Tuesday, June 27, 2017

FCC Proposes $120 Million Fine for Illegal Robocalls

Last week, the FCC issued a Citation and Order which proposed a $120 million fine for Adrian Abramovich, the originator of nearly 100 million illegal robocalls. Illegal robocalls are an example of consumer harm that can be reduced with FCC consumer protections and enforcement. Since becoming FCC Chairman earlier this year, Ajit Pai has made it a top priority to combat this illegal activity that harms consumers.

Wednesday, June 21, 2017

More Data on Mobile Broadband Growth

Here is a new report by Ericsson with projections for continued very strong growth for mobile broadband. Worth a look.

Tuesday, June 20, 2017

Online Advertising May Be Annoying to Some, But Life-Changing to Others

There are two main business models that edge providers, like Google and Netflix, use to enable consumers to access information online. The first is through use of paywalls or a subscription-based model. For example, consumers pay a monthly or annual fee to a media outlet, like a The New York Times, or a video content provider, like Netflix, and receive unlimited access to that website’s content. The other more prevalent business model is through use of advertising. Edge providers will sell advertising space on their website, allowing consumers to access the content without paying a monetary fee. Edge providers need to generate revenue in order to have the incentive to create more content or, for example, report on important current events. Some people may find online advertising to be annoying, but others may see it as the only way to access information online.
In an August 2016 Perspectives from FSF Scholars, I discussed the importance of the advertising business model and showed how it benefits all consumers because they can access information without having to pay a subscription fee. For low-income consumers who cannot afford subscriptions, the advertising business model creates an opportunity for upward mobility by increasing their access to human capital and entertainment and raising their standard of living. For middle and high-income consumers who can afford subscriptions, advertising frees up income that would have been spent on subscriptions but now can be spent on other goods and services.
However, some consumers may find advertisements to be inconvenient or just simply annoying. Some websites have the option where consumers can choose the business model they prefer. Giving consumers a choice is the ideal scenario because consumers have different preferences toward advertising and subscriptions. There is nothing wrong with preferring one option over the other, but to say that consumers should be forced to use one option over the other ignores the fundamentals of economics.
Advertising often has been criticized for attempting to manipulate consumers into buying certain products, believe certain information, or vote for certain politicians. Vance Packard made this argument in his 1957 book The Hidden Persuaders. I might argue that “manipulate” is a harsh word, but I cannot argue that advertising does not influence consumer behavior. After all, companies would not advertise if it did not have an impact on consumer behavior and studies have shown that advertising works. But even though advertising influences consumers, it also creates an opportunity for consumers to access information without having to pay a subscription fee, freeing up money that would have been spent on subscriptions and encouraging additional economic activity.
In October 2016, Columbia Law School Professor Tim Wu published a book called The Attention Merchants, which discusses the history of advertising. The book also attempts to influence consumers into adopting subscription-based models to slow the wave of advertising throughout the Internet. In an interview entitled “Does Advertising Ruin Everything?” Tim Wu said:
We have to get over our addiction to free stuff. Suck it up and pay. A lot of people say, “I hate ads, I’m sick of ads, I’m sick of clickbait, I’m sick of this race to the bottom.” If you say that, you have to put your money where your mouth is. We have to get over our addiction to free if we’re going to save the web. That’s us, the users. We can’t expect everything to be free and to be good.
But oftentimes, consumers might think they have their preference sorted out in their head, but as soon as they are confronted with an economic choice, their decision does not represent their perceived preference. This too is not a bad thing; it is just the reality of consumers having imperfect information. A consumer may not enjoy ads and may complain about ads, but when confronted with the option to pay $10 a month, for example, advertising might be the preferred option.
As a consumer, Tim Wu may prefer subscriptions over advertisements, but his preferences should not dictate the preferences of other consumers. For example, it will be difficult for low-income consumers to simply “suck it up and pay” for subscriptions to online content. And while Tim Wu acknowledges that advertising enables many consumers to access online information who otherwise would not be able to, that point bears much more emphasis. Many consumers would not have access to the vast economic benefits of the Internet if not for the advertising business model. And for the consumers who can afford to use the subscription-based model but instead choose advertising, this action creates a consumer surplus that frees up money that can now be spent on other goods and services.
In other words, the advertising business model has created access to information for low-income consumers and has created additional economic activity for middle and high-income consumers who can afford but choose not to pay for subscriptions. Advertising may be annoying to some, but considering the vast economic benefits the business model brings to consumers around the globe, it’s actually life-changing.

Friday, June 16, 2017

New Bill Would Accelerate Broadband Deployment in Rural Areas

On June 15, 2017, Senators Dean Heller (R-NV) and Joe Manchin (D-WV) introduced legislation that would expand rural broadband access by streamlining the application process required for deploying broadband infrastructure on federal lands. The "Rural Broadband Deployment Streamlining Act" (S.1363) would set a 270-day shot clock for the Department of Interior (DOI) and the United States Forrest Service (USFS) to respond to all applications regarding broadband easement and rights-of-way. If the agencies do not act before the deadline, the application will be deemed approved.

