Tales of the Sausage Factory

Using The Cost of Exclusion to Measure The Dominance of Digital Platforms.

This is the third blog post in a series on regulating digital platforms. A version of this first appeared on the blog of my employer, Public Knowledge.

 

In my last blog post, I explained my working definition for what constitutes a “digital platform.” Today, I focus on another concept that gets thrown around a lot: “dominant.” While many regulations promoting consumer protection and competition apply throughout a sector, some economic regulations apply to “dominant” firms or firms with “market power.” Behavior that is harmless, or potentially even positive when done by smaller companies or in a more competitive marketplace, can be anticompetitive or harmful to consumers when done by dominant firms — regardless of the firm’s actual intent.

For reasons discussed in my previous blog posts, defining what constitutes “dominant” (or even identifying a single market in which to make such a determination), presents many challenges using the traditional tools of analysis favored by antitrust enforcers and regulators. I therefore propose that we use the cost of exclusion (“COE,” because nothing in policy is taken seriously unless it has its own acronym) as the means of determining when we need to apply regulation to “dominant” firms. That is to say, the greater the cost to individuals and firms (whether as consumers or producers or any of the other roles they may play simultaneously on digital platforms), the greater the need for regulations to protect platform users from harm. If a firm is “too big to lose access to,” then we should treat that firm as dominant.

 

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Tales of the Sausage Factory

So What The Heck *IS* A Digital Platform?

This is the second blog in a series on regulating digital platforms. A (less snaky) version first appeared on the blog of my employer, Public Knowledge.


In Part I, I explored the challenges of regulating digital platforms to promote competition, protect consumers, and encourage news production and civic engagement. Today, I plan to dive into the first set of challenges. First, I define what I mean when I talk about digital platforms. I will argue that platforms that (a) provide a two-sided or multi-sided market; (b) are accessed via the internet; and (c) have at least one side that is marketed as a “mass market” service, share a set of characteristics and raise a similar set of concerns so that we should consider them as a distinct set of businesses.


Let me stress at the outset something that I will repeat multiple times. First and foremost, describing the common attributes of platforms does not make value judgments about whether these attributes are bad or good. Indeed, many of the attributes I describe have enormous positive effects for consumers, competition, and civic discourse. At the same time, however, the implications of these specific attributes give rise to a number of unique concerns that we read about every day, ranging from companies using targeted advertising to stalk people to extremists using social media to radicalize and recruit.


Equally important, nothing in sector-specific regulation replaces antitrust or consumer protection laws of general applicability. Nor does it suggest that digital services that do not meet the definition of a “digital platform” do not need oversight. Rather, both the definitions I propose below and the sector-specific recommendations that flow from them (discussed in future blog posts) complement each other. The fact that many platform attributes complicate existing antitrust analysis does not mean that antitrust law has now lost its utility as an important tool for protecting competition. But even embracing a broader view of antitrust law and its goals, there remains an important role for sector-specific regulation to address concerns that arise from the unique nature of digital platforms (as unique from other sectors of the economy).


Finally, before diving in, I must caveat this with the recognition that this is a field very much in flux. I have identified what I think are the important elements which, taken together, make digital platforms different from other lines of business or even other “internet companies.” Nor is this the only potentially useful distinction. In the past, for example, I have argued that we should also distinguish between “public utility” concerns (services so important the government has an affirmative responsibility to ensure affordable access for everyone) and services that, while important, do not rise to this level. Deputy Director of Georgetown Law’s Center on Privacy and Technology Laura Moy, in testimony before the House Energy and Commerce Committee, provides an excellent distinction between “essential services” and “unavoidable services,” i.e., services so ubiquitous they are virtually impossible to avoid in one form or another. Others have different definitions of platforms, and/or different distinctions among them.


The definition I propose here is therefore not intended as a final conclusion, but an initial working definition to debate and refine over time. 

 

With all that out of the way, lets move on to the good stuff . . .



What I Mean by “Digital Platform.”


When considering whether we need regulation, let alone what that regulation is, it helps to know what the heck we are talking about and what we are trying to accomplish. Or, as I like to say, the most important question in policy is “why do we care?” Are we talking about something that should apply to all businesses? For example, we all agree that no business should engage in deceptive advertising — even if we might disagree on what constitutes “deceptive.” For this kind of behavior, general laws of applicability suffice. But when a line of business or a particular set of products raise unique concerns by their very nature, then we want sector-specific regulation.

 

We Pause Briefly For A Hopefully Useful Analogy But Please God Don’t Get All Caught Up In The Details Because I’m Just Trying To Illustrate A Basic General Point About How The Above Statement Works.


