Battling over clouds
More than 40 years ago, the FCC was worried about telephone companies using their power over communications to control the then-nascent (and competitive) data processing marketplace. The Bell System at that point was already banned from providing services that weren’t common carriage communications services (or “incidental to” those communications services).
In Computer 1, the Commission tried to distinguish the use of computers for processing information from the use of computers as part of communications, with the goal of not allowing the Bell System into the data processing business.
In a 1999 article in the Texas Law Review, Steve Bickerstaff pointed out that Computer 1 meant that no one could provide a “computer utility” service. The Bell System couldn’t as a matter of regulation, and no one else could because they’d be completely dependent on the good graces of the Bell System for transmission. There weren’t enough highspeed lines to make a computer utility viable, and other companies probably didn’t want to test the regulatory boundaries anyway - they didn’t want to suddenly become telecommunications carriers by providing transport to remote computing services.
Today, we’d call the “computer utility” something different - we’d use the term “cloud computing.”
Fast-forward: Computer I was the right decision, arguably, in that it allowed the internet to come into being. Our government made a number of policy decisions (and delayed action in a number of ways) that supported internet access, as Bickerstaff describes.
Since then, Computer I and the divestiture conditions that continued the Computer I regime have been completely dismantled. More than that - they’ve been reversed. Now the telephone companies are *only* in the data processing business, which we now call “enhanced services” or “information services.” No more common carriage transmission. Nice note from Bickerstaff, writing, remember, in 1999: “Mostly escaping attention has been the successful effort of the BOCs to position themselves as a very potent future force in the Internet market.”
You can reframe the net neutrality battle as an argument for re-imposing the restrictions of Computer I. Keep these companies from providing “information services”! Put them back in the “transmission” box!
That hasn’t happened - yet. Meanwhile, though, what about cloud computing? Bickerstaff suggests that the conditions for cloud computing emerging would have to be (1) an increase in highspeed internet access, (2) increasing frustration with PCs, and (3) the existence of ample competitors to provide carriage.
Let’s say the first two conditions have been met now. The third is still a major problem. Yet there are companies - including Google - who have a great interest in providing the cloud. What will happen?
The carriers have no particular reason to give up voluntarily on the regulatory gains they’ve made over the last 40 years. Google is doing its best to open up or limit the control of the carriers (plus finding alternative pathways), but surely wants to move forward with the cloud more than it wants to win on principle. Of course, I could be wrong.
So many questions - is cloud computing desirable? Are people willing to possibly lose access to their entire portfolio of stuff if their internet connection goes down? If cloud computing is desirable, will companies that are good at clouds be striking deals with the companies that have a lock on transmission? Or will the companies that have a lock on transmission be emerging with clouds of their own?
Thursday links
The House Commerce committee investigation of the FCC continues. According to the Washington Post, a detailed letter signed by Rep. Dingell has gone out to the FCC asking for a host of documents that (among other things) relate to “management practices that may adversely affect the Commission’s ability both to discharge effectively its statutory duties and to guard against waste, fraud, and abuse.” This is serious - business as usual at the Commission must be under severe pressure, and the idea of real structural reform of the Commission (and perhaps a new telecommunications act) can now be talked about with some confidence. This won’t happen now, but it could be happening a year from now.
According to CDT, the House should approve H.R. 3773, the FISA Amendments Act. It requires prior FISA court approval of surveillance procedures (if not of actual surveillance), ongoing judicial oversight of compliance with those procedures, does not grant retroactive immunity to the carriers, and has a Dec. 31, 2009 sunset.
I’m feeling prescient (or maybe just trend-aware) about yesterday’s post - today, WIRED has a substantial article covering a music industry notion of charging highspeed internet access subscribers a levy for access to music. Never mind that it’s impossible to figure out who’s doing what - particularly if everyone starts encrypting their communications. Never mind that the network access provider may not be shielded from liability if it starts looking at every transmission. As the article concludes, the music industry’s feeling is:
Pay up. . or we’ll sic Washington on you — and London and Paris and anybody else we can find.
The rock star, the Christian Coalition, and NN
Yesterday’s House Judiciary hearing (witness statements and archived video here) had a deeply political angle - what committee should have jurisdiction over network neutrality issues - but also revealed to me that:
We’re seeing the moment when Hollywood, law enforcement, and the network access providers publicly attempt to join hands in favor of monitored/monetized network access.
