Friday, October 12, 2018

President Trump Signed the Music Modernization Act

Yesterday, President Trump signed the "Orrin Hatch-Bob Goodlatte Music Modernization Act" (H.R. 1551), which creates a compulsory blanket licensing system for music recordings, updates the rate standards applicable to music licensing, provides copyright royalties to pre-1972 artists, and provides compensation to producers, mixers, and sound engineers.
President Trump released the following statement when he signed the bill:
The Music Modernization Act closes loopholes in our digital royalty laws to ensure that songwriters, artists, producers, and providers receive fair payment for the licensing of music. 
Streaming has made music more accessible than ever, yet our laws have not kept up with the pace of technology.  As such, artists of all varieties and all career stages are losing out on revenue that they have rightly earned
This legislation will help ensure that artists from eras long ago, in addition to modern day, can retire in security, and that current and upcoming artists can make a living by creating amazing works that captivate their fans and entertain our nation — and the world. 
FSF scholars have advocated for Congress to pass the Music Modernization Act in order to better secure copyright protections and royalty payments for recording artists, songwriters, and other music professionals.
Further Readings:
Randolph May and Seth Cooper, "A Constitution Day to Strengthen Copyright Protection," Perspectives from FSF Scholars, Vol. 13, No. 35, (September 17, 2018).
Seth Cooper, "Senate Should Vote on the Bill to Modernize Music Copyright," FSF Blog, (August 9, 2018).
Randolph May and Seth Cooper, "World IP Day – An Opportune Time to Modernize Music Copyright Protections," Perspectives from FSF Scholars, Vol. 13, No. 14, (April 23, 2018).

Reducing Regulatory Costs Will Increase Broadband Investment

Earlier this week, FCC Chairman Ajit Pai delivered a speech at the International Institute of Communications' International Regulators Forum, where he discussed several initiatives and proceedings undertaken by the Commission that will help spur broadband investment.
Specifically, Chairman Pai stated:
The best way to make sure every American has better, faster, cheaper Internet access is to set a market-based regulatory framework that promotes competition and increases network investment. We need to make it as appealing as possible for private companies to raise the capital and hire the crews to deploy networks to unserved and underserved areas. That is why the FCC has removed many regulatory barriers to lower the cost and speed the process of building infrastructure. For example, the agency has adopted reforms to make it easier and cheaper for broadband providers to access utility poles. The FCC has also modernized rules that required carriers to maintain yesterday's copper networks, which frees more money to build tomorrow's fiber networks.
Chairman Pai also gave some specific examples of the rules and proposals adopted by the FCC that will cut regulatory costs and streamline broadband deployment for wireline, mobile, and satellite broadband services. In a March 2018 Perspectives from FSF Scholars titled "Reaching Rural America: Free Market Solutions for Promoting Broadband Deployment," I explained how the increasing capabilities of emerging broadband technologies, like satellite, fixed wireless, and mobile wireless, will provide unserved and rural consumers with a viable alternative for a broadband connection. I also outlined what the FCC has done to accelerate the deployment of these services and what still needs to be done at the federal, state, and local levels.
As you can see from the graph above, rural broadband deployment improved dramatically from 2012 to 2016. If the FCC continues to adopt market-based rules and reduce the regulatory costs of broadband deployment, providers of all broadband technologies will be incentivized to invest in rural and underserved areas, closing the gap of the digital divide.