For example, human beings have relied on various means of transportation since we domesticated the horse. But the invention of the automobile and its rapid adoption in the early 20th century required legislators to address entirely new problems created by cars. Some of these, like traffic control, were older problems magnified by the enormous speed of cars, which increased both the likelihood and potential consequences of collisions. Other regulations, such as regulations governing noise and parking (and later, fuel standards and emissions), were entirely new problems created by the nature of the technology. (If you are curious about the entirely different problems of managing horse poop, horse parking, and other fun aspects of urban horse traffic and how it differed from car traffic, see here.) Still other regulations, like “lemon laws,” were made necessary because of the economic and social patterns that arose organically with the adoption of the automobile.


Once it became clear that we needed specific regulations for cars, we found we needed to distinguish cars from other forms of transportation, and then further distinguish motorized transport based on things like size and purpose. Motorcycles, SUVs, compact sedans, and trucks are all motorized vehicles that share certain common characteristics, but they are also different from each other. In some ways they are regulated the same, but in other ways they are regulated quite differently. Sometimes the distinction is rational, sometimes arbitrary. But in general we can distinguish between a car and a horse-drawn buggy, or a car and an airplane, or a car and a train, even if certain edge cases (such as between a passenger car and an SUV) are somewhat more arbitrary.

 

Now Back To Platforms. Here’s The Juicy Definition Stuff.


Likewise, there is increasing consensus that a growing class of online companies operates in ways that neither network economics or standard industrial organization fully explain. Most of the attention focuses on the largest companies — notably Google, Facebook, and Amazon. But at the same time, we have increasingly recognized a broader group of “edge providers” or “platforms.” But what common thread ties together companies as diverse as Yelp, Twitter, and Vimeo? And what, if anything, distinguishes them from companies like Cloudflare and Comcast?


As my colleague John Bergmayer noted in his recent white paper, “Even Under Kind Masters,” the term “platform” is rather ambiguous. Bergmayer summarized various ways in which people have used “platform” as a forum for speech, as an operating system for development, or as a set of components around which users organize their activities.


Looking at commonalities of these uses, as well as what economic or other factors make sense to construct a set of things that defines “platforms” and excludes “non-platforms,” I propose the following definition. For purposes of this discussion, a digital platform:

1. Operates as a two-sided or multi-sided market;
2. the service is accessed via the internet; and,
3. at least one component of the platform is “open” and a mass market service.

These three factors combine to produce entities operating under broadly similar economic incentives and which raise a set of issues/concerns that are common to all such platforms (even if the services delivered are radically different) — and which are not wholly shared by other services. Put another way, Google and Amazon have much more in common with each other than they do with Netflix — despite the fact that all three stream video and that Google and Amazon have radically different businesses and business models from each other.

 

(No, Netflix is not a “digital platform,” it is a fancified cable programmer with more in common in terms of incentives with HBO than with Amazon or Youtube. Mind . . . Blown!)


Why Do These Features Matter More than Others?


Potentially low marginal cost, network effects (particularly the cost of exclusion), and the ability to scale rapidly to absorb millions of new customers make these platforms distinct from other types of businesses. The digital nature of the platform allows it to rapidly deploy new features, and integrate data across multiple apparently unrelated business lines or sources (especially if these are also digital). These factors allow platforms to avoid any of the traditional costs associated with rapid expansion, both vertically and horizontally. These features distinguish platforms from other traditional two-sided markets, and allow platforms to combine elements of traditional communications networks and mass media, as well as traditional retail market networks.

As Jean Tirole, who won the Nobel Prize for his work on two-sided markets, observed here, today’s dominant platforms began as niche segment vendors. Amazon, for example, began exclusively as an online bookstore. The features described above allowed it to expand relatively rapidly first from books, to other products, then to streaming, and finally to manufacturing of its own generic brands. Once a sufficiently large customer base began using Amazon for one purpose, it was much easier for Amazon to expand than it would have been for a traditional book chain such as Barnes & Noble or Borders. Its established distribution network (both the online access and the physical process of moving goods from one place to another) could be readily adapted for other goods, without any need to alter existing physical stores or dealing with what products to display in scarce shelf space. The relationship, algorithms for recommending related items, and the convenience of “one click” shopping were all readily and seamlessly expandable in a way that would be impossible for comparable brick-and-mortar retailers.

It is important to note that, as with any of the characteristics that I describe, other successful (or even dominant) businesses will replicate some of the features described. Walmart, for example, likewise expanded its retail services to include pharmaceuticals, groceries, and even pre-paid cell phone service. It is the combination of being online, multi-sided, and open on at least one side (so as to capture a giant audience) that confer unique advantages, shape incentives, and raise concerns of enduring (rather than merely transitory) market power. In particular, the fact that platform users potentially play multiple roles simultaneously distinguishes digital platforms from other two-sided platforms or internet businesses that have clear distinctions between providers and consumers.



A Multi-Role User in a Multi-Sided Market.


