American Enterprise Institute

[Commentary] When a court struck down the Federal Communications Commission’s network neutrality rules, many consumer advocates argued that the result would be less online innovation. But a glance at international markets suggests that the FCC’s one-size-fits-all approach to broadband service may actually have left American consumers with fewer choices and denied them the potential benefits of more innovative broadband pricing models.

This all-or-nothing homogenization of the broadband product placed America increasingly at odds with the rest of the world. This is especially true with regard to mobile broadband. In various parts of the world, customers are offered a variety of alternatives to the unlimited Internet model, many of which are explored at length in the paper. These include: Social Media Plans; Facebook and Google “Free Zones”; and TELUS VoIP partnership.

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

[Commentary] “Over the Top” (OTT) technologies cannot exist without a network. While the providers of these services invest in servers and data centers for their own operations, their operating model does not include the cost of the underlying infrastructure investment, namely the expensive last mile infrastructure.

As OTTs grow their user base and revenue, it becomes increasingly clear that there’s a double standard in regulation. Why should antidiscrimination and data protections rules apply only to telecommunications and cable companies when an increasing part of communication s goes on in unregulated platforms? Indeed placing rules on some part of the value chain but not others is itself discriminatory.

Additionally it grows increasingly untenable for European governments to allow profitable OTTs not to pay tax, especially when the telco sector is laying off 10% of its workforce for lack of profitability. The same antidiscrimination and taxation rules should be applied across the board. Fortunately some of these discrepancies may be righted through the process to update America’s Communication Act, as the siloes created in 1934 to apply to different communications networks are now obsolete. Fair competition and a level playing field means that all competitors need to play by the same rules.

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

[Commentary] Following news of the proposed Comcast/Time Warner Cable merger and the Comcast/Netflix interconnection agreement, the tone of telecom and tech policy discussions has fallen precipitously.

Most commentary about these deals has been immediate and reflexively hostile -- based in emotion and fear rather than in facts. At its core, the response to these deals reflects popular anti-market, pro-regulatory, sentiment.

Perhaps surprisingly, I find these attitudes quite sympathetic -- the pro-regulatory view is intuitively appealing and at some level a reasonable one to hold. While I disagree with it, it is important to understand why this view is so durable. Market-oriented advocates generally view the market as respecting and promoting individual autonomy and dignity -- and they fear that regulation robs individuals of this dignity, denying them their basic freedoms of association and conscience.

Advocates for stronger regulation generally have the opposite perspective, distrusting markets and fearing that they treat individuals as commodities, robbing them of same dignity that market-oriented thinkers seek to protect. The pro-regulatory view sees regulation as a way preserve individuals’ dignity against a hostile market.

Which view is right? The answer, of course, is both -- for reasons that I believe are particularly important for free-market advocates to understand. If the free-market view is to be internally consistent, its advocates need not only to focus on why they are right, but also to respect why its detractors are not wrong. The winning appeal to the public is that of dignity, of the market’s power to protect and promote the interests of the individual -- of all individuals -- and of the counter-intuitive dangers that regulation poses to it.

[Hurwitz is an assistant professor at the University of Nebraska College of Law]

[Commentary] Nineteen-ninety eight called. It wants its shiny new copyright law back. I agree that in the age of the cloud-based Internet, at least one part of our copyright system has outlived its usefulness.

That’s the Digital Millennium Copyright Act of 1998’s notice and takedown system, which is codified in Section 512 of the Copyright Act. On March 13th, the House of Representatives is holding a hearing on Section 512. The US Patent and Trademark Office will also consider the topic in a forum on March 20th.

This reconsideration is long overdue. Like many things designed for the Internet in 1998, the Notice and Takedown system belongs to a bygone era. In 2014, the DMCA’s file-based quarantine and containment strategy is hopelessly outdated. The creative industries aren’t worried about particular files. The problem is the pervasive and persistent uploading of creative works. Infringing versions are created or duplicated frequently, and finding a particular point of origin of a particular file is usually worthless.

In short, the presence of infringing content on both legitimate and rogue websites has become a chronic condition, rather than an infectious outbreak. We are no longer dealing with an outbreak that can be quarantined -- for a chronic condition like infringement, that strategy is mostly irrelevant. However, we are stuck with the DMCA’s outdated file-based, quarantine and containment system.

[Schultz serves as a Senior Scholar and Co-Director of Academic Programs at George Mason University School of Law's Center for the Protection of Intellectual Property]

[Commentary] The chairman of Sprint is putting on a blitz to sway skeptical regulators to approve his acquisition of T-Mobile US.

There are good reasons to approve Sprint’s acquisition of T-Mobile, but an allegedly lousy US mobile broadband market is not one of them. Son, the CEO of Sofbank, seems caught in a Japanese mindset where government supervision and intervention is required to be sure everything turns out the way the state wants it to. He embarrasses himself making such an argument at the US Chamber of Commerce, the bastion of capitalism.

The truth is that the US mobile broadband system is outstripping the world. It’s one of the reasons that the six most visited websites in the world are US firms and that seven of the ten largest Internet companies are US-based and just one is Japanese. The robust and competitive mobile broadband market has ignited major capital spending -- according to CTIA, the Wireless Association, six times more per subscriber than global counterparts. Meanwhile, data prices per megabyte have dropped 93% in five years.

As for a price war, T-Mobile has also started one. Who says there is no competition? Claims that the US mobile market is “not good,” that we have “terrible connections” (as Son said in a press conference) and that the US has “one of the world’s highest mobile fees” (as he also said) -- those claims are myths, perpetrated by interested parties, like Son himself, that are grinding their own axes.

