Washington, D.C., June 23, 2008—Today the Competitive Enterprise Institute mourns the loss of one of America’s greatest comedic talents, George Carlin. Jon Stewart, host of The Daily Show, remarked that Carlin was part of stand-up’s holy trinity, to be revered alongside Richard Pryor and Lenny Bruce.

This amount of adulation is absolutely deserved. Carlin made 23 comedy albums, won four Grammy awards, produced 14 HBO specials, and was nominated for five Emmys.

The Kennedy Center announced five days ago that Carlin was to be awarded the Mark Twain Prize for American Humor, making him not only one of the greatest of a generation, but of all time. He was truly one of America’s great talents.

Like Bruce and Pryor, Carlin’s controversial material invoked the ire of authorities who sought to make examples of the comedian for violating obscenity laws. In 1972, Carlin was arrested in Milwaukee for performing his “seven words” routine, which describes at length the words that are banned on television and radio.

In a fantastic case of legal irony, Carlin’s “seven words” routine was eventually broadcast over the air, resulting in a landmark Supreme Court case. In 1978, the Court ruled 5-4 in the case of FCC v. Pacifica Foundation—or the “Carlin case” as it now commonly called—that the Federal Communications Commission had the right to regulate the airwaves to prevent children from hearing profanities—striking a huge blow against free speech.

But the Court was sharply split on this decision. Justice Brennan’s railed against the majority in his decent proclaiming:

As surprising as it may be to individual Members of this Court, some parents may actually find Mr. Carlin’s unabashed attitude towards the seven “dirty words” healthy [ . . . ] Such parents may constitute a minority of the American public, but the absence of great numbers willing to exercise the right to raise their children in this fashion does not alter the right’s nature or its existence. Only the Court’s regrettable decision does that.

Both Justice Brennan and Carlin himself recognized that the bit was about more than filthy words; it was a reflection on language, obsessions with certain words, and our society’s sometimes unhealthy attitudes on free speech and censorship. Carlin taught us that “[There are] no bad words—bad thoughts, bad intentions…and words.”

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Today I released a press statement about the Federal Communications Commission’s hearing today on early termination fees for customers who cancel their mobile phone, cable or Internet service contracts early. Quickly after the statement was released, I got reasoned response from Ken Werner, a Senior Analyst at Insight Media.

As reasoned as Ken’s response was, however, it just doesn’t make much sense. Ken argues that, ” bundling of phone and wireless services does not enhance competition; it suppresses it.” He goes on to say that “Unbundling of phone and service sales would create a far more varied and vibrant set of offerings.”

But this simply isn’t true. By forcing unbundling—that means banning subsidized phones—we’re taking away consumer choice. Being able to buy a phone outright and then purchase a plan on a month-to-month but if Ken is right and “Google, the Android open platform, the Open Handset Alliance, and (maybe) even Verizon are moving in that direction,” then there is no reason to force a no-contract model on the wireless industry.

The way to true offer a “more varied and vibrant set of offerings” is to allow the market to continue to operate as it is. Because of exceptional hardware like the iPhone, Ken is likely right that Verizon and other carriers will open up to selling plans separately from phones, but consumers should still be able to buy basic phones that are subsidized through long-term phone plan commitments. Banning the latter option decreases choice, rather than expanding it as Ken claims.

It may take times for American business models to shift, but ultimately it will result in more choice than markets like Europe, where choice is limited by contract negotiation. To say that banning contract options will increase the variety of options is simply a contradiction in terms.

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Justice Oliver Wendell Holmes famously wrote that the best test of truth “is the power of the thought to get itself accepted in the competition of the market…” But today many are turning away from this theory, calling for greater government intervention in media ownership and the perceived lack of fairness in the press.

Senator Byron Dorgan (D-ND), a vocal critic of the free market for ideas, recently stated, “We really do literally have five or six major corporations in this country that determine for the most part what Americans see, hear and read every day.”