Unlike in traditional two-sided markets, a single user may simultaneously engage in multiple roles on the platform. A subscriber to YouTube is potentially a producer of content and a consumer of content. A customer on Amazon may simultaneously be a reviewer, a buyer, and a publisher or retailer. This has several effects on the ability of the platform to extract value, avoid traditional costs, and maximize bargaining power over all platform users regardless of their comparative value or what role they play in the transaction.


First, this “multi-sided market” maximizes the “long tail” effect, which is where the true value of the platform lies. This is distinct from the more traditional “network effect,” which holds that an increase in the number of users of the network increases the value of the network to all users (although platforms also experience network effects). It is also different from economies of scale, which allow businesses to reduce marginal cost per unit due to increased scale (again, sufficiently large platforms may enjoy these as well). Rather, as popularized by Chris Anderson in his book of the same name, the idea of the “long tail” is that the value of a platform is derived from aggregating large numbers of niche products (the “tail”) rather than focusing on a few very successful products (the “hits”).


Consider, for example, a traditional cable package or an online streaming service such as Netflix. It is easy to divide the platform between subscribers/viewers and programmers. The value to the user derives chiefly from the availability of a suite of programming. If a major programmer withdraws its programming, the video provider may suffer as customers migrate to rival distributors of the programming. A package that lacks “must-have” programming (such as local live sports) will prove less able to attract subscribers than rivals who have the “must-have” programming. (Yeah, yeah. Judge Leon doesn’t believe it. I know.)


By contrast, Amazon does not particularly worry about any specific streaming content because its streaming service is merely part of its overall bundle. Streaming is simply one more product, like batteries or self-published novels, that attracts some portion of consumers. It is part of the overall “long tail” of goods and services Amazon offers. Similarly, there is no single must have content that attracts some significant number of YouTube’s customers. Even the most popular YouTube channel accounts for a tiny fraction of total YouTube views. Rather, it is the access to the platform, with the ability to upload or download literally billions of clips, that makes YouTube an attractive service (combined, of course, with it being free to end users). As a result, no single programmer, or even group of programmers, can effectively negotiate with YouTube. (Youtube’s recent forays into the traditional distribution business don’t change this any more than Amazon buying Wholefoods made Amazon a bricks-and-mortar business.)


Similarly, as news organizations keep discovering, any website can withdraw its content from Google’s search index. Doing so, however, will have little impact on the value of Google to users and will therefore have zero impact on Google’s revenue — which derives from targeted ads. It would require some huge portion of the internet to “go dark” to Google Search before it significantly impacted the value of Google Search to customers — and therefore to advertisers. This is simply not possible.



It is noteworthy that even the comparatively simple model of video distributor and subscriber becomes potentially more complicated when the distributor plays the additional role of content producer by generating its own content. This can create vertical integration concerns if the distribution platform is dominant (and therefore its ability to favor affiliated content threatens competition among video producers) or if the distributor controls “must-have” programming (and can therefore inhibit the ability of rival distributors to compete). We should therefore not be surprised that a platform that enables multiple users to play multiple roles simultaneously creates an entirely different set of incentives, potential benefits, and potential concerns — especially when coupled with the additional attributes described above and below.



Why This Potentially Creates Enduring Market Power in Ways That Challenge Modern Antitrust Analysis.


At this point, it is worthwhile to point out (and repeat) several things. First, this feature of platforms is not intrinsically a bad thing. To the contrary, platforms empower consumers and producers to play multiple roles simultaneously, which creates many important benefits. Services like Patreon or Twitter make it easy for anyone to disintermediate traditional gatekeepers and leverage that platform to find other interested parties and engage in whatever joint, community related activities the platform supports. For example, “Black Twitter” describes how traditionally fragmented and marginalized African American activists and communities can bypass traditional bottlenecks to disseminate news, organize, and otherwise create a distinct cultural identity using the open Twitter platform. Teachers organizing for higher pay in West Virginia and elsewhere credit Facebook for providing them with the tools to communicate and organize. Millions of people are able to use platforms such as eBay or Etsy to supplement their income or create entirely new businesses without the need to negotiate individually with the platforms. The ability to create content and distribute it through platforms such as YouTube, Amazon, or Facebook allows individuals and organizations freedom to make their work accessible broadly whether or not they can prove to a traditional publisher it will be a commercial success.


But the ability of platforms to potentially put all this together creates a combination of user “stickiness” and a flexibility of revenue stream that, once enormous market share is achieved, is likely to become enduring. It creates a common set of incentives among platforms to engage in a strategy of taking long-term losses and cross-subsidizing services in order to defeat new entrants and maintain sufficient dominance across sufficient markets to hold monopsony power across a wide swath of related industries. It drives innovative startups to seek acquisition by dominant platforms rather than invest in competing services, and it drives dominant platforms to acquire potential competitors not merely because the acquisition of the potential competitor increases this depth of services, but because it neutralizes a potential rival.


