Internet

Introduced last summer, a bill affording President Obama executive power over private Internet companies in the event of a “national cyberemergency” is returning this year, albeit with a few tweaks. The CBS News article, “Renewed Push to Give Obama an Internet ‘Kill Switch,‘” insists that the bill should not cause Internet companies any alarm, citing government promises to limit the bill’s use to “crucial components of national infrastructure.” We must question, then, why it is the case that these promises aren’t built into the bill.

The revised version includes new language saying that the federal government’s designation of vital Internet or other computer systems “shall not be subject to judicial review.” Another addition expanded the definition of critical infrastructure to include “provider of information technology,” and a third authorized the submission of “classified” reports on security vulnerabilities.

For the layperson, information technology is “the use of technologies from computing, electronics, and telecommunications to process and distribute information in digital and other forms.” If it seems as though “provider of information technology” is applicable to literally any website you’ve ever been on, that’s because it is. And if the comprehensiveness of the list of those sites potentially subject to government intervention wasn’t enough, the legislation also includes clauses for government secrecy and unaccountability; that judicial review has gone by the wayside serves as a clear indication that this legislation is intended to envelop the private sector.

But last month’s rewrite that bans courts from reviewing executive branch decrees has given companies new reason to worry. “Judicial review is our main concern,” said Steve DelBianco, director of the NetChoice coalition, which includes eBay, Oracle, Verisign, and Yahoo as members. “A designation of critical information infrastructure brings with it huge obligations for upgrades and compliance.”

In some cases, DelBianco said, a company may have a “good-faith disagreement” with the government’s ruling and would want to seek court review. “The country we’re seeking to protect is a country that respects the right of any individual to have their day in court,” he said. “Yet this bill would deny that day in court to the owner of infrastructure.”

The government practice of ignoring private-sector rights is certainly common enough; it’s when one branch of government is liberated of any checks whatsoever, including those of other branches of government, that Americans have an even greater cause for concern. This is especially true when our patronizing representatives are considerably less-qualified, good intentions and all, to understand the ins-and-outs of Internet security than are major Internet corporations.

Other industry representatives say it’s not clear that lawyers and policy analysts who will inhabit Homeland Security’s 4.5 million square-foot headquarters in the southeast corner of the District of Columbia have the expertise to improve the security of servers and networks operated by companies like AT&T, Verizon, Microsoft, and Google. American companies already spend billions of dollars on computer security a year.

The article highlights the following restrictions, strapped across an otherwise a limitless pool of sites subject to executive overhaul:

Under the revised legislation, the definition of critical infrastructure has been tightened. DHS is only supposed to place a computer system (including a server, Web site, router, and so on) on the list if it meets three requirements. First, the disruption of the system could cause “severe economic consequences” or worse. Second, that the system “is a component of the national information infrastructure.” Third, that the “national information infrastructure is essential to the reliable operation of the system.”

That the definition has been meaningfully “tightened,” however, remains to be seen. A closer look at these requirements reveals as much:

1) The first requirement only stipulates that the disruption of the site might impact the economy (the word “severe” is open to unchecked executive interpretation, so we ought to disregard it altogether). Ironically, government intervention to a given website in a time of crisis is likely to involve shutting the site down (leading critics of the legislation to label it a government “kill switch”) — this most certainly qualifies as a “disruption.”

2) The Department of Defense defines the national information infrastructure (NII) as:

The nationwide interconnection of communications networks, computers, databases, and consumer electronics that make vast amounts of information available to users. The national information infrastructure encompasses a wide range of equipment, including cameras, scanners, keyboards, facsimile machines, computers, switches, compact disks, video and audio tape, cable, wire, satellites, fiber-optic transmission lines, networks of all types, televisions, monitors, printers, and much more. …

A good rule of thumb: when your personal keyboard qualifies for the NII, then so does the technology being used to generate a website.

3) Combined with (2), the final requirement only necessitates that the website be in some way dependant on technology within the United States to operate (it doesn’t even require that the site be based in the U.S.).