I loved meeting Damian Kulash and hearing him testify. His opposite number (for purposes of the hearing) was the president of the Songwriters Guild, Rick Carnes. Carnes was there to talk about piracy, p2p file-trading destroying his industry. Here’s the angle, from Carnes’s point of view: isn’t it true mandating neutral internet access won’t allow network access providers to watch for copyrighted files?
And then there was the “but what about pornography” line of questioning. Although the Christian Coalition representative, Michele Combs, was there to testify about the importance of neutral network access for speech of all kinds (and it was great to see the alliance with the ACLU), the direction of questioning seemed to be: isn’t it true that mandating neutral internet access won’t allow network access providers to watch for nasty files of various kinds?
There are many responses to both of these points.
Copyright infringement is a judgment call, not something that can be figured out automatically at the network level;
screening for infringing files will make the last mile grind to a halt;
network access providers will lose their immunity from copyright claims if they search for these files;
given the concentrated market for internet access, the idea of screening for (and filtering out) particular content creates the opportunity for a great deal of anticompetitive mischief;
content-layer applications are a far better place for this kind of screening - they know what artists they have licenses with, and they can actually respond to notices under the DMCA structure.
On the indecency etc. front, same kinds of arguments:
there’s a dramatic risk of overblocking, threatening innocent speech;
it’s impossible to tell in advance which packet bears the “wrong” kind of flesh tones;
screening will cause the last mile to grind to a halt;
network access providers already cooperate with law enforcement;
we should go after behavior, not tech mandates that will burden all uses of the network;
etc.
But it’s a concerted theme. Avoid network neutrality by summoning up all the evils that it will loose upon the world. Never mind that law still applies online, and that the idea of neutral access is not predicated on facilitating unlawful activity; never mind the costs to all users of creating a carefully (and invisibly) filtered access regime; never mind the outright impossibility of the task - just do it.
It seems to me that it is not in the long-run interests of network access providers to be too closely tied to any particular content industry representative, or set of representatives, given the dramatic change in liability risk that such a partnership represents; it also seems to me that it is not in the long-run interests of law enforcement to push users towards a dramatic uptick in the use of encryption technologies; and it seems clear that it is in no one’s interest to establish a kind of private police force in this highly-concentrated market for highspeed internet access. Mischief, unaccountability, arbitrariness, censorship for commercial reasons - why would we want this?
I had my picture taken with the guys from OK Go. It was an interesting hearing. I’m hoping that these various industries discover their differing interests soon.
Raising the stakes
The first panel discussion during Monday’s FCC hearing in Cambridge provided a useful summary of the first stages of what will be/already is a much bigger battle.
I think it would be a good idea to raise the stakes in this discussion. Even the most pro-public interest of the five commissioners, Cmmr. Copps, talks only about a case-by-case adjudication by the FCC of the “rules of the road” for “reasonable network management.” But that won’t get us faster, more open high-speed internet access. Commr. Adelstein makes more headway - he’s suggesting that we need to explore a “comprehensive solution” for this issue. Commr. McDowell, by contrast, slides way way back, saying internet access is (to him) “new media” that is mostly made up of people passively watching video. Even Vuze asks only for better disclosures of network management practices.
Although nothing goes away, it seems to me that these older “media” modalities of cable and telephone “services” are melting gradually (like the Wicked Witch of the West) into simple transport of bits. (Broadcast has melted into cable and scarcely counts as a separate category any more.)
Now, these modalities, these silos don’t want this, don’t have any use for such a change, and so they are hanging on to friction, management, control - and they’re saying that self-regulatory efforts are all that is needed to ensure that the public interest is served by their management efforts. We know they’re competing with the internet. They want to stay “media” companies and avoid commoditization. They’ve got enough market power to make this happen, and if the system can stay just about the way it is until the people inside these silos reach retirement age, that’s a fine goal.
Will we have a future shaped by the choices of these particular informational gatekeepers? Or will we have a general-purpose network that anyone can use for his/her own reasons? Will we replicate the models of the past, just because we’re used to them?