Unfortunately for the Senator, we really don’t. According to Ben Compaine, author of Who Owns the Media?, from 1985 to 1995 the top ten media companies went from raking in 38 percent of media revenue to 41 percent—not exactly the kind of mass consolidation the pundits would have you fear.

But revenues — the traditional means for measuring media market diversity—are not the best way to gauge the diversity of opinions in the American marketplace of ideas. With the advent of the Internet and the new national pastime, blogging, media revenue models are being completely redrawn.

Arianna Huffington’s aptly named Huffington Post claims to draw in 4.7 million unique users a month (Nielson estimates show about 1.5 million). Fortune has quoted an unnamed source estimating that Huffington can expect her team of less than 50 staffers to haul in $7.5 million this year.

Compare that to the other post—the Washington Post. The Washington Post Company reported that in 2007 the Post took in a comparatively whopping $496.2 million in advertising revenue. Yet its average daily circulation totaled 649,700, half of Nielson’s conservative estimate of Huffington’s reach.

Lean, web-based companies—which have much lower operating costs and use far fewer dead trees to disseminate their ideas—are left underrepresented in current media market measurement for no other reason than their relative efficiency. If we substituted eyeballs reached for dollars spent the already robust picture of the media market would show even less evidence for concern.

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Washington, D.C., June 12, 2008—Today the Federal Communications Commission will hear testimony on “early termination” fees for customers who cancel their mobile phone, cable or Internet service contracts early. Critics of telecom service providers will charge that long-term contracts with cancellation fees are unfair, but in reality, such contracts help more people afford a higher-quality range of products.

In the case of mobile phones, many companies provide customers with low-cost or even free phones in return for customers agreeing to a service contract, often of one to two years. That agreement puts better phones in the hands of customers at every price level, while bringing into the market many who could otherwise not afford a phone at all.

Since the provider is counting on the future revenue from the contract as part of the bargain, they include the early termination fee as insurance that they won’t subsidize the equipment costs of customers only to have them immediately jump to other carriers offering yet other deals.

Moreover, despite opposition to early termination fees in the mobile phone market, they’re nothing new. Aside from telecom services, consumers have long had the choice of signing long-term contracts that involve early cancellation charges. Renters typically sign 12-month apartment leases, and are usually required to pay a breakage fee if they back out of their lease early. Similar contract clauses are often found in fitness center memberships and automobile leases.

In all of those cases, we expect consumers to figure out for themselves what is and what is not part of the contract they’re signing. As long as any potential fees are disclosed at the time of the agreement, they’re simply part of the deal. In the case of a provider attempting to levy a fee that wasn’t part of the original agreement, that’s a case for small claims court, not the further federal regulation of an entire industry.

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Time Warner rolled out data metering in Beaumont, Texas on Thursday, a development that might inspire many in the pro net neutrality regulation camp to cry foul. However, bandwidth metering is probably a fairer and more transparent way to deal with the vast disparities in usage amongst broadband subscribers. Rather than claiming “unlimited” service and then proceeding to restrict access in a few dozen ways, metering gives unlimited use to a point, and then asks heavy users to pay their fair share.

I had an exchange with Robert X. Cringely over email recently. He was responding to a newsletter released by CEI about network neutrality regulation. Amongst his many helpful insights in our exchange he made a keen observation about the real issue in this debate, namely fraud:

The carrier sells me something he claims is unrestricted and unlimited within specific bandwidth guarantees then it turns out that’s not true. It’s unlimited and yet there is a limit. It is unrestricted and yet there are restrictions. Not even the bandwidth is what it is claimed to be. That’s not network management, it is fraud. It is not capitalism, it is fraud. The alternative isn’t socialism but simple contract compliance.

I agree wholeheartedly with Cringely on this issue. Claims of “unlimited” anything should be met with suspicion, especially unlimited bandwidth. However, instead of mandating that restrictions be lifted and some management methods be outlawed, why don’t we just outlaw these fraudulent claims?

Were we to make claims of “unlimited” bandwidth in advertising illegal, we’d face a far better future than one with mandated neutrality. In a fraud-free world, we can have networks advertised as metered, managed, or really unlimited (total free-for-alls). It’s likely that consumers will drift away from truly unlimited networks if BitTorrent and other bandwidth-hogging protocols continue to chew up networks.