How wide a net does this legislation cast? A website should be concerned if it meets the following criteria: it’s big, and it utilizes some technology in the U.S. (one or two websites come to mind). The article does, however, leave us with these words of comfort:

For their part, [bill sponsors] Lieberman and Collins say the president already has “nearly unchecked authority” to control Internet companies.

It’s unclear why the author bothered to qualify his statement with “nearly,” though the message itself is as clear as crystal: private Internet companies exist under the government’s thumb, and they can’t do anything about it.

Last week, I had the pleasure of discussing net neutrality with James Boyle, a Duke Law Professor and the co-founder of the Center for the Study of the Public Domain, and Paul Jones, the director of ibiblio, on WUNC’s The State of Things radio program. Our hour-long discussion touched on a number of important tech policy topics, and I highly recommend giving the show a listen (download the MP3 here) if you’re interested in hearing the insights of two very thoughtful scholars and critics of cyber-libertarianism.

I’m a big admirer of Boyle and Jones, who’ve both done a lot of excellent work studying copyright and public domain in the information age. While I don’t share their views on the merits of net neutrality regulation — or, perhaps, of government regulation in general — there’s much common ground between us on many issues, including intellectual property, free speech, and government surveillance.

For folks who don’t want to spend an hour listening to our discussion, I’ve typed up a brief summary of the questions we attempted to tackle in our discussion and the various arguments we raised. My apologies if I’ve mischaracterized any arguments or statements — if you want to know what was actually said, go listen to the whole interview!

  • What role should government play in regulating the Internet? I argue its proper role is to enforce voluntary arrangements (Terms of Service) and, when appropriate, enforce civil judgments against firms that have broken their promises. Boyle, on the other hand, argues that government should enforce not only contracts but also net neutrality rules because last-mile Internet service is a natural monopoly and consumers often don’t understand what they’re getting, which means that socially desirable contracts aren’t likely to emerge. I respond by citing Thomas DiLorenzo’s critique of the natural monopoly hypothesis and pointing out that government has obstructed ISP competition by allocating spectrum inefficiently and imposing excessive costs on wireline ISPs through burdensome rights-of-way and franchising rules.
  • Why did Google retreat on its commitment to net neutrality in joining with Verizon to exempt wireless services from neutrality? Boyle argues it’s because Google realized the future of communications is mobile and believed it needed to compromise with Verizon (America’s biggest wireless carrier). Jones points out that the Google-Verizon proposal isn’t a business agreement, but a compromise designed to address the conflicting interests of various stakeholders. I argue that Google recognized that government discrimination among competing business models and platforms is a greater danger to consumers than provider discrimination, and that innovation truly occurs when ‘walled gardens’ such as the iPhone co-evolve with open platforms like Android — the “Yin and Yang” of innovation, as Bret Swanson puts it). Boyle argues that proprietary platforms and exclusionary deals between content and service providers preclude disruptive innovation and digital generativity. He cites the financial crisis as an example of inadequate regulation resulting in poor outcomes that might have not have occurred had there been greater oversight.
  • Does collusion among large, powerful Internet corporations help or harm consumers and innovation? Jones cites Adam Smith’s The Wealth of Nations in arguing that, without government regulation, mega-corporations will collude and carve up the marketplace, hindering innovation and progress. I argue that leaving companies free to try to “carve up markets” actually spurs beneficial competitive responses and promotes destructive market entry, even if the process isn’t always pretty. I argue that the forces arrayed against today’s major companies–competitors, consumers, suppliers, downstream partners–make it impossible for any entity or group of entities to engage in any truly abusive practices without suffering harsh punishment.
  • Will entrepreneurs and innovators even be able to get off the ground if corporations have unlimited control over Internet applications and content? I argue that government policies, such as the DMCA’s anti-circumvention provisions, are a major part of the problem because they distort natural market outcomes and prop up bad business models. Boyle agrees that these provisions are seriously problematic, calling DMCA a “lawyers’ full employment act.” He points out that many of the most important innovations of the last couple of decades — Google, Facebook, Twitter, and so forth — came about precisely because of the Internet’s openness and dynamism. I argue that the openness that characterizes the Internet is indeed desirable in many ways, but that voluntary institutions can offer open platforms without being forced to do so by government. I point out that network operators who hinder the value of the content that traverses their pipes do so at their own peril, and that infrastructure and content companies actually have a symbiotic relationship, rather than an adversarial one. Jones argues that because many ISPs are also content companies, they have an incentive to privilege their own content at the expense of competing offerings. I point out that consumer demand for Internet video outlets (i.e. YouTube and Hulu) deters providers from slowing down Internet-delivered content. Boyle argues that the continued existence of the open Internet is crucial in ensuring that the ‘walls’ that enclose walled gardens don’t grow too tall.
  • Shouldn’t we treat the Internet like a public utility — a road on which all can travel? I argue that treating the Internet like a public utility, like we already treat roads, raises the dilemma of the tragedy of the commons. I point out that many private roads already exist today without the ‘tollbooths’ that neutrality advocates fear. Jones points out that the real tragedy is one of unregulated commons which lack adequate rules. Boyle argues that the economics of physical property (scarce goods) cannot readily be mapped to networks and calls the Internet a “comedy of the commons” (borrowing from Carol Rose). I argue that government-run commons have a poor track record, from highways to the wi-fi band, and that the success of network industries requires smart investment and innovation that government isn’t well-equipped to deliver. Boyle argues that not all resources must be owned if they’re to be efficiently utilized, citing the emergence of free trade with India and China in the 1700s and the subsequent collapse of state-chartered trading monopolies. Boyle argues that tomorrow’s “next great thing” may never emerge if the openness of today’s Internet isn’t enshrined in regulation.

