Archive for July, 2007

You should really know about “State of Play V: Building the Global Metaverse.”  It's the fifth annual State of Play conference on the future of virtual worlds, organized by New York Law School in conjunction with Trinity University, and with the support of Harvard Law School, Yale Law School, and Nanyang Technological University in Singapore.

The conference will feature experts from around the world talking about:

+ Cross-cultural communication and avatar-to-avatar diplomacy
+ Strategies for understanding behaviors and values of virtual world residents
+ Regulating speech, property, and addiction
+ Building transnational businesses in virtual worlds
+ Using virtual environments to teach students of all ages
+ Space, place, and virtual world cultures

Plus new documentaries.  Plus lots of workshops. You should go.  They'll archive everything, but why not go in person? 

(Thanks to Dan Hunter and Beth Noveck.)

A brawl has erupted at the FCC and in Congress over what rules should apply to an auction of a narrow swath of electromagnetic spectrum. Because the auction is likely to reap $20 billion in revenue for the U.S. Treasury, Congressional interest is high.  All of the players in the current communications industry are involved in the fight, making strong arguments about the conditions under which this spectrum should be licensed.  The size of the spectrum licenses (local, regional, or national?), the business model of the licensee (wholesale or retail?), and the obligations of the licensee to public safety officials (build a network for public safety, or make some services available at a low price?) all are subjects of extensive commentary.

Reports about this 700 MHz auction have prompted a vigorous debate in the press and the blogosphere about the goals and expectations of U.S. communications policy.  Opponents of license conditions typically focus on the revenue to be gathered through the auction, and argue that any limitation on what could be done by licensees will diminish the market value of these licenses.  (Sad rumor about this argument here in a post by Harold Feld suggesting that the Bells are hard at work commissioning a favorable report from OMB that will show that license conditions will depress revenue from the auction.) 

Defenders of license conditions make different arguments.  Many argue that the market for wireless highspeed internet access is highly concentrated, and that license conditions could spark additional competition.  In an editorial, the Los Angeles Times says, for example, that “the point isn’t to raise the most money for the Treasury, it’s to generate the broadest public benefit from these valuable public airwaves. . . The FCC should [ ] require winning bidders to provide wholesale access to their networks.”   Others argue that the most important element of the auction should be to require the winner to build a national public safety network. Still others argue that the auction should be focused on allowing new models of dynamic spectrum allocation to thrive that could also take advantage of unlicensed airwaves elsewhere on the spectrum dial.

The debate over the rules to be applied to the 700 MHz auction is just one example of a broader problem in communications regulation that has been exacerbated by the advent of the internet. 

The problem is this:  What is the “public interest” to be served in regulating communications in the 21st century? Both the FCC and Congress are confronted with multiple demands, including:  (1) Congress’s own budgetary needs, (2) the needs of public safety officials, (3) the demands of existing communications companies, and (4) the demands of companies that would like to be new entrants in the communications industry.  A threshold problem is which of these groups, all of which claim to represent the public interest, should be the beneficiaries of the rules. 

For example, in the case of the 700 MHz auction, should the FCC focus on generating the most auction revenue possible, leaving the resulting questions about competition to the marketplace?  Alternatively, should the FCC support proposals that serve public safety by providing that a licensee must build a free national network for their use, or proposals that serve future innovators who want to manufacture devices for use on wireless networks?

How should the FCC and Congress choose among (or combine) the various “public interest” claims involved in spectrum policy?

The real story of the 700 MHz auction lies in its repetition of the three great themes of radio regulation that have been playing out since the time this regulation began:  protection of incumbents, uneasiness about new technology, and priority of public safety.  Nothing much has changed in the American regulatory landscape since 1912, when hundreds of thousands of amateur radio enthusiasts and other small operators were swept into spectrum Siberia.  The technological landscape has changed dramatically, however.  Over the last ten years, highspeed access to the open internet by general-purpose devices has become increasingly important to the economic and cultural development of people around the globe. This changed technical reality should have more effect on U.S. spectrum policy than it currently does. 