In a mandated neutrality world, however, consumers will have fewer choices. Managed networks that provide reliable access to average consumers won’t be able to exist depending on the regulatory regime. If shaping, throttling, outright blocking, or any combination of management techniques are banned, it may be that the service that best fits your needs won’t be allowed to exist.

Cringley is right when he says what we need is contract compliance. We also need to ban the bait and switch routine of “unlimited” for managed and limited. Honesty and honoring contracts is at the heart of any free-market system. So, the alternative to today’s system shouldn’t be a government controlled one, but rather one that is actually much more capitalist.

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It’s worth noting that the Viacom lawsuit against YouTube makes little sense in light of the DMCA. For the few TechLiberation readers unfamiliar with the DMCA, that’s because the law grants YouTube, and other sites with unedited user-generated content “safe harbor.” So long as YouTube honors requests to take-down material that is claimed to be protected under copyright, it isn’t liable for that material being posted in the first place.

Google is following the DMCA and even going beyond its legal obligations to protect copyright.

In fact, YouTube suspended CEI’s account—wiping out all of our videos—based on a disputed 7 seconds of footage used in one of our videos. This was a very severe punishment and thankfully our account was reinstated after we were able to argue against the merits of the take-down. For those who do violate copyright, permanent suspension is a harsh punishment—so long as the account in questions isn’t a throw-away. Google is going well beyond the required take-down in this instance.

Yet, one of the complaints Viacom has about YouTube is that it hasn’t implemented software that would automatically weed out some copyrighted material produced by the entertainment industry—something that, again, would be above and beyond their legal obligations. YouTube planned to implement this software last year, but has failed to roll it out to the site. Viacom can complain about this delay, but not in the legal sense. Viacom simply has no grounds for a legal complaint unless they can somehow argue that the safe harbor provision of the DMCA is somehow invalid. A copyright lawyer might be able to suggest to us how such a thing could be done, if possible.

If Viacom means to show that the DMCA is in conflict with other copyright law and therefore the DMCA should be abandon or at least rewritten, it makes one wonder what a new system would look like. The current system of free posting and honoring take-downs seems to work well. It allows users to upload 10 hours of content per minute to YouTube—most of it seems to be kittens doing amusing things, not pre-lease episodes of 24—while still honoring copyright through take down. This has created a whole new medium for self-expression, expanding the media market in ways we are still trying to understand.

Were another balance to be struck, one that place the burden of policing content on YouTube, we would see this explosion of user-generated content fizzle out…or at least, like I said in my previous post, on YouTube.

Another balancing of the concerns of video sites and content owners—this one more heavily favoring content owners—would create significant barriers to video sharing and drive many from the market. Even so, user-generated video won’t be going away and infringement will continue in different forms. So again I’m forced to ask, “What is Viacom getting out of this?”

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As the Viacom’s lawsuit against YouTube and its parent company Google rolls forward, it’s worth asking if any outcome of the suit will change the situation for Viacom. In fact, were the impossible to happen, like a judge shutting down YouTube altogether, Viacom may be worse off.

CNET’s coverage of the piece sites an anonymous source from Viacom who notes that “The company basically is paying for an entire new department to watch YouTube.”

But imagine how difficult it will be to police amateur video without YouTube or other video sharing sites around—it’d be impossible. That’s because even if huge repositories of video are made illegal, web-based video won’t just disappear, it’ll move.

Our favorite cute kitten videos could end up on the same foreign servers that are serving up online poker and other forms of gambling to Americans each day, despite that activity being made illegal by the last Congress. (That was a Repubican Congress, the guys who stay out of your lives.) Just like Sierra Leone lent its flag to pirate broadcasters in the 1960s, it may rent its servers to pirate video broadcasters of the web variety.

On the other hand, videos could move to smaller websites domestically, even individual blogs and web pages. But the location doesn’t really matter, either scenario would be bad for content creators. Balkanizing videos and making them harder to find makes them harder to police. Similarly, moving video from larger sites run by legitimate, domestic businesses manes take-down notices might not be honored.