This challenges existing antitrust jurisprudence in several ways. For example, ease of entry and low switching cost — features associated with platforms because of their digital nature and accessibility online — are usually mitigating factors against a finding of market power when considering potential mergers such as the acquisition of Instagram and WhatsApp by Facebook. This is particularly true where the service does not directly compete in a traditional sense (e.g., Instagram is designed for distribution of images, whereas Facebook at the time was primarily a “microblogging” site). But in the realm of digital platforms, this may eliminate a potential competitor. As described above, the online and digital nature of the service would have potentially allowed Instagram to expand quickly into services provided by Facebook. The more significant challenge than entering a new “market” is building a sufficiently large audience.


By focusing on acquisition of platforms that are experiencing high growth, even where they do not directly compete in a traditional sense, dominant platforms can dramatically delay, or even prevent, the emergence of future competitors. The digital and online nature of the dominant platform and the acquired platform reduce the cost of integration and increase the depth of service offered by the dominant platform, making it more difficult for firms to compete. Additionally, if the business model of the online platform depends on creating a detailed user profile for targeting ads or products (as pretty much all the dominant platforms do to some degree), the ease of integration noted above allows the acquisition to enhance the existing dominance of the platform by providing another source of personal user information.


Finally, the multiple roles/depth of service of platforms also stymies traditional antitrust analysis because there is no single, easily definable market. Facebook is not merely a “social network” competing with LinkedIn, Twitter, Reddit, and Livejournal. Facebook is a unique combination of services that includes a massive network of businesses, political speakers, and other social networks like WhatsApp and Instagram. This goes beyond traditional product and market differentiation, because the value to users on both sides of the platform is in part derived by the combination of services, not competition among services.


Again, we can find some analogies in other markets. For example, cable operators argued for decades that individual broadcast television stations, movies, and home video recordings were all competitors for “eyeballs” and thus part of the same market. Regulators rejected this argument because while each of these replicated some piece of what a cable subscription provided, the unique combination of multiple sources of programming distinguished cable (and later other “multichannel video programming distributors”) from these other providers of video.


Similarly, the attempt to define a new “attention economy” and concomitant “attention marketplace” falls short of the way in which this multifaceted combination creates value to the platform (and, to be fair, to users as well) and plays havoc with traditional market definitions. Because switching costs are extremely low, and because applications through which these services are accessed are generally non-rivalrous, the platform can continue quite nicely as users cycle from low engagement to high engagement. Certainly the incentive of the platform is to maximize engagement. But market power by dominant platforms proves more enduring than predicted because, in contrast to other markets where consumers buy one product or another, I can happily continue to consume several competing comments with virtually no effort. The ability of these platforms to form joint promotional partnerships further enhances the endurance of market power once established.

 

Another Example For Illustration Purposes. I Know It’s Anecdotal and Don’t Get Too Hung Up On It.


To illustrate using a personal example. I had no interest in Twitch.tv until I saw an advertisement on YouTube that TwitchPresents was running a marathon of all classic Doctor Who episodes. I accessed Twitch through “Twitch Prime,” a service of Amazon Prime which allows an Amazon Prime subscriber to subscribe to one Twitch Channel as a premium viewer. I usually keep open my YouTube browser viewer while watching Doctor Who on Twitch because during the commercials at the end of each Doctor Who episode, I bounce back to YouTube to watch something else. Meanwhile, since I am accessing Twitch via Prime, I assume that Prime derives some value and gathers some information from my Twitch activities. Meanwhile, because Twitch has an entirely different business model, its revenue stream is completely unimpacted by my shifting attention from one platform to another. (I, by the way, am a pathetic fuddy-duddy when it comes to this sort of multitasking entertainment. I have only to glance over at my son playing Twitch in the background while playing multiple games and chats across three different devices.)


Contrast this with my traditional voice/broadband/video subscription package. I used to subscribe to Verizon FIOS. I switched to RCN. FIOS lost me as a customer, while RCN gained me as a customer. Zero-sum game. By contrast, although Twitch, Prime, and Youtube are theoretical competitors in the video streaming market using classic antitrust analysis, none of them have lost me as a customer. Even my shifting attention may not impact significantly my value to the service as a subscriber.


Perfect Information Asymmetry.


Finally, the combination of features puts the platform in a unique position with regard to platform users and control of information. The platform enjoys essentially perfect information with regard to the activities of users on the platform. Importantly, this includes not simply information about consumers, but also information about content producers, advertisers, or anyone else using the platform for any purpose. By contrast, the user will only have access to the information that the platform enables the user to collect. Additionally, the platform can make different levels of information available to different users on an individualized basis – although sophisticated users may also find ways to reverse engineer data and exploit the platform in potentially harmful or even dangerous ways.