Broadly speaking, regulators should choose spectrum policy actions by weighing (1) the effects on longterm improved internet access created by a specific policy against (2) the short-term incentives of particular incumbents.  A wish to maximize overall improved internet access might encourage the adoption of rules that limited the vertical integration of oligopolist incumbents and mandated open, ubiquitous transport. Such rules would benefit developers, users, companies, and public safety alike. 

Perhaps the “public interest” should be understood to have a temporal aspect as well as a substantive one.  It could be understood to mean “the longterm economic and cultural interest of the greatest number of Americans.”

But at the moment the negotiation over the “public interest” is more accurately described as a brawl.

====Summer Friday video link. Medieval tech support – the “making of.”  ht: John Firestone.

Assemblage, the box of Joseph Cornell.

Although no one in the wider world seems to have seen a copy of the document, Chairman Martin is known to be circulating draft rules for the 700 MHz auction.   It sounds as if it's a collection of elements with which no one will be fully satisfied. 

To review for a moment:  This auction has been triggered by the statutorily-required release of spectrum by broadcasters (as part of the nation's transition to digital televion).  The Deficit Reduction Act requires the FCC to start this 700 MHz
spectrum auction no later than Jan. 28, 2008 and deposit the proceeds of that
auction (which may be as much as $20 billion) in the Digital Television Transition and Public Safety Fund by June 30,
2008.  The date by which the DTV
transition must be completed is February 17, 2009 (just after the Super Bowl).  Bidders have said they need six months to prepare for the end-of-January auction, so we're running out of time for these auction rules to be released.  (It seems that time is getting so short that someone will ask for more of it.)

This is, people say, the last great auction of spectrum we'll see for a long time.

This chunk of 700 MHz spectrum includes 60 MHz to be
auctioned to commercial users and another 24 MHz to be set aside for public safety
agencies. Frontline had wanted a nationwide license of 10 MHz of
commercial spectrum to be auctioned with 12 MHz of public safety spectrum to add up to a 22 MHz-wide network that would have both public safety and commercial users.
Frontline's proposal included other elements that it wanted added to the auction rules, such as ensuring that whoever ran this 10+12 MHz would be required to operate a wholesale network (while being treated as a small business for bidding credit purposes, if the winner was in fact a small business); would be required to build (for free) a network for public safety use; would allow commercial uses of the 22 MHz to be preempted in case of an emergency; would not block the use of any application on the network (with some caveats); and would allow certified devices to attach to its network (without the device manufacturer having to ask specifically for the carrier's permission).

Google, meanwhile, asked the Commission to verify that any wholesaler of access would be allowed to provide for dynamic spectrum auctions among retailers.  Google has also made clear that it is interested in open access conditions being applied to some portion of the auctioned spectrum.

What's in the draft rules?  Again, no one knows except the people who have seen them.  I understand that some of the elements of the Frontline proposal are still in play, in modified form:  the idea of a nationwide license for 10 MHz, and the idea that the winners of the other, regional blocks of spectrum would be obligated to allow certified devices and not block applications. 

Importantly, however, the idea that the winner of the nationwide chunk would be obliged to operate on a wholesale basis seems to have been defeated.  That's a big deal, because some people think this 10 MHz could provide a competitive wireless broadband alternative to the existing incumbents.  (But 10 MHz by itself wouldn't have been enough, even with a wholesale requirement — you'd need a lot more spectrum to create a real competitive force.  Even the 22 MHz that was proposed by Frontline probably wasn't enough.)

Also importantly, the notion that the winner would have to “use it or lose it” – build an actual network using the spectrum on a geographic basis – is gone. That's a big deal, because the incumbents don't really need this spectrum.  They already have a lot of spectrum. So if Verizon wins this auction, it can just breathe a sigh of relief and build out just enough to satisfy some light population requirements.  The foreclosure value of the spectrum – the value of blocking a potential competitor – may be greater to an incumbent than its actual market value.

And also importantly, whoever wins the 10 MHz national license has to share with public safety.  This is easy for Verizon, but won't support the business model of any new entrant.  Poof.

Interestingly, the word is that anonymous bidding will apply to the commercial parts of this auction.  That's interesting because there's ample evidence that the mere presence of an incumbent (deep pockets, willing to spend anything) in an auction scares away new entrants.