It’s possible that YouTube could function similarly as an index, just as Google does for web content. But the Torrent Spy case suggests that even “contributory” copyright infringement—making the copyright-infringing material easier to find—is just as illegal as hosting it in the first place. This means that even video search could be off the table if the principles of the DMCA aren’t upheld.

Ultimately, I just don’t see what Viacom thinks it’s getting out of this lawsuit, other than the obvious benefit that comes with $1 billion in cold hard cash. To think this move will suddenly make the realities of web-based video go away is foolish at best. It might be hard for some to accept, but we just can’t make it 2004 again.

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I’m looking for examples of effective tech lobbyists. We’ve seen a lot of people moving from the Valley to the Hill lately. Microsoft has gone from “Jack and His Jeep ” to a giant lobbying shop. Google learned from Microsoft’s mistakes and now has a couple floors down on New York Ave. These guys are making an impact in Washington, but what are the best Baptist and Bootleggers scenarios?

Bruce Yandle was the first to put this name to the common two-man play in Washington. It involves a moral authority and an underwriter with deep pockets to fund a lobbying effort. He used Baptists and bootleggers as the most clear example of this. Baptists called for temperance and prohibition because they genuinely believed that alcohol was a great evil. This provided moral authority. The bootleggers didn’t care much about morals, but they knew they’d get rich if legitimate breweries and distilleries were made illegal.

The same thing seems to be going on now. “Lobbying 2.0″ features moral crusaders fighting for net neutrality, the unlocking of cell phones, the unbundling of any service that dare be bundled and other such tech-morality causes. Meanwhile, the real beneficiaries of any regulation to come out of this are big tech companies trying to gain an advantage on one another through regulation rather than through competition and innovation.

So, by “best” stories I mean classic examples of businesses lobbying in favor of regulation as opposed to defending themselves against regulation. Who’s most guilty of being a bootlegger? What individual crusader or group is playing the role of the Baptists?

Your comments are appreciated. Also, be sure to check out this Onion discussion on lobbyists.

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Washington, D.C., May 6, 2008—Today the House Subcommittee on Telecommunications and Internet will hold a hearing on the Internet Freedom Preservation Act of 2008 (H.R. 5353), introduced by Rep. Ed Markey (D-MA). This legislation would impose network neutrality regulation on all Internet Service Providers (ISPs). Proponents of the legislation believe that neutrality regulation is necessary in order to prevent ISPs from blocking websites and other Internet-based services—becoming de facto censorship boards for new media. However, in attempting to prevent this unlikely nightmare scenario, advocates of this regulation risk denying ISPs the tools needed to manage the traffic of tomorrow’s Internet.

Supporters of neutrality regulation (like Ben Scott of the Washington-based advocacy group Free Press) claim that without new laws, Internet providers will act as “gatekeepers,” dictating what content consumers may access. Yet these claims make little sense when we consider how little leverage ISPs really have in today’s competitive landscape.

New, broadband-grade wireless offerings like Sprint’s Xohm Wi-Max service and multiple LTE-based networks are bringing new choices to nationwide markets. Franchise reform efforts in several states have allowed more wired connections to reach consumers as well. With more ISP choices than ever before, and numerous bold projects on the horizon, whatever leverage incumbents have now is quickly dwindling.

Neutrality regulation’s supporters underestimate how well the American public understands Internet technology and values the freedom to view what they want online. Bloggers—the citizen journalists of cyberspace—are poised to react to any discriminatory behavior from ISPs. Content portals like YouTube and iTunes also have an overwhelming incentive to reject threats from ISPs to pay-up or suffer degraded service quality.

The increased amount of competition in broadband has shifted power toward content providers and consumers—and ISPs are keenly aware of this. It would be economic suicide for any ISP to engage in tactics of extortion that neutrality-regulation advocates fear. Any such action would incite media uproar and customers would flee in droves to the expanding field of competing broadband options. To say that content discrimination is inevitable, or even likely, betrays how out of touch the pro-regulation side of this debate is with the reality of today’s Internet economy.