Wednesday, October 10, 2018

USMCA Strengthens IP Rights Protections But Can Be Improved Further

On October 1, 2018, the Trump Administration announced a new multilateral free trade agreement with Mexico and Canada, set to replace the North American Free Trade Agreement (NAFTA). In some respects, the Intellectual Property (IP) Chapter in the United States-Mexico-Canada Agreement (USMCA) would strengthen the protections and enforcement of IP rights relative to NAFTA's IP Chapter, and this is an improvement. Notably, the USMCA would implement provisions and enforcement mechanisms that should diminish the facilitation of pirated and counterfeit goods in the three member countries.
However, the proposed agreement also carries forward an outdated "notice-and-takedown" provision that does not properly protect the interests of creators and consumers.
FSF scholars recently have advocated for the modernization of NAFTA's IP Chapter. (See here and here.) And the USMCA would improve some important measures related to the protection of the rights of trademark and copyright holders. Here are some of the key provisions in the USMCA that would strengthen IP rights protections:
  • Requires a minimum copyright term of life of the author plus 70 years, and for those works with a copyright term that is not based on the life of a person, a minimum of 75 years after first authorized publication. Canada currently has terms of life of the author plus 50 years and 70 years, respectively.
  • Requires strong standards against the circumvention of technological protection measures that often protect works such as digital music, movies, and books.
  • Enhances provisions for protecting trademarks, including well-known marks, to help companies that have invested effort and resources into establishing goodwill for their brands.
  • Provides important procedural safeguards for recognition of new geographical indications (GIs), including strong standards for protection against issuances of GIs that would prevent United States producers from using common names, as well as establishes a mechanism for consultation between the member countries on future GIs pursuant to international agreements.

Additionally, the proposed agreement would require some enforcement mechanisms to deter the facilitation of pirated and counterfeit goods. Specifically, IP enforcement procedures must be available for the digital environment for copyright and trademark. The USMCA also includes procedures and penalties for unauthorized "camcording" of movies, which is a significant source of pirated movies online.
From the United States' perspective, about $1.3 trillion in annual economic activity is attributable to trade that crosses the U.S. borders with Canada and Mexico. Efforts to stop online piracy and the sale of counterfeit goods will encourage creators and entrepreneurs to develop new content and invest in new brands because they will have a greater ability to earn a return on their labor and resources.
However, there is one area where the USMCA needs work. The USMCA includes outdated safe harbor provisions very similar to the provisions adopted in the Digital Millennium Copyright Act (DMCA). In particular, the USMCA carries forward without strengthening a "notice-and-takedown" provision that does not adequately protect creators and consumers.
As Free State Foundation President Randolph May and Senior Fellow Seth Cooper stated in a February 2018 Perspectives from FSF Scholars, the notice-and-takedown provision was adopted twenty years ago and does not reflect today's digital marketplace for copyrighted works:  
"[Under the notice-and-takedown provision], copyright holders are entitled to give notice to an online service provider when infringing content is posted on its network or website. A provider receives immunity if it 'responds expeditiously to remove, or disable access to, the material that is claimed to be infringing.'"
"In the late 1990s there were far fewer Internet users and far fewer online platforms for user posting of content. Today, user-upload websites such as YouTube, Vevo, Dailymotion, and SoundCloud make massive amounts of music and video content available. Regrettably, users of those websites and others post far too much infringing content. For example, between 2011 and 2015, the sound recording industry issued over 175 million takedown notices to various online providers."
"As a result of mass online infringement and the burdensome nature of the notice and takedown process, copyright owners lose revenues that they would receive otherwise from legitimate sales of copies to consumers."
Compared to NAFTA, the USMCA takes some important steps to modernize and strengthen the protection and enforcement of IP rights to account for a burgeoning digital marketplace. But it's not perfect. Congress and the Office of the United States Trade Representative still need to find a way, in the context of negotiating trade agreements, to revise the "notice-and-takedown" regime in a way that adequately protects creators and consumers.

Tuesday, October 09, 2018

Three Reasons to Heed Michelle Connolly on Wireless Competition

Michelle Connolly is a former Chief Economist of the Federal Communications Commission. Indeed, the only person, I believe, to hold that position on two separate occasions. Good cred.

Dr. Connolly is also a highly distinguished Professor of Economics at Duke University, my alma mater. Another good cred.

Finally, Michelle is also a long-time member of the Free State Foundation's Board of Academic Advisors. Another really good cred.

Please don't ask me to choose which of these is most important!!!

No matter! Any one of them alone, of course, is sufficient to spur me to recommend for your consideration Professor Connolly's new paper, Competition in Wireless Telecommunications: The Role of MVNOs and Cable's Entry into Wireless. You can find it here on the T-Mobile-Sprint merger website or here on SSRN. (Dr. Connolly acknowledges that the report was underwritten by T-Mobile but states that the opinions expressed in this report are hers alone.)