Just three take-aways:

1.  If the rules come out the way predicted, they will protect incumbents against a new nationwide entrant in the wireless broadband access market.  First, it will be very easy to block a new entrant from buying all of the regional licenses they'd need to piece together a nationwide presence.  Second, the absence of a wholesaling requirement will mean that no real competition will emerge.

2.  The no-locking-device and no-blocking-application moves are welcome, but I predict they will end up being so narrowly implemented and so unenforceable as a practical matter that we will end up mired in details – and still years behind Europe.

3.  It's unclear that public safety will get what it wants and needs.

This morning the House Commerce Committee, chaired by Rep. Markey (D-MA), is holding a hearing about a range of wireless issues:  the role of states in providing consumer protection in this market, and the role of Congress and the FCC in protecting innovation.  Markey's focused in particular on early termination fees and portability generally.  He's also concerned that the carriers are exerting too much control over the features and functions of wireless devices.  He's aware that Carterphone broke Ma Bell's stranglehold over devices for the wireline marketplace, and says the FCC could do the same thing for wireless.  Markey urges the FCC to seize the opportunity to require open access for wireless services in the upcoming auction, and welcomes Chairman Martin's suggestion that this may happen for a portion of the auctioned spectrum.

How you see this set of issues turns in part on whether you believe the wireless sector is competitive or not.

The battle lines are clearly drawn here; Rep. Upton (R-MI) says that “innovation” happens when there is enough spectrum available for wireless services, and that we can best enhance consumer choice through the operation of market forces.  He asserts that the wireless market is highly competitive, with four national carriers and many regional players, and that there's no need to emulate policies that have applied in the past to monopolists.  Indeed, from his perspective imposing Carterphone requirements on wireless networks would “punish” current innovative wireless carriers.

The public safety theme is muted in this hearing – Rep. Harman (D-CA) says that her priority is to assure open access, wholesaling, and a national, not regional approach in the 700 MHz auction, so that when the next attack on US soil happens (she says likely this summer), we will be fixing the interoperable communications problem faced by first responders.  And the Verizon witness notes that more flexible phones that work across networks would not necessarily be compliant with new E911 standards requiring access to public safety answering points, disabled-access requirements, GPS, and radio-frequency emission standards.  (This was skillfully done — require Carterphone, and no one will be able to call for help.)

Even the state-preemption theme gets little play.  Tony Clark of the North Dakota PSC presents very credible testimony that states should continue to have enforcement powers (and the state AGs support him), but no one takes him up on it.

What everyone wants to talk about is competition and Carterphone.  Steven Zipperstein, GC of Verizon Wireless, says his customers aren't asking about being able to bring other devices onto the Verizon network.  (A response could be: consumer expectations are extraordinarily low in this country when it comes to wireless phones.)   Zipperstein also notes that if there's a business plan supporting open access, an entrepreneur will enter the 700MHz auction and carry out that plan voluntarily.

Tim Wu says that we've allowed a spectrum-based oligopoly in wireless to control innovation and the development of new devices, and that the US is not leading the world in this area as a result.  He points out that over 90% of the retail market for new devices is controlled by the four national carriers, and they've successfully imposed a bottleneck -tying the devices to their networks.  He makes the strong point that Americans should see these phones as property that they're not being allowed to use freely.

Philip Verveer, of Willkie, Farr, notes that Part 68 (the certification rules carrying out Carterphone, so that any certified device can attach to wireline) took 10 years to write.  He says the wireless market is vigorously competitive and can't be described as an oligopoly.

Jason Devitt, of Vindigo and Skydeck is outspoken, clear, and heroic.  He's making the point that he's furious that he has to ask for permission to innovate – refrigerators don't have to ask for permission to attach to the electrical grid (beyond certification), cars don't have to ask for permission to use highways, but he has to ask his competitors the carriers permission to introduce a new application on their network.  He has some concrete examples:  the Verizon phone work on GSM networks in Europe, but not the US;  why can't he provide an application that allows a phone to work on all four networks in the US?  Why are ringtones so expensive?  Why won't carriers take any legal risk?