This has implications well beyond privacy and surveillance (although these are obviously enormous concerns). This blog post is already too long to even scratch the surface on the literature of information asymmetry and its effects on competition and consumer protection. But it is worth pointing out some of the concerns raised recently with regard to platforms. For example, Amazon reportedly uses the information about sales by third-party vendors through its platform as market research to develop its own line of competing products. Google has been accused of manipulating search results to favor its own products. Facebook has admitted to conducting secret experiments on its users to influence their moods. Advocates have raised concerns that the ability to understand users and their behavior to an unprecedented degree facilitates “design for addiction.”


In particular, it is the opacity of the algorithm that platforms use to make recommendations and order the presentation of products, news, or services that can create concerns in ways even the platforms cannot anticipate. The ability of the platforms to analyze user behavior drives the recommendations of Google’s search algorithms, Facebook’s news feeds, and Amazon’s product recommendations. But a user — whether a consumer or a content producer — cannot easily determine what factors drive the recommendations. Even advertisers who specify particular attributes they desire for targeted placement have tremendous difficulty confirming that these advertisements are being placed appropriately beyond the tools provided by the platform.


To repeat a now familiar caveat, this ability of the platform to potentially control the information flow is not, in itself, a good or bad thing. It is a feature of the digital nature of the platform, combined with the integration of the component parts via the internet. Consumers enjoy enormous benefits from recommendations tailored to their needs or tastes. Search tools and tools for organizing the proliferating deluge of information depend on absorbing and processing vast amounts of information, and the ability of the platform to limit dissemination of that information plays an important role in protecting user privacy.


Nevertheless, the fact that near-perfect control of information is both a natural artifact of the platform and in some cases a necessary (or socially desirable) feature in providing the service does not eliminate concerns. To the contrary, it highlights the need for targeted rules and protections that carefully analyze both the dangers and the benefits and tries to arrive at a reasonable trade-off between enabling the positive and mitigating the negative.


Sector-Specific Policy Should Direct Itself to Those Attributes That Make the Sector Different. What About These Differences Raise Concerns?


Again, the point of the definition is not simply to identify problems. It is to understand what (if anything) makes digital platforms distinct as actors as compared to other business sectors. This combination of enabling producers and consumers to simultaneously play multiple roles, the openness of the platform to attract a critical mass of participants that produce and consume the content, and the advantages of online distribution create these distinctions.


If this were simply a matter of antitrust and traditional concerns about dominance, we could resolve these problems simply by enforcing the antitrust law. But one of the advantages of sector-specific regulation is that we can use policy not merely to protect existing competition, but to promote competition. By understanding what distinguishes digital platforms from other sectors of commerce, we can carefully target any needed regulation to supplement antitrust enforcement to achieve this goal.


Similarly, we should target consumer protection concerns to supplement existing state and federal consumer protection laws of general applicability based on the unique features of digital platforms and the incentives they create both for the platforms and for actors using the platform. Two examples illustrate this principle. We have specific laws targeting robocalls enforced by both the Federal Communications Commission and the Federal Trade Commission. This reflects the fact that while robocalling is a generically bad practice by any business, it is the use of the telephone and telephone technology that enables robocalls. Similarly, although privacy is a broad concern, we have specific laws governing privacy in the health profession as a consequence of the unique sensitivity of medical records and the need to ensure that patients can trust that their medical records will not be exposed without their express consent.


Who Should Enforce Sector-Specific Regulation of Digital Platforms?


As is often the case, people in Washington often start out with an answer and then work backward rather than starting with the question. Even before defining what digital platforms are, people have been eager to argue that they properly belong under the purview of the FTC or the FCC. For purposes of our ongoing discussion, let’s set that question aside until we determine what actual policy we need. Determining what regulation we need to protect the public interest will instruct us on which existing agency is best suited to enforce these policies. We may divide enforcement among several agencies. We may even determine we need a new specialized agency to address the unique concerns raised by digital platforms.


In other words, we should let regulatory form follow function rather than force function to follow form. We should start by considering what policies we need to protect consumers, promote free expression and civic discourse, and encourage competition. Once we have some idea of what we need to do, we can draft the job description for who we want to do it.


CONCLUSION

We can say with confidence that digital platforms are a distinct set of businesses, with their own set of capabilities and incentives that set them apart from other online businesses. This does not make laws of general applicability such as antitrust inapposite. Nor are these distinct capabilities and incentives intrinsically bad or good. Identifying the nature of digital platforms and understanding the implications of this increasingly important sector of the economy is critical to understanding both how to update antitrust and other generally applicable laws, and when sector-specific regulation is required to promote the public interest.