But this bill does more than prohibit bad actions that will never happen. It also prevents ISPs from employing sensible network management that is vital for addressing the growing demands of Internet users.

Some ISPs have identified the benefits of curbing bandwidth-intensive applications such as peer-to-peer (P2P) file sharing programs like BitTorrent. In comments filed last month, Bell Canada argued that such curbing is in subscribers’ interests, explaining that 95% of their customers suffer on account of the file sharing of the other 5% of users.

Recent reports lend further credence to claims that P2P traffic is a major culprit behind network congestion. According to AT&T, in three years time, 20 typical households will consume as much bandwidth as the entire Internet does today. Between price increases, bandwidth caps, and protocol discrimination, it is far from clear which course of action to deal with this flood of information will be best for average users. But by abolishing network management techniques that target specific applications, ISPs will have fewer options to deal with overloads.

Freedom to innovate and explore new solutions has been crucial to the Internet’s success—handing over control of private networks to government threatens this freedom. Nearly every regulatory regime suffers from “mission creep,” the tendency of politicians to impose ever-greater restraints and regulations. Deterring unlikely, hypothetical discrimination is hardly a justification for turning over a crucial vehicle of free expression to political control.

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Last week a scad of stories from Reuters to News.com covered the growing push for a “Do Not Track” registry similar to the “Do Not Call” list that serves to protect US households from mid-dinner sales calls. While I understand the concerns expressed by folks like Marc Rotenberg of EPIC and Jeff Chester of the Center for Digital Democracy, who were both cited by Anne Broache in the News.com piece from last week, I think that asking the government to hold a master list of IPs and consumer names is a bad idea, or at least one that won’t do much to really protect consumers.

First, tracking people online is a bit different from calling folks in their homes. Telemarketing, while highly effective in terms of sales produced per dollar of marketing money spent, is still orders of magnitude more expensive than spamming or collecting data online without consent. Both of these activities are illegal today, but they still occur. They occur so much that spam-filtering technology contains some of the most advanced natural language recognition and parsing software created. Cory Doctorow has mused that the first artificial intelligences will emerge from Spam and anti-Spam computer arrays.

So this list wouldn’t be the magic wish that privacy advocates and legislators might dream it to be. It would cause law-abiding companies like Google, AOL, and Microsoft to stop collecting data, but so could privately developed and enforced systems.

Anne Broache notes that cookies are a bad solution for stopping data tracking as many anti-spy-ware programs delete cookies, since cookies are often used for the purpose of data tracking. But why not just create a new variety of cookie? Call it a cake, a brownie, a cupcake–maybe even a muffin. Whatever you call it, just specify that a standards-compliant browser must contain a place for something similar to a cookie to be placed that will opt consumers out of tracking schemes. This isn’t a technological problem at all, it’s just a matter of industry deciding to follow this course.

My other concern is something that fellow TLFer and former CEI staffer James Gattuso pointed out in a 2003 piece in regard to the “Do Not Call” list, namely that the government will likely exempt itself from the rules. In our post-9/11 world (whatever that means) we should expect government–the supposed protector of our rights–to make these sorts of moves. But you don’t have to trust my assertion, look no farther than Declan McCullagh’s Wednesday post at New.com. The FBI is pushing hard for Internet companies to retain data so that they can later sift through it. It’s doubtful that the government will place itself on “Do Not Track” list if they believe they can gain useful intelligence by tracking people online.

So, by and large, this proposed registry seems unnecessary and ineffective. Industry can easily work out a way to allow consumers to opt-out and the two groups I’m most afraid of–the Russian Mob and the U.S. Government–won’t pay heed to any registry anyway.

Instead of wringing our hands over advertisers tracking what duvet covers we buy, can we turn our attention to what our freewheelin’ executive branch is trying to pull-over on us? Seems to me they’re cooking up exemptions to more than just this registry–a few of my favorite Constitutional Amendments spring to mind.

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