After hearing from the CTIA representative, Chris Murray of Consumers Union takes the floor, and makes some simple points very persuasively.  He thinks we've got tight oligopoly behavior here, because two dominant providers control wireline, broadband isn't competitive, and very few actors can bundle wireless with these other services. He's worried about hefty termination fees, and he notes that preempting state enforcement (where the damages can be paying back these termination fees) will remove a way of policing this kind of behavior.  And he says clearly that applications are being stopped from reaching consumers.  Things are going better in Europe because they don't allow the carriers to carry out this locking-down behavior.

Jason Devitt makes a strong point:  there are very few people dumb and crazy enough to fight the carriers.  Chrmn. Markey: “At least you were crazy enough to come and testify here.”

The New York Times reported today that Bill Clinton was reading Drew Westen's The Political Brain this past weekend. I feel so trendy.  I was reading it too. 

Clinton does come off awfully well in this book.  He and FDR are among the few emotionally-intelligent-and-communicating-it Presidents the Democratic party has produced.  Westen's point is that politics is a marketplace of emotions and narratives, not a marketplace of ideas.  He writes persuasively.  It does seem as if the Democrats have been steadily missing all possible boats for decades. 

At one point today I had Political Brain in my hand while a big screen was projecting images in front of me.  On that screen were two images:  President Bush speaking in a folksy way to people about healthcare, and the Oakland airport being evacuated because of a terrorism scare.  The sound was off, and I could see Bush's relaxed shoulders and his easy way of making eye contact.  People were just nodding along with him, smiling benevolently.  Meanwhile, things are not going too well for this country, and airports get evacuated.  He's a guy people would want to have a beer with, but he may be governing (if Cheney isn't doing absolutely everything) with that same gut sense – and it's not working. 

The Democrats don't seem to be able to find that kind of good-guy, emotionally-connected candidate.  Westen's point is that in order to govern (rationally!) the first step is to get elected.  You can't take that first step without emotion.

===Today, Chairman Martin feints towards “open access,” in a shrewd political move.  If he can defuse network neutrality advocates by claiming to be giving them something they wanted, without really doing so, that will be quite a trick.  I'll explain the trick tomorrow, along with a report on the “iPhone hearing.” 

According to Susan Douglas's “Inventing American Broadcasting, 1899-1922,” in 1912 the U.S. had several hundred thousand active amateur radio operators.  These were boys and men who built their own stations, as a hobby – the explosion of amateurism happened because crystal detectors became widely available in 1906. 

They did amazingly ingenious things to replicate the tuning coil, which was covered by a Marconi patent. The amateurs put other items to use:  “[W]hen Quaker Oats began packaging its oatmeal in cylindrical cardboard containers, these tubes became the standard core for the tuning coil.”

And they bought components from stores like this one:

At the time, anyone with this kind of inexpensive homemade equipment could transmit and receive signals at whatever frequency they wanted.

The amateurs got swept up in fierce currents of centralization and control, coming from many different directions – big corporations and new institutions of government were arriving on the scene at the same time.  Secretary of Commerce Herbert Hoover took strong action to allocate the airwaves, backed up by Congress, in ways that would essentially protect all the major broadcasters and eliminate new entrants and marginal amateurs.  Listeners were assured that they wouldn't have to buy new receivers that could tune in new stations.

I'm just starting to look into this early, pre-1920s history of radio.  It seems to me that in this summer's 700 MHz auction many of these same historical themes are playing out in much the same way they did in Hoover's era.  So far, I've identified three:

1.  protection of incumbents (rich get richer, sweeping away amateurs and new entrants)
2.  resistance to new technology (now, resistance to software-defined radios and dynamic auctions for use of spectrum)
3.  military preemption (important in Hoover's time as now).

I'm sure there are more. 

Douglas's description of the hero-amateurs, who were “radio” before it meant “broadcasting,” is enthralling.  It wasn't inevitable that we turned towards broadcasting in the 1920s, and it isn't inevitable that we reject new entrants providing internet-access-enhancing models today.

David Weinberger has done us all a favor by explaining structural separation in terms everyone can understand — I hope you will read what he's written here.

Meanwhile, Moscow has two-thirds (600,000) of the fiber connections (about a million) we now have in the entire U.S. (those U.S. connections thanks to Verizon's FiOS program).  John Quarterman asks if it's “Sputnik time.”  Steve Levy had a fine piece pointing out that “Americans are paying more to putter around the Net at golf-cart speeds
than citizens elsewhere spend to race around the Web in Porsches—often
seven to 10 times as much.“

But the FTC has issued a report saying that, basically, all things considered, when you look at the situation in a certain way, everything is just fine.  Reaction from Public Knowledge is here.