The proposed legislation would require the DOI and USFS to establish a streamlined, consistent, and standardized application review process. The bill also would require the Government Accountability Office to analyze the accuracy and usefulness of the National Broadband Map with regard to expanding broadband in rural areas.

If enacted, this legislation will spur the deployment of next-generation 5G networks, which will create $275 billion in investment, 3 million jobs, and $500 billion in economic activity, and it will deliver broadband access to Americans who live in rural and remote areas.

Thursday, June 15, 2017

President Trump Nominates Jessica Rosenworcel as FCC Commissioner

Earlier this week, President Trump nominated former FCC Commissioner Jessica Rosenworcel to return to the Commission to fill an open Democratic seat. Having served as a Commissioner from 2012 to January 2017, it is likely she will be confirmed.

With a current 2-1 Republican majority at the Commission, it is important that there be a full cohort of Commissioners to satisfy the 3-2 majority. Ms. Rosenworcel's nomination is a step in that direction, but President Trump should soon nominate a Republican Commissioner to fill the last open seat, assuming Ms. Rosenworcel is confirmed.

Friday, June 09, 2017

Why the FTC Should Oversee Broadband Internet Service Providers

The Free State Foundation hosted its Ninth Annual Telecom Policy Conference on May 31. Knowledgeable speakers offered policymakers forward-looking insights befitting the Conference’s title: “A New Direction in Communications Policy: Less Regulation, More Investment and Innovation.”

As explained below, insights offered by Conference speakers reinforce two critical ways that communications policy ought to be made more conducive to fostering innovation and investment by Internet service providers. First, the Federal Communications Commission should cede jurisdiction over broadband privacy practices back to the Federal Trade Commission because the FTC is better suited to the task. Second, to the extent the FCC retains any regulatory authority at all over Internet service providers, the agency generally should adopt only the fact-specific, complaint-based ex post approach of the FTC. Public utility-like regulation of Internet service providers should be repealed. To the extent that the FCC retains any regulatory authority at all over Internet providers, which we do not here concede, any replacement regulatory framework adopted should be tied to market power analysis and target specific instances of claimed consumer harm or anticompetitive conduct.

The remarks of the panelists at the Conference session, “The View from the FTC: Overseeing Internet Practices in the Digital Age,” as detailed below, are very instructive, as well as very timely.

Return Oversight of Broadband Privacy to the FTC

The FCC’s Title II Order (2015) declared broadband Internet access services to be a “telecommunications service” subject to public utility regulation. The Title II Order thereby effectively stripped the FTC of jurisdiction over broadband Internet access service providers’ (ISP) privacy practices. Onerous, one-sided privacy regulation adopted in the FCC’s Broadband Privacy Order (2016) was repealed by Congress in March 2017. Now the FCC’s proposed Restoring Internet Freedom rulemaking would declare broadband Internet access services to be a Title I “information service.” In effect, this would repeal public utility regulation and return broadband privacy jurisdiction to the FTC.

The FTC’s expertise and analytical approach toward privacy issues were discussed during the Conference’s panel: “The View from the FTC: Overseeing Internet Practices in the Digital Age.” Thomas Pahl, Acting Director of the FTC’s Bureau of Consumer Protection, critiqued the FCC’s Broadband Privacy Order and contrasted it with his agency’s privacy policy:
[T]he FCC chose a more rigid and prescriptive approach to broadband data security and privacy issues than the FTC’s traditional case-by-case approach to these topics. The FCC’s rules also set standards for broadband providers separate and apart from standards applicable to others in the online space, eschewing the FTC’s more comprehensive approach. 
Mr. Pahl described what the public could expect if the FCC adopts its Restoring Internet Freedom proposal and thereby returns jurisdiction over broadband ISP privacy practices to the FTC:
The FTC is ready, willing, and able to protect the data security and privacy of broadband subscribers . . . .  We have a wealth of consumer protection and competition experience and expertise, which we will bring to bear on online data security and privacy laws. We will apply data security and privacy standards to all companies that compete in the online space regardless of whether the companies provide broadband services, data analysis, social media, or other services. Our approach would ensure the standards the government applies are comprehensive, consistent, and pro-competitive. 
The FTC’s Case-by-Case Approach Is Preferred for ISP Oversight

Tad Lipsky, Acting Director of the FTC’s Bureau of Competition, also participated on the panel. Drawing on his expertise in antitrust and competition law and policy, he described case-by-case enforcement by the FTC and private litigation as ready means to address any anticompetitive practices that might arise in the broadband Internet access services market. Mr. Lipsky rejected “the idea that a lessening of the regulatory burden on the FCC side would lead to a situation in which anticompetitive conduct was free to occur without fear of further consequence.” According to Mr. Lipsky: “That is demonstrably false. The FTC is waiting” and able to address anticompetitive concerns that might arise.