The witnesses keep talking about “services” - but these aren’t services, this is just access, transport, commodity roads on which unimaginable complexity can flourish. These gatekeepers have every interest in maintaining scarcity, when we could have abundance - with an injection of leadership, national planning, and will.
The stakes couldn’t be higher. The idea of keeping these networks subject to nondiscrimination obligations isn’t some crazy newfangled heavyhanded overreach - it’s the way we have run communications for hundreds of years. These are communications networks (or should be), transport functions - not “media.” We subject communications networks to regulation for the good of all; if we hadn’t acted that way, the internet would never have come into being. (Remember, the internet is not the same thing as the World Wide Web - it’s a logical architecture for transport, not a vessel from which we download streams.) If these few duopolist actors get away with “management,” the promise of the internet will not be fulfilled.
Rulemaking: Timing is Everything
Last week’s GAO report, “FCC Should Take Steps to Ensure Equal Access to Rulemaking Information,” didn’t have too much impact. All the telecommunications “stakeholders” with offices in Washington, D.C. know how things work.
Rulemakings go on indefinitely. They start at some point, these proceedings, and then they just keep going. There may be interim rules, notices of further proposed rules, requests for additional information, any number of other filings. There are deadlines for comments on particular pieces of paper, but the process keeps rolling and doesn’t have to be completed by any particular date.
But timing is everything. When the Chairman is ready to put an order on the public agenda, he circulates a draft to the other commissioners. This usually happens about three weeks before the public meeting - and about two weeks before the agenda for the meeting is released to the public. Once the agenda is public, a “Sunshine Period” begins during which no one can lobby the commissioners. Here’s the GAO:
FCC officials told us that, for stakeholders to successfully make their case before FCC, “timing is everything.” Specifically, if a stakeholder knows that a proposed rule has been scheduled for a vote and may be voted on in 3 weeks, that stakeholder can schedule a meeting with FCC officials before the rule is voted on. In contrast, a stakeholder who does not know that the rule is scheduled for a vote may not learn that the rule will be voted on until the agenda is announced 1 week before the public meeting.
At that point, a week before the meeting, no one is allowed to lobby.
Stakeholders other than those representing consumer and public-interest groups hear about scheduled votes in advance. Remember the first part above - these rulemakings go on without tight deadlines. Advance knowledge that a vote is coming up is supposed to be nonpublic FCC information. No one is supposed to know outside the FCC. But that’s not how things have worked at the FCC. Here’s the GAO again:
[S]takeholders who generally represent consumer and public-interest groups, told us that they do not know when FCC is about to vote on a rulemaking or when it would be best to meet with FCC staff to make their arguments.
By contrast, it’s likely that large organizations will know about the scheduled vote:
Several stakeholders told us that they learn which items FCC is about to vote on even though that information is not supposed to be released outside of FCC. . . . [N]ine stakeholders. . told us that they hear this information from both FCC bureau staff and commissioner staff. One stakeholder — representing a large organization that is involved in numerous rulemakings — told us that FCC staff call them and tell them what items are scheduled for a vote.
FCC isn’t playing fair — but we knew that. If you don’t know about a vote, you’ll lose your chance to lobby when it matters. The GAO report sharply criticizes the FCC:
Situations where some, but not all, stakeholders know what FCC is considering for an upcoming vote undermine the fairness and transparency of the process and constitute a violation of FCC’s rules. Since the success of lobbying for a particular issue can be highly dependent on whether an issue is being actively considered, FCC staff . . could be providing an advantage to some stakeholders, allowing them to time their lobbying efforts to maximize their impact.
The GAO gave FCC a draft of their report, but FCC had nothing to say about it.
This week in the white spaces
The FCC says today that it’s continuing “the process of investigating the potential performance capabilities of TV white space devices in an open and transparent manner. To that end, the Laboratory will be conducting additional laboratory and field testing of prototype devices.” This probably means that the FCC will be re-testing the (apparently broken) Microsoft prototype device. (Background here: Even If It’s Broken..)
1. The Maximum Service Television group (against portable unlicensed devices) asks questions about this future testing. A sample: “In the event that devices in the new tests are found to meet manufacturers’ suggested performance levels, will further testing be done to determine the proper sensing threshold necessary for protection of TV viewers?”