At this point in our country's history, the strongest metaphor, the most convincing argument, has a hard time getting through and having an effect on policy.  This is a strange, blank-walled time; it will be difficult for Weinberger, Quarterman, Levy, or Public Knowledge to get even a response, much less feel that they're having an impact. 

The only branch of government that can help is Congress – the courts will defer to whatever the FCC does, and the executive branch is delighted to keep the incumbents happy (and very unlikely to show any leadership in any creative direction on this issue).  But without different leadership in place, Congress is completely unlikely to act in a way that will fix our national highspeed internet access problem.

==

Meanwhile, no one can stand up in a federal court and challenge the President's secret and illegal domestic wiretapping program, because the program is secret.  This effectively immunizes the wiretapping scheme from judicial review.

We have standing doctrines for good reasons – they keep courts from wandering into ruling on abstract questions of policy.  But this result subverts the work of the Church Committee.   If the courts, the executive, and Congress can't help, it's time for the fourth branch — journalists — to reveal even more of the story.  And by journalists I mean obsessive, passionate bloggers.  Surely there's a leak somewhere.

Harold Feld has pointed out that AT&T hasn't completely rejected the idea of bidding on spectrum whose use is conditioned on compliance with open access rules.

One of the most interesting things about that 10MHz block, if it gets auctioned in the manner Frontline suggests, is that it will be a huge national license.  Google has filed comments saying very interesting things about ensuring that the holder of that huge national license could run dynamic auctions for its use.  This would be like turning the market for spectrum into the market for pay-for-click search — you run the auction among competitive retail providers of transport, automatically, when they need access. 

It would be quite a thing to see how the Google model actually worked.  It could end up being much more efficient in its use of spectrum than the command/control model we have now.

How much would it be worth to AT&T and Verizon to ensure that this dynamic auction model never gets tried?  Would it be worth bidding for, and winning, this 10MHz even though they already have enough spectrum?  Will they be willing to pay more for this blocking opportunity than the new entrants (whoever they are) are willing to pay to start up their own network provision?

We're all waiting, as Harold says, to see what rules the Commission comes up with.  He notes that AT&T says it hasn't changed its position.  But I think things are looking good for open access — and good for a blocking manuver on the part of the incumbents. 

Happy Fourth, a day late.

Yesterday, the Ninth Circuit issued its opinion in Perfect 10 v. Visa.  (You may remember the Perfect 10 v. Amazon opinion of a couple of months ago, also from the Ninth Circuit – Eric Goldman wrote about it here.)

Perfect 10 operates a subscription site that “feature[s] tasteful copyrighted images of the world’s most beautiful natural models.”  It sued Google and Amazon claiming that the display of thumbnail images in response to search queries constituted copyright infringement, and it sued Visa and MasterCard for furnishing payment services that forwarded the business of allegedly infringing sites – many of which operate offshore.

Although both of these decisions are facially “good” for these intermediaries — none of them are found directly liable for copyright infringement, the search engines aren't necessarily secondarily liable for copyright infringement, and the functions of the credit card actors are found to be sufficiently different from those of the search engines that the secondary liability claim as to them is dismissed — they both have strange and troubling vibrations.  They both suggest that infringement liability can exist everywhere, in every part of the chain of relationships between end-users and infringement, as long as the right kind of “knowledge” exists.

Copyright plaintiffs have long wanted to use intermediaries like search engines and credit card companies as easy-to-pound levers to solve the plaintiffs' perceived online problems.  The actual infringers are small and agile, and may not be reachable by service of process in the U.S.  Plus, you don't make yourself popular by suing grandmothers, and there is always the risk that an innocent, young or old, will be in the pile of end-users that you go after.  So it's a very popular move to go after the big actors providing multiple-use platforms to end-users.  They have money, corporate ties, and physical offices – and when those offices are in the U.S. it's easy to serve them with process.

