenge for the multi-stakeholders engaged in this process. Continuing to seek balance between governments, industry partners, content providers, and the end user will be an ongoing challenge.

[Tews is the Chief Policy Officer at 463 Communications]

[Commentary] I am usually not surprised at America’s fascination with sports telecasts (I share it; that’s why I write on it!). But surprised I was when not just one, but at least three Senators took a great deal of time to pose questions about sports programming during the Comcast/Time Warner hearing.

As any good fielder would do, I called out to the television “I got this,” but the Senators apparently didn’t hear the play. So let me try to respond to their concerns in this format. Roughly paraphrased, the Senators are uneasy with the proposed merger because Time Warner owns certain regional sports networks (RSNs) and Comcast owns interests in other RSNs. They fear that together the two companies would create a sports network juggernaut that could leverage these networks into an indomitable market share -- crushing all competition.

The perceived power of the RSN is almost hypnotic for the regulator – and apparently also for Senators and their constituents. They just can’t let it go. There are procompetitive rationales for not making such programming contracts compulsory, but for now I’ll leave it at this: senators, RSNs will not affect the market power of a merged Comcast/Time Warner. Just ask the Federal Communications Commission -- “they got this.”

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

[Commentary] The Federal Communications Commission confirmed that it will not expand the scope of the ongoing network neutrality proceeding to encompass peering and transit services.

This was a blow to Netflix CEO Reed Hastings, who launched a blistering attack designed to focus the agency’s attention on this market. But given the robust state of competition in the interconnection market, the FCC’s response was good news for the future of the Internet ecosystem.

Despite Hastings’ hand-wringing, the Comcast-Netflix agreement illustrates the robust competitiveness of the interconnection market. The fact that Netflix pays Cogent transit fees is uncontroversial. The Netflix-Comcast agreement should be no less controversial merely because the identity of the transit provider has changed, or because the transit provider also happens to manage a last-mile broadband network.

The FCC is absolutely right that the market for interconnection is robust and competitive, meaning there is no reason to justify regulatory intervention. Its regulatory humility is both refreshing and promising for the future of Internet policy.

[Lyons is associate professor at Boston College Law School]