2. The Open Mobile Video Coalition (who want Americans to carry around new versions of television sets), is anxious too. Their filing urges the Commission “not to permit unlicensed devices to operate in the DTV spectrum unless there is fully effective protection against interference to the mobile broadcast service from mobile devices.”
3. Cox Communications weighs in, claiming that no one is bothering to test the effects on cable headends that might be caused by unlicensed portable devices in the white spaces. They’re also pointing out that there are no generally-accepted standards for sensing detection thresholds, so how can the Commission claim to be meeting them? Most importantly, they argue, the DTV transition is complicated enough - and “[p]ermitting personal and portable devices could effectively undermine these [transition] efforts - introducing considerable confusion, as well as degrading existing services, to the detriment of American consumers.”
4. Both Cox and the Rural Telecommunications Group argue that limiting use of the white spaces to fixed, licensed devices will bring highspeed internet access to rural areas. Not to mention, says the Rural Telecommunications Group, that “[b]y limiting new services in the TV bands to those that are both fixed and icensed, the Commission would avoid having to rely upon ineffective and unproven technologies to avoid degrading incumbent operations.”
5. The New America Foundation visited the FCC, with actual engineers in tow, to say that they’re ready to help the FCC with measurements. They’re pointing out that the sensitivity standards used by the White Spaces Coalition may themselves be too sensitive, particularly in light of “the huge opportunity costs for wireless service and innovation associated with allowing spectrum to lie fallow because in a few places a high-gain antenna could view a signal that most of the shrinking share of over-the-air viewers would find to be below the threshold of visibility.” Translation: The FCC’s (and Congress’s) political obsession with protecting the small (and getting smaller) percentage of Americans who use rabbit ear antennas to receive over-the-air broadcast limits innovation - to protect those viewers, we’re giving up wireless uses that could be very valuable. Yes, there could be a well-focused antenna that would pick up some portable devices’s transmission by accident, but just about everyone else using rabbit ears will never be bothered.
6. The Hispanic Technology and Telecommunications Partnership writes in, pointing out that “Hispanic households use over-the-air broadcast television at significantly higher rates than the non-minority national average. For example, in Houston nearly 459,852 homes (23.2%) receive signals over the air. Of these over-the-air homes, 290,000 (58.9%) are Hispanic homes. This is typical in many cities with large Hispanic audiences. Their argument is that the DTV transition is meaningful and shouldn’t be interfered with by portable, unlicensed devices. This is powerful: “With the DTV transition less than 18 months away, now is not the time to experiment with a new policy that could disrupt the transition and cause permanent damage to consumers. Unchecked interference from new unfixed and unlicensed devices in the TV spectrum could effectively disenfranchise over-the-air digital viewers across America. The “free” information safety net for many
Hispanic homes will be lost and they will be left behind in the new digital era.”
Bottom line: some devices will be re-tested, we don’t know which, we don’t know what standards will apply, and the advent of the DTV transition is putting a lot of pressure on this process.
The radio and the internet
A good article at SFGate.com yesterday made the point that interest in radio technology started Silicon Valley on its entrepreneurial path. The article is based in part on a paper by Timothy Sturgeon of MIT. Sturgeon makes the point that Silicon Valley’s culture didn’t just emerge magically from dusty agricultural fields. Rather, “industrial development takes a long time to build up momentum, is profoundly structured by place and historical context, and acquires path-dependent characteristics that continue to influence outcomes far into the future.” In the case of the Valley, the culture was formed around radio: “engineers who hung out in hobby clubs, brainstormed and borrowed equipment, spun new companies out of old ones, and established a meritocracy ruled by those who made electronic products cheaper, faster, and better.”
There are many elements to this story. The presence of venture capital, lots of inter-firm swapping (of both people and ideas), a local great university, and close relationships with government agencies (as clients, as funders) - all of these things were related to the development of Silicon Valley.
Sturgeon’s paper, which became part of a book called Understanding Silicon Valley: Anatomy of an Entrepreneurial Region, is well worth reading. From the conclusion:
The fact that the San Francisco Bay Area’s electronics industry began close to the turn of the Twentieth Century should lay to rest the notion that industrialization and urbanization on the scale of Silicon Valley can be quickly induced in other areas. Silicon Valley is nearly 100 years old. It grew out of a historically and geographically specific context that cannot be recreated. The lesson for planners and economic developers is to focus on long-term, not short-term developmental trajectories.