In particular, this analysis should make clear that regulation based on surface similarities is not merely unlikely to be helpful, but may be downright harmful. Facebook is not the same as Apple, which is not the same as Microsoft, which is not the same as AT&T. To treat all of these as “platforms” makes as much sense as insisting that we treat motorcycles, 18-wheeler trucks, trains, and bicycles the same because they are all “vehicles.” Even where digital platforms share some attributes with other lines of business, understanding the differences (and whether they matter in the particular instance) is essential to good policy.

It is a common cliché that “if it looks like a duck and quacks like a duck, it’s a duck.” Unless, of course, it is actually a clever hunting decoy. For ducks, distinguishing between these two possibilities is rather essential. Similarly, for the formulation of good policy — whether through updating antitrust law or applying sector-specific regulation — understanding what makes digital platforms different is critical to protecting and promoting the public interest.

 

In my next installment, I will discuss what actually makes a digital firm “dominant.”

 

Stay tuned . . .

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Tales of the Sausage Factory

Why Platform Regulation Is Both Necessary and Hard.

This is the first blog in a series on regulating digital platforms.

 

As digital platforms have become increasingly important in our everyday lives, we’ve recognized that the need for some sort of regulatory oversight increases. In the past, we’ve talked about this in the context of privacy and what general sorts of due process rights dominant platforms owe their customers. Today, we make it clear that we have reached the point where we need sector-specific regulation focused on online digital platforms, not just application of existing antitrust or existing consumer protection laws. When platforms have become so central to our lives that a change in algorithm can dramatically crash third-party businesses, when social media plays such an important role in our lives that entire businesses exist to pump up your follower numbers, and when a multi-billion dollar industry exists for the sole purpose of helping businesses game search engine rankings, lawmakers need to stop talking hopefully about self-regulation and start putting in place enforceable rights to protect the public interest.

 

That said, we need to recognize at the outset that a lot of things make it rather challenging to  figure out what kind of regulation actually makes sense in this space. Although Ecclesiastes assures us “there is nothing new under the sun,” digital platforms combine issues we’ve dealt with in electronic media (and elsewhere) in novel ways that make applying traditional solutions tricky. Before diving into the solution, therefore, we need to (a) define the problem, and (b) decide what kind of outcome we want to see.

 

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So What The Heck Does 5G Actually Do? And Is It Worth What The Carriers Are Demanding?

It’s become increasingly impossible to talk about spectrum policy without getting into the fight over whether 5G is a miracle technology that will end poverty, war and disease or an evil marketing scam by wireless carriers to extort concessions in exchange for magic beans. Mind you, most people never talk about spectrum policy at all — so they are spared this problem in the first place. But with T-Mobile and Sprint now invoking 5G as a central reason to let them merge, it’s important for people to understand precisely what 5G actually doesUnfortunately, when you ask most people in Policyland what 5G actually does and how it works, the discussion looks a lot like the discussion in Hitchhikers Guide To the Galaxy where Deep Thought announces that the answer to Life the Universe and Everything is “42.”

 

So while not an engineer, I have spent the last two weeks or so doing a deep dive on what, exactly does 5G actually do — with a particular emphasis on the recently released 3GPP standard (Release 15) that everyone is celebrating as the first real industry standard for 5G. My conclusion is that while the Emperor is not naked, that is one Hell of a skimpy thong he’s got on.

 

More precisely, the bunch of different things that people talk about when they say “5G”: millimeter wave spectrum, network slicing, and something called (I am not making this up) “flexible numerology” are real. They represent improvements in existing wireless technology that will enhance overall efficiency and thus add capacity to the network (and also reduce latency). But, as a number of the more serious commentators (such as Dave Burstien over here) have pointed out, we can already do these things using existing LTE (plain old 4G). Given the timetable for development and deployment of new 5G network technology, it will be at least 5 years before we see more than incremental improvement in function and performance.

 

Put another way, it would be like calling the adoption of a new version of Wi-Fi “5G Wi-Fi.” (Which I am totally going to do from now on, btw, because why not?)

 

I elaborate more below . . .

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Tales of the Sausage Factory

UPDATE: Why Tech Freedom Are Totally Wrong About The CRA.

Last week, I wrote this blog post addressing the argument that the Markey resolution under the Congressional Review Act would not actually restore the 2015 net neutrality rules. Since then, my opposite numbers at Tech Freedom have put together this 8-page letter saying otherwise. To save myself the trouble of repeating myself, I will update my previous blog post to explain why Tech Freedom specifically is utterly and completely wrong.

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Tales of the Sausage Factory

“A Woman of Valor Who Can Find?” Farewell to Commissioner Mignon Clyburn.

This week has been the going away for Chairwoman Mignon Clyburn, often called “the Conscience of the Commission.” Not some soppy, Jiminy Cricket-style conscience sitting helplessly on your shoulder pleading and wheedling to try to get you to be good. Clyburn has been a conscience that kicks ass and takes names. The fact that, despite these hyper-partisan times, so many of her Republican colleagues and former colleagues were positively clamoring at her official FCC send off to praise her with genuine warmth for her empathy, graciousness and passion proves (as I once said about Jim Cicconi, who came out of retirement to add his own praise at Clyburn’s official farewell), you can be extremely effective without being a total jerk.