[Commentary] There are strong arguments in favor of allowing the third largest US wireless carrier, Sprint, to acquire the fourth, T-Mobile, but Sprint Chairman (and Softbank CEO) Masayoshi Son's assertion that current performance of the US mobile market is "terrible" isn't among them.

Perhaps he should visit more often -- or try using a different provider. The reality is that the US mobile broadband market is one of the most competitive, and best performing, in the world. More than 90 percent of US households have coverage from next generation LTE wireless networks, which are now being deployed by all the major US carriers, including Sprint and T-Mobile. That puts the US in a virtual tie with Japan and South Korea for the most widely available mobile broadband coverage in the world. The US is also tied with Japan for the highest LTE penetration, with 20 percent of subscribers using LTE connections. Only South Korea, at 46 percent, has more.

International pricing comparisons for mobile broadband services are notoriously difficult, thanks to variations in business models (some countries rely more heavily on handset subsidies than others) and usage (Americans use twice as much mobile data as Europeans). But according to the OECD, which surveys prices for a variety of different bundles and service, US prices are lower than those in Japan for nearly every basket, and lower on average by 35 percent.

[Eisenach is director of the American Enterprise Institute's Center for Internet, Telecommunications, and Technology Policy]

[March 11]

[Commentary] There are strong arguments in favor of allowing the third largest US wireless carrier, Sprint, to acquire the fourth, T-Mobile, but Sprint Chairman (and Softbank CEO) Masayoshi Son's assertion that current performance of the US mobile market is "terrible" isn't among them.

Perhaps he should visit more often -- or try using a different provider. The reality is that the US mobile broadband market is one of the most competitive, and best performing, in the world. More than 90 percent of US households have coverage from next generation LTE wireless networks, which are now being deployed by all the major US carriers, including Sprint and T-Mobile. That puts the US in a virtual tie with Japan and South Korea for the most widely available mobile broadband coverage in the world. The US is also tied with Japan for the highest LTE penetration, with 20 percent of subscribers using LTE connections. Only South Korea, at 46 percent, has more.

International pricing comparisons for mobile broadband services are notoriously difficult, thanks to variations in business models (some countries rely more heavily on handset subsidies than others) and usage (Americans use twice as much mobile data as Europeans). But according to the OECD, which surveys prices for a variety of different bundles and service, US prices are lower than those in Japan for nearly every basket, and lower on average by 35 percent.

[Eisenach is director of the American Enterprise Institute's Center for Internet, Telecommunications, and Technology Policy]

[March 11]

[Commentary] Since the decision of Verizon v. FCC in which the Federal Communications Commission “lost” some net neutrality rules, many (including myself) have claimed that Verizon was actually the loser.

But I’ve had time to reassess and I feel compelled to rephrase my claim; it is not Verizon but rather Google (and other of that ilk) who is the biggest loser. This is why: Verizon (and its ilk) is accustomed to being regulated, heavily -- the Verizon decision will not change that. Google is not used to being regulated -- the Verizon decision will change that. The result of the case was that the FCC can adopt policies that help get consumers Internet connections.

That’s not the most shocking part. If I were to ask 100 people what would encourage you to adopt a new Internet provider (maybe even your first provider) the vast majority would answer the same way you would -- a lower price would be the key. The court in Verizon saw things differently. Rather than price being “the”, or even “a”, fundamental driver of consumer demand, the direct connection between consumer price and consumer demand was ignored. Ultimately, the court bought the FCC’s tale that only content drives Internet adoption. What’s more, the court believed the FCC’s claim that content “innovators” (like WhatsApp, Facebook’s new $19 billion purchase) cannot fend for themselves but must be subsidized by Verizon (and others) -- which really means they will be subsidized by you through higher consumer prices. The increase of consumer prices will thus add to innovation, that will add to consumer adoption and (if this is to be believed) even higher consumer prices.

It is this thin theory that the court found sufficient to support the FCC’s move into Internet regulation.

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

[March 10]

[Commentary] Australia has spent $7.3 billion on its highly touted National Broadband Network, but made fiber available to only about 260,000 premises, which works out to over $28,000 each.

Nearly a decade ago, it had a chance to take a different path. In 2005, Australian phone company Telstra would cover 87 percent of households on its own nickel, with the government pitching in $2.6 billion to extend the build out into rural areas. The catch: Australian regulators would agree to follow the US model of exempting next generation networks from network unbundling requirements, thus creating incentives for intermodal competition from cable and wireless. The answer: No sale. Australian bureaucrats and politicians decided instead to heed the cries of access seekers and follow the European approach of “encouraging competition” through massive regulatory intervention.

[Commentary] The 1992 Cable Act, passed over the veto of President George H.W. Bush, contained two major provisions regarding the carriage of broadcast stations on cable and satellite systems.

First, the Act prohibits these systems from retransmitting a commercial broadcaster’s signal without the broadcaster’s explicit permission. This is known as “retransmission consent.”

However, not all broadcast channels are popular enough to warrant inclusion on a cable system. As more Americans ditched their antennas for cable, these stations found themselves reaching smaller and smaller audiences. To protect them, the Cable Act granted broadcasters the second provision, the so-called “must carry” rights. Generally, cable companies are required to carry a broadcaster’s signal upon request on cable systems within the broadcaster’s local market, without charge. If requested, the cable company must give a must-carry station the channel number corresponding to its over-the-air channel designation. These two provisions are designed to work together. However, in recent years, retransmission consent has become much more lucrative for major broadcasters. [Lyons is an assistant professor at Boston College Law School]