Another region, in addition to/instead of Silicon Valley, could become the place of innovation for this century. The New York tech meetup has 5000 members. I’m just saying.
The big picture: Why the Verizon/NARAL flap matters
I arrived in DC in the middle of last night without a phone charger, having left mine in Manhattan last weekend. So this morning my first stop was a Verizon Wireless store downtown. Right in the store, in a corner, I plugged in my phone and called back someone who had a lot of questions about yesterday’s kerfuffle. Sitting on the floor, I tried to explain why this story matters.
[The convenience of the VZ store downtown (and in fact the ubiquitousness of those stores in most cities in the US) is a telling sign, so although I certainly recognize that it might seem like abusing their hospitality and electricity to rail about them from their own sales floor I decided to use it as an element in this story. Thanks, Verizon Wireless.]
Did VZ act illegally? No. Although the regulatory story here is tricky, the bottom line is that although the FCC could require that short codes be offered on a nondiscriminatory basis, they don’t. The Communications Act says that commercial cellular providers have to act in a nondiscriminatory fashion to the extent they are providing “commercial mobile services.” But “commercial mobile telephone services” are defined as services that are interconnected with the traditional phone network - reachable via dialing a phone number. Arguably, the short codes that the carriers allow people to subscribe to (”send me weather reports daily for $2.99 a month!”) are not “phone number” services. They’re private numbers controlled by the carrier. So they’re not covered by this nondiscrimination mandate. And VZ and all the rest of the carriers have many rules about who gets allocated a short code - I linked to those rules yesterday.
If VZ didn’t act illegally, why should we care? The shock of the public in learning that wireless carriers don’t act like common carriers should tell us something. From the consumer’s perspective, a communication (for data, to a person, using any device, whatever) is a communication. We assume that communications that feel just like phone calls are supposed to be provided on a common carriage, nondiscriminatory basis. We think of communications as a utility, like electricity or water, that is regulated by the government. It’s alarming to find out that these gigantic wireless carriers think of themselves as providing a private service within which they can discriminate for any reason or no reason at all.
But isn’t the wireless market competitive? Why would we need government intervention? Here’s where the long view is important. Wireless prices have been steadily rising since 1999, at the same time that the industry has been concentrating: twelve wireless carriers that were independent as of 1999 have combined (through merger, spinoff, or joint venture) into these four large wireless carriers - Verizon, AT&T, Sprint, and T-Mobile. Verizon and AT&T already control 51% of the wireless market in the US and are growing very quickly. Verizon ($22.6 billion operating cash flow) and AT&T ($17.8 billion operating cash flow) combined have 64% of the net additions to wireless subscriptions and 120 million subscribers. These are rich networks that are getting richer.
But the salient marketplace isn’t necessarily the market for wireless phone calls. These same two companies, Verizon and AT&T, control DSL internet access through regional monopolies across the country, and offer these wireless services as part of packages that tie together traditional phone services, “IPTV” access, and internet access. Everything is bundled. The elements of these bundles don’t compete against each other, really. And, as readers of this blog are tired of hearing, we don’t have real competition for highspeed internet access.
But this issue is all about wireless phone calls. So what? This issue matters because Verizon and AT&T see the wireless future - and we should too. These phone companies are making their key revenue in the wireless area, and they like the control that they have there. They understand that we’ll all be accessing all data/interaction/people using mobile handsets, and they’d like to wrest control of these communications from the PC arena - which is traditionally more open. They’d like to have mobile phone standards, which allow network providers to charge for every transaction we do using a handset, apply to all of our interactions. They’d like all applications to have to ask permission before they can be accessed - because that will allow the carrier to charge. So they’re hoping to move away from the traditional phone-common-carriage model to the “future” wireless-carrier-private-actor model as both a regulatory matter and as a business imperative, and they have the market power to do this.
That’s why this story matters. More than a billion handsets will be bought around the world next year. We’ll all be going online using mobile devices. If the wireless “we get to discriminate” model of regulation applies to handsets in the U.S., the mobile carriers will be able to act as gatekeepers in the marketplace of ideas, choosing winners and losers. The fact that a Verizon lawyer was empowered to say NARAL’s texts were “unsavory” as a matter of company policy
is hugely important - Verizon may have withdrawn this particular decision (smart move), but that’s just the tip of the iceberg.