 

Many people understand the duty of public service. But for Mignon Clyburn, it is a calling.

 

As you can tell, I’m a big fan. If you wonder why, read her going away speech from the appreciation/going away party the public interest community held for her last Wednesday — although simply reading the words cannot convey the stirring passion and eloquence with which she read it. Too many people who care deeply about social justice dismiss communications law as a wonky specialty. Those with the passion to follow the instruction of the prophet Isaiah to “learn to do good, seek justice, comfort the oppressed, demand justice for the orphan and fight for the widow” often chose to go into fields where this struggle is more obvious such as civil rights or immigration law. But as Clyburn made clear through both words and actions, we desperately need this same passion in communications law. “The communications sector does not just intersect with every other critical sector of our economy, society, and democracy; it is inextricably intertwined. Healthcare, education, energy, agriculture, commerce, governance, civic engagement, labor, housing, transportation, public safety—all rely on this modern communications infrastructure. Any weaknesses or shortcomings, systemic or isolated, will have ripple effects that can be difficult to discern, but are unmistakable in their impact.”

 

Some reflections on Clyburn’s tenure below . . .

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Tales of the Sausage Factory

UPDATE: Net Neutrality Repeal Goes Into Effect June 11 (Absent CRA Passage Or Anything Else).

We now have an official date on when the 2017 Net Neutrality repeal will go into effect. The Government Printing Office now gives a preview of what will get published in Fed Reg 24 hours in advance. They announced today that tomorrow will have both the OMB approval of the new and undermined transparency rule and the FCC notice that things will officially go into effect in 30 days from tomorrow.

 

Apparently stung by being called out on this peculiar process, Pai has issued a new and exciting statement totally doubling down on everything he has ever said about the terribleness of the previous rules and the awesomeness of our new and exciting Internet freedom. You can read it here. (I have got to believe this Administration at least borrows speech writers from Russia. This reads like something from Pravda in the Cold War announcing “glorious triumph of new 5 year plan in crushing capitalist running dogs.”) Commissioner Rosenworcel has a much shorter and rather less bombastic counterpoint here.

 

Stay tuned . . .

 

Posted in How Democracy Works, Or Doesn't, Life In The Sausage Factory, Tales of the Sausage Factory | Comments closed

Tales of the Sausage Factory

Yes, the 2017 Net Neutrality Repeal Is A “Rule” Under the CRA.

I have a rule of thumb that when I hear a stupid argument three times or more, I will blog about it so I don’t have to keep repeating myself. In this case, the argument that the CRA would not undo the FCC’s 2017 Net Neutrality Repeal Order/Declaratory Ruling because it is not a “rule,” and the CRA only applies to “rules.” See 5 U.S.C. 801.

 

This argument falls into the stupid category because the CRA defines what it means by “rule.” See 5 U.S.C. 804. In typical legal fashion, Section 804 refers you to 5 U.S.C. 551. Section 551(4)(a) defines “rule” as follows:

 

rule” means the whole or a part of an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy or describing the organization, procedure, or practice requirements of an agency and includes the approval or prescription for the future of rates, wages, corporate or financial structures or reorganizations thereof, prices, facilities, appliances, services or allowances therefor or of valuations, costs, or accounting, or practices bearing on any of the foregoing.

 

Section 804 excludes rules relating to agency organization (which clearly does not apply to the 2017 Net Neutrality Repeal Order), or decisions applicable to a specific individual or group of individuals (such as merger decisions) (again, clearly does not apply here), or specific tariff/rate making/wage setting proceedings (again, clearly not applicable here). It clearly is a “statement of general or particular applicability and future effect designed to implement, interpret or prescribe law or policy.”

 

Put another way, did the agency action require notice and comment? Is it governed by the Administrative Procedure Act? Congratulations! You have a “rule” for purposes of the CRA.

Read More »

Posted in Series of Tubes, Tales of the Sausage Factory | Comments closed

Tales of the Sausage Factory

How Popular Is Net Neutrality? Opponents Have to Hide They Are Campaigning Against It.

Nothing brings home the peculiar nature of “the D.C. Beltway Bubble” than listening to the local news station WTOP. Lets start with the fact that our local 24-hour news station is actually the most popular radio station in the D.C. market. It’s also fun when some incident around the White House or the Capital ends up sequentially on the national news, the local news, and the traffic report.