The Amazon case suggests that a search engine “could be held contributorily liable if it had knowledge that infringing Perfect 10 images were available using its search engine, could take simple measures to prevent further damage to Perfect 10’s copyrighted works, and failed to take such steps.”  That standard creates quite a cloud for intermediaries.  How much knowledge is required?  A phone call to customer service? A chat session?  How expensive do the fixer-upper measures (taken to “prevent further damage”) have to be before they cease to be “simple”?  How much failure is actionable, across what span of time?

The Visa case says that standard is fine for search engines, but tries manfully to distinguish credit card services from search engine facilities.  Judge Kozinski, dissenting, isn't buying the distinctions his colleagues establish:

According to the majority, “Google may materially contribute to infringement by making it fast and easy for third parties to locate and distribute infringing material, whereas Defendants [credit card cos] make it easier for infringement to be profitable, which tends to increase financial incentives to infringe, which in turn tends to increase infringement.” The majority is mistaken; there is no “additional step.” Defendants participate in every credit card sale of pirated images; the images are delivered to the buyer only after defendants approve the transaction and process the payment. This is not just an economic incentive for infringement; it’s an essential step in the infringement process. In any event, I don’t see why it matters whether there is an “additional step.” Materiality turns on how significantly the activity helps infringement, not on whether it’s characterized as one step or two steps removed from it.

The Amazon standard is a swamp, which isn't great news for the internet ecosystem.  Kozinski's reasoning may be persuasive – his point is:  what's the difference between one link in the chain of connection and another?  Who cares when and by whom an unauthorized copy is made?  He sees copyright law as economic policy; we've decided to protect owners of copyright, and that means protecting them against the depredations of everyone involved in the infringement, whether they're duplicating files or just handing over the cash.

Because it's a web out there, and because we've got lots of U.S. actors who depend on protection from liability in order to operate massive free multi-purpose platforms that end-users really like, extending the monopoly of copyright to cover every possible intermediary would bring the system to its knees.  Unlimited liability for intermediaries housed in this country could have the effect of driving a great deal of innovation offshore.
 
These are just vibrations – the opinions both go mostly in the “right” direction.  But other shoes, in other circuits, can always drop.

==update:  report that a Belgian court has ruled that an ISP must stop file-sharing on its network.  Thanks to Dirk van der Woude. 

“This is an extremely significant ruling which bears out exactly what we have been saying for the last two years – that the internet's gatekeepers, the ISPs, have a responsibility to help control copyright-infringing traffic on their networks,” IFPI Chairman and CEO John Kennedy said.

“The court has confirmed that the ISPs have both a legal responsibility and the technical means to tackle piracy. This is a decision that we hope will set the mould for government policy and for courts in other countries in Europe and around the world,” he added.

We're reaching the thousandth post here, soon – not now, but soon.  So it was refreshing this evening to hear from a treasured relative of mine, a woman about my age, who said, “You have a blog?  Why?”  Seemed like a moment to reflect. (Hi, Linda!)

“Blog” is one of the most disliked words these days.  It's up there with “netiquette” and “wiki”.  Something about
those words makes people wince. 

Bad news
first: Technorati says there are 175,000 new blogs each day. Over 18 updates a second  — 1.6 million posts per day.

Good news for
those of you who really don't want to hear about this: Hugh McLeod says blogs have peaked.  They’re on the downswing because it's hard to have a blog. And who wants to be a little broadcaster?  What people really want to do is get together with their friends.  So look at this list:  QQ in China has 160 million subscribers, 183 million people are on MySpace. More than 96% of 20-somethings in Korea spend
time in Cyworld.

I'm new to Facebook, and I'm feeling “old media” for remaining fond of blogs.  I run through many blogs on most days, seeing what people are writing about.

Recently, I caught a glimpse of a candidate for public office, on television, posing with his ballot half-in, half-out of the box.  Fifty cameras flashed as part of that televised image, clattering fiercely.  What a waste!  I thought.  Why do all those physical pictures have to be taken, all of the same scene?  All that equipment!  Couldn't that be done better online with a single shared digital file? 

But then, of course, that's the great thing about these much-maligned blogs – they give a thousand word-pictures of the same event.  Are shards worthwhile?  Maybe so – maybe if that candidate, viewed from another direction, was doing something quite different, we'd want to know.  And if we only had one image we wouldn't have had the full story.