We have to decide what model for communications regulation we want. Do we want the carriers to decide what we do online, or do we want the carriers just to be carriers? “Online,” “cell phone,” “telephone,” and “cable” all feel the same to the consumer. It’s all just data traveling fast. The regulatory reluctance of the FCC and the weirdly out-of-date structure of the Communications Act are allowing for differential treatment of the same kinds of transactions — the FCC knows this, and so it is strongly leaning in the deregulatory direction. “We’ll treat everything the same way and everything will be a private network. The market will be victorious!” But as a matter of social policy and our own future, we should sharply question that direction. We don’t have enough competition or enough enlightened, nondiscriminatory communications companies to allow us to be confident that the market will be able to do anything. We should move back towards common carriage for telecommunications - which will require that control over transport be separated from content.
So Verizon Wireless stores are everywhere, and incredibly convenient, because we’re addicted to these devices. They’ll be even more important in the years to come. But we shouldn’t be addicted to the regulatory model that currently governs our use of these devices. This will take leadership to change.
Buying regulation
So now AT&T has joined Verizon (and Frontline) in challenging the FCC’s 700 MHz proposed rules.
AT&T’s beef is not about the no-locking, no-blocking rules - rather, they’re focused on the block of spectrum that a commercial private actor is supposed to use to build out a network for public safety’s purposes (the “public/private partnership”). They’re saying it’s too hard to do a deal with public safety officials before the auction. There just isn’t enough information coming from public safety about what it needs.
I’m focused on two things: (1) Verizon’s arguments (we should know more in the next few weeks, when they file their statement of issues due October 10), and (2) the lawfulness of the entire “reserve price” scheme.
Think about it. How can the FCC condition regulations (about what should be a common-carriage public
service anyway) on the payment of money? And then have the rules dissolve if
it doesn’t get the money? This is such a pure quid pro quo - it’s government for
sale. Completely screwy. But how do you say “completely screwy” in legalese?
Sure, it’s arbitrary. But is there some constitutional dimension to the arbitrariness?
Amateur Hour: Nov. 2, NYLS
From the esteemed Dan Hunter comes the following:
From television (YouTube and Revver) to advertising
(craigslist and consumer-made TV ads), movies (Machinima), photography (Flickr
and iStockPhoto), and news (blogs and citizen journalism), technology is
enabling amateurs to produce and distribute high-quality content that people
want to watch, read, consume, re-use, and buy. Media and entertainment
companies are facing a range of challenging new issues.
On November 2, 2007, New York Law School’s Institute
for Information Law & Policy will host the inaugural Amateur Hour Conference
to bring together leaders in business, law and technology to focus on the
opportunities and challenges of user-generated content to traditional media
& entertainment businesses.
Confirmed speakers include Professor Clay Shirky (NYU
professor, and author of the forthcoming book “Here Comes Everybody”), Kai
Falkenberg (Editorial Counsel, Forbes Magazine), Nathan Freitas (Co-founder,
Cruxy.com), Heather Moosnick (VP Business Development, CBS Interactive Audience
Network), Brian Murphy (Partner, Frankfurt Kurnit Klein & Selz, PC), Marni
Pedorella (Vice President, Intellectual Property, NBC Universal), Stanley
Pierre-Louis (Vice-President and Associate General Counsel, Viacom Inc.), Lisa
Stancati (Assistant General Counsel, ESPN), Marty Schwimmer (The Trademark
Blog), David Sternbach (Director Legal & Business Affairs, A&E
Television Networks), and Ken Werner (President, Warner Bros. Domestic TV
Distribution).
Amateur Hour follows in the cutting-edge and
interdisciplinary tradition of New York Law School’s enormously successful State
of Play conferences, which for the last five years have brought together
scholars, technologists, and business leaders to study virtual worlds. The
Amateur Hour conference will begin a new series of conversations about the
changes that the Internet brings to media and entertainment.
Space is limited so please register early. We look forward to seeing you at Amateur Hour.
For conference schedule and registration please
visit: New York Law School-Amateur Hour.
I checked, and the registration fee is a delightfully participatory $50.