 

But what really sets D.C. apart is our advertisements. The political ads never stop. Particularly when a major vote is about to happen — such as the upcoming vote in the Senate on S. J. Res. 52, aka the “net neutrality CRA,” aka the repeal of the FCC’s net neutrality repeal. Today (May 9), Senator Markey will file the resolution to force the vote — which is expected to actually happen next week. So, naturally, we are getting all kinds of ads from broadband companies and their various associations (e.g., Broadband for America) trying to push the public to get their Senators to vote against the resolution.

 

The problem for the anti-net neutrality folks, however, is that network neutrality remains enormously popular with the general public. Which leaves these groups trying to rally the public with a problem. Die-hard anti-net neutrality folks like Rep. Marsha Blackburn may think “let ISPs discriminate so that your online experience can be more like going through a TSA security line before flying” is a selling point, people who actually sell stuff for a living recognize that “make your browsing experience like your airline experience with long waits and hidden fees” is kind of a loser.  So if you just advertise “The Senate is considering a resolution to restore the network neutrality rules the FCC repealed last December, call your Senator today and tell them to stand up for ISP freedom to throttle competitors charge new fees ‘innovate’!” — odds are good you will actually drive lots of people to call their Senator and tell them to vote for the resolution and restore net neutrality. (Which, btw, you can do here.) So how do you campaign against network neutrality without actually telling the public you are voting against restoring the net neutrality rules?

 

UPDATE: Jay Cassono has this piece in Medium providing details on a similar scam opposing net neutrality while pretending to be in favor.

Read More »

Posted in How Democracy Works, Or Doesn't, Series of Tubes, Tales of the Sausage Factory | Tagged , , | Comments closed

Tales of the Sausage Factory

Net Neutrality Does Not End Today. We Still Don’t Know When It Will. Which Is Weird When You Think About It.

There is a lot of confusion on the effective date for the 2017 Net Neutrality Repeal Order, aka “Restoring Internet Freedom — Which Is Not In The Least Overdramatic Unlike You Hysterical Hippies.” This is not surprising, given the rather confusing way the Federal Register Notice reads.

 

You can see the Federal Register Notice here. If you look at the section labeled dates, you will see it says the following:

“Effective dates: April 23, 2018, except for amendatory instructions 2, 3, 5, 6, and 8, which are delayed as follows. The FCC will publish a document in the Federal Register announcing the effective date(s) of the delayed amendatory instructions, which are contingent on OMB approval of the modified information collection requirements in 47 CFR 8.1 (amendatory instruction 5). The Declaratory Ruling, Report and Order, and Order will also be effective upon the date announced in that same document. (Emphasis added.)

 

Which is a very confusing way of saying the following: ‘Before net neutrality gets repealed and the new, much weaker disclosure obligations go into effect, we are going to wait for the Office of Management and Budget (OMB) to review the much weaker transparency rule under the Paperwork Reduction Act and other legislation that is supposed to make it harder to pass rules. Once OMB signs off, we at the FCC will publish a second notice in the Federal Register announcing when everything goes into effect. But until we do that, nothing actually happens. Zip. Nadda. Zero. Total psyche!’

 

This is, to say the least, highly unusual. There is absolutely no reason for FCC Chairman Ajit Pai to have stretched out this process so ridiculously long. It is especially puzzling in light Pai’s insistence that he had to rush through repeal of net neutrality over the objections of just about everyone but the ISPs and their cheerleaders because every day — nay every minute! — ISPs suffer under the horrible, crushing burden of Title II is another day in which Princess Comcast Celestia, Princess Twilight Verizon Sparkle, and all the other Broadband Equestria Girls must endure the agonies of a blasted regulatory Hellscape rather than provide us all with wonderful new innovative services at even lower cost than they do now. Because Broadband Is Magic.

 

So yeah, if Pai thought it was a total emergency that he take his vote in December, why did he basically extend the current Title II regime indefinitely? We hasn’t Pai restored our Internet Freedom? Why has Pai instead forced us to languish here in the terrible regulatory Hellscape that is the merely “open Internet” rather than the private sector controlled de-regulatory paradise he and his fellow Republican Commissioners have promised us? Hell, the FCC didn’t even submit the new rule to OMB for approval until March 27. For a guy who was all on fire to repeal Title II and free his Broadband Ponies, Pai sure has taken his time making it actually happen.

 

An excellent question. Somebody who is an actual reporter might want to ask him about that. I have some guesses and rank speculation — but they are just that, guesses. It’s like wondering why Number 6 resigned, or why the Minbari surrendered at the Battle of the Line. Unless we get a big reveal, we’ll never know.

 

But one thing is clear. For whatever reason, Ajit Pai is taking his own sweet time restoring that Internet freedom he claimed to be so obsessed about back in December. Whenever the net neutrality appeal does happen, it won’t be Monday, April 23.

 

Stay tuned . . .

Posted in Life In The Sausage Factory, Series of Tubes, Tales of the Sausage Factory | 3 Comments (Comments closed)
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