If you are interested in better understanding the marketplace context of the proposed T-Mobile/Sprint merger and the competition analysis that the regulatory authorities are undertaking, I heartily commend the entire report to you. But, in the meantime, here I highlight just a few key excerpts:

"This report examines the competitive effects of Hybrid Mobile Network Operators (HMNOs) — mobile virtual network operators that rely in large part on self-deployed facilities — on the market for mobile wireless services and recommends that the Federal Communications Commission (FCC) broaden its now antiquated definition of the mobile telephony and broadband market to account for HMNOs. HMNOs share certain characteristics of both facilities-based carriers (Mobile Network Operators or MNOs) and non-facilities-based providers of mobile services (Mobile Virtual Network Operators or MVNOs). An understanding of MVNOs therefore partially illuminates the competitive impact of HMNOs, but HMNOs are poised to play a competitive role in the wireless marketplace that goes substantially beyond that of traditional MVNOs."

"HMNOs use a combination of facilities to provide wireless service and are not as reliant on MNOs as are pure MVNOs. Cable operator HMNOs own high-capacity network facilities that enable them to offload a majority of the voice and data traffic coming from mobile devices onto their fixed broadband networks. For example, rather than relying solely on their MVNO agreements to use Verizon’s mobile network, Comcast and Charter use their own extensive Wi-Fi hotspot networks to deliver wireless service to their customers over wide geographic areas. Comcast and Charter thus are providing wireless service using a hybrid strategy, combining traditional non-facilities-based MVNO agreements and facilities-based MNOs. (Emphasis in original.)"

"HMNOs should be considered as part of the relevant mobile services market. Cable HMNOs’ entry into the wireless market has already increased competition. The impact of this intensified competition on price discipline will grow in the next couple of years. Accordingly, any analysis of the mobile telephony/broadband market must at the very least include HMNOs. (Emphasis in original.)"

On behalf of the Free State Foundation, Senior Fellow Seth Cooper and I filed comments and reply comments in the FCC's proceeding to consider the proposed T-Mobile/Sprint merger in order to provide context for the agency's consideration, including the competition analysis. As with Professor Connolly's paper, if you are interested in the merger, I hope you will review the FSF comments and reply in their entirety.

Here is a brief excerpt from each that, in relevant part, is consistent with Dr. Connolly's conclusions in her paper.

From FSF's August 27 Comments:

"Wireless market entry by Comcast and Charter Communications using hybrid Wi-Fi/cellular mobile wireless networks as well as DISH Network’s planned launches of IoT and 5G networks diminish the likelihood of significant price increases, post-merger. Commission precedents like the CenturyLink/Level 3 Order (2017) factor such entry into the review analysis."

"Of course, reciting the market shares above might be read to suggest that mobile broadband is a properly defined market for purposes of competition analysis, but this likely is no longer the case. It is more likely that wireless and wireline broadband services properly are part of an overall broadband communications market – a broader broadband market, if you will – as these two market segments become increasingly substitutable. Traditional market definitions, such as a “mobile broadband” market, are now likely to be overly narrow, just as "cable" is certainly outdated and overly narrow as a meaningful product market definition."

From FSF's September 18 reply comments:

"The Commission should reject any artificial rule demanding four nationwide mobile wireless providers. Post-merger, consumer choices will still include three nationwide mobile service providers, plus regional providers, and hybrid Wi-Fi/cellular service providers Charter Communications and Comcast. “New T-Mobile” would likely be a stronger competitor. And the proposed merger would provide New T-Mobile an accelerated pathway for nationwide 5G network coverage that neither provider would have by themselves."

Again, if you're interested in knowing more about the dynamics of competition in the wireless marketplace, I commend to you Michelle Connolly's newly-published paper, Competition in Wireless Telecommunications: The Role of MVNOs and Cable's Entry into Wireless. And while you're at it, you might also read the Free State Foundation's comments and reply comments submitted in the FCC's T-Mobile/Sprint merger proceeding.