The so-called financial “reform” bill backed by President Obama gives federal bureaucrats new powers over the Internet, while doing nothing about the corrupt government-backed mortgage giants that spawned the financial crisis.

For example, “the bill contains provisions that would put the Federal Trade Commission in position to start issuing rules on Internet transactions that would not only slow down business growth but also have no relevance at all to the financial collapse that prompted the bill.”

Meanwhile, the bill does nothing to reform the government-sponsored mortgage giants Fannie Mae and Freddie Mac, admits Obama’s Treasury Secretary, tax cheat Timothy Geithner, even though he admits that “Fannie and Freddie were a core part of what went wrong in our system.“ Worse, the Obama administration lifted the $400 billion limit on bailouts for Fannie and Freddie, so that they could continue to buy up junky mortgages at taxpayer expense, and showered their executives with $42 million in compensation.  The Obama Administration is now expanding the bailouts of these mortgage giants so that they can reduce the payments of deadbeat mortgage borrowers.  (At the direction of the Obama administration, Freddie Mac is now running up $30 billion in losses to bail out mortgage borrowers, some of whom have high incomes.  Federal regulators sought to make Freddie Mac hide the resulting losses from the SEC and the public.)

The bill will also enrich the Wall Street firm of Goldman Sachs, recently accused of fraud, which bankrolls liberal lawmakers.

Government pressure on banks to make risky loans was a key reason for the mortgage meltdown and the financial crisis.  If Obama has his way, that pressure will increase.  The House earlier approved Obama’s proposal to create a politically-correct entity called the Consumer Financial Protection Agency. “The agency would be in charge of enforcing the Community Reinvestment Act, a law that prods banks to make loans in low-income communities.”  It would do so without regard for banks’ financial safety and soundness, even though the Community Reinvestment Act was a key contributor to the financial crisis.

So, too, were the government-sponsored mortgage giants, Fannie Mae and Freddie Mac.  They helped spawn the mortgage crisis by acting as loan toilets, buying up risky mortgages and thus creating an artificial market for junk.  “From the time Fannie and Freddie began buying risky loans as early as 1993, they routinely misrepresented the mortgages they were acquiring, reporting them as prime when they had characteristics that made them clearly subprime.”