Characterizing himself as a “light touch regulator” and as “a fan of antitrust as the way of ensuring that dynamic free competition gives the consumer what he wants,” Mr. Lipsky also criticized the public utility model of regulation embodied in the 1887 Interstate Commerce Act, stating: “[I]t is a fact that the FCC Title II regulation is a direct descendant of that form of regulation.” Mr. Lipsky added:
[T]he temptation to look at the problems of a dynamic and quickly developing industry and to immediately apply this structure of economic regulation as a way of anticipating and making sure that future problems don’t arise has largely been a failure. 
Of course, the FCC’s Title II Order succumbed to such temptation. The order imposed public utility regulation on broadband Internet access services with no evidentiary findings of market failure or consumer harm. Indeed, the Title II Order dismissed market power’s relevance.

Professor Daniel Lyons, a member of FSF’s Board of Academic Advisers, also characterized broadband Internet access service regulation as “an antitrust and a consumer protection issue.” Recounting the FTC’s antitrust analytical tools, including its test for market power, Professor Lyons stated:
The FTC is well equipped to evaluate on a case-by-case basis whether a particular agreement is one that might harm consumers. Using robust law that’s been developed from a number of different cases elsewhere in the economy… they have a broader scope informed by a lot more history than the Federal Communications Commission. I agree that the ex post review and flexibility the FTC brings is a lot better in a dynamic marketplace than the more rigid FCC ex ante rulemaking. 
Thus, the FTC’s institutional competencies and case-by-case approach to anticompetitive conduct – as attested by Messrs. Pahl and Lipsky and Professor Lyons – bolster the basic direction set out in the FCC’s Restoring Internet Freedom proposal. The FTC has wide-ranging experience in addressing privacy practices and should be empowered to apply that experience to all online services alike. The FCC should follow through on its proposal and return jurisdiction over broadband ISP privacy practices to the FTC.

Going forward, the FCC should repeal its Title II public utility regulation of broadband Internet access services. To the extent the FCC determines in its Restoring Internet Freedom proceeding that it retains any regulatory authority at all over Internet service providers, which we do not here concede, the agency should adopt only the fact-specific, complaint-based ex post approach of the FTC. To the extent any replacement regulatory framework is retained, it should be tied to market power analysis and target specific instances of claimed consumer harm or anticompetitive conduct.

The C-SPAN video of the conference session, “The View from the FTC: Overseeing Internet Practices in the Digital Age,” is here.

[Note: The quotations by the panel speakers included in this post were taken from the C-SPAN transcription of the Conference, with minor edits made for purposes of correcting obvious syntax, grammar, and punctuation errors. None of the meaning was changed.]

Monday, June 05, 2017

C-SPAN Videos for Panels and Speakers at FSF Ninth Annual Telecom Policy Conference

The Free State Foundation is proud and grateful that C-SPAN covered our ninth annual telecom policy conference entitled "A New Direction in Communications Policy: Less Regulation, More Investment and Innovation." 

The video of the Opening Keynote Address by former OIRA Administrator Howard Shelanski - "Lessons Learned: Improving Regulation and Government Administration" - with reactions by C. Boyden Gray, former U.S. Ambassador to the European Union and former White House Counsel, is here.



The video of the session, "All Star Panel: The Challenges and Opportunities Ahead," is here. This session featured a discussion among Meredith Baker, President and CEO, CTIA; David Cohen, Senior Executive Vice President, Comcast Corporation; Kim Keenan, President and CEO, MMTC; Blair Levin, Nonresident Senior Fellow, Brookings Institution; and Robert Quinn, Senior Executive Vice President, AT&T.

The video of the Lunch Conversation with FCC Chairman Ajit Pai is here.


The video of the session, "The View from the FTC: Overseeing Internet Practices in the Digital Age," with Tom Pahl, Acting Director of the FTC's Bureau of Consumer Protection, and Tad Lipsky, Acting Director of the FTC's Bureau of Competition, along with comments by Daniel Lyons, Professor of Law at Boston College, and the "Final Thoughts" by Michelle Connolly, Professor of Economics at Duke University, is here.        
Enjoy the videos and please share!
                                                                                                                

Thursday, June 01, 2017

C-SPAN Video of Ninth Annual Telecom Policy Conference is Available

The Free State Foundation is proud and grateful that C-SPAN covered our ninth annual telecom policy conference entitled "A New Direction in Communications Policy: Less Regulation, More Investment and Innovation." The video is now available so do not miss the line up of prominent speakers, all-star panels, and a conversation with FSF President Randolph May and FCC Chairman Ajit Pai.