Why did they buy these risky loans?  They put up with Clinton-era affordable-housing regulations that required them to buy up lots of risky loans, in order to curry favor on Capitol Hill and thus retain their annual $10 billion in tax and other special privileges (which they possessed owing to their status as “Government-Sponsored Enterprises” or GSEs). They paid their CEOs millions in the process, and engaged in massive accounting fraud–$6.3 billion at Fannie Mae alone–to increase the size of their managers’ bonuses.  As GSEs, they were exempt from the capital requirements that apply to private banks, so they did not have enough reserves to cover their losses when their mortgages started defaulting.

Banking expert Peter J. Wallison, who prophetically warned against the risky practices of Fannie Mae and Freddie Mac for years, says that Obama’s proposals will lead to “bailouts forever” and give big, politically-connected banks that are “too big to fail” the ability to drive smaller rivals out of business at the expense of consumers and taxpayers.  His colleague Alex Pollock notes that Obama has not lived up his administration’s claims that it would back reform of Fannie Mae and Freddie Mac.

Obama claims that it will not lead to more bailouts, but even congressional Democrats admit that it will.  As Congressman Brad Sherman (D-Calif.) admitted, the “bill has unlimited executive bailout authority…The bill contains permanent, unlimited bailout authority.”

I was having extreme itching in my toes that I’ve never experienced before. I reconstructed the circumstances under which it arose, plugged them in, and out popped this. (See inset for a somewhat worse case than I have.)

Chilblains is a perfect fit. Hits me after I exercise, because that’s when my feet suddenly go from nippy (I keep the temp down to save money) to very warm. (Mind you, had it proved to be an STD I wouldn’t be blogging on it.)

Irritating as hell, but nobody dies from it. And I did save a $30 copay at the podiatrist plus the time to see him, and he wouldn’t have been able to help me anyway.

On much more serious matters, I used the Internet to diagnose my wife’s celiac disease after three different gastroenterologists failed to do so. And I found out why a friend was having double menses, after at least one OB/GYN had failed to diagnose her.

I suppose in the wrong hands the Internet can backfire and give you “Medical Student Syndrome,” in which you become convinced you’re dying from three different diseases. But I seem to be immune to that, if you’ll pardon the expression.

Internet access is not a right. It is a privilege; one that we pay for. FCC Chairman Julius Genachowski, while not explicitly demanding high-speed Internet access for all Americans did tip-toe toward that ledge in recent comments, in which he noted the importance of high-speed broadband Internet in economic development.

Pointing out that the United States ranks far behind several other nations in Internet speeds, Genachowski revealed a major goal outlined in the broadband plan–to provide speeds of 100 megabits per second (Mbps) to 100 million households by 2020. He noted that other countries have already benefited economically from national broadband, citing one example in China.

“Look at Shenzhen, China,” he said in his speech. “In the 1980s, it was a fishing center. Today, it is a city of 12 million that produces about 25 percent of the world’s cell phones.”

Sure, America is in a tight spot right now and economically speaking we might be experience less growth than China, but that isn’t necessarily a bad thing and anyway do we really want to emulate China? Do we want the government to filter out websites it doesn’t like and throw bloggers in jail for talking about things it doesn’t want us to discuss? Do we want to erode property rights and contract law?

Genachowski seems to believe that Internet access is a root cause of prosperity, employment, and economic growth. While high-speed Internet access certainly improves the efficiency of job searches, information gathering, and advertising, the reason Internet technology has developed so quickly, become ingrained in our society, and dropped precipitously in price is because of competition and the freedom to experiment. Internet technology has become more available and cheaper precisely because it is not free.  The money consumers pour into the latest technological advances drives competition, innovation, and cost cutting. Simply demanding more access to broadband may result in  more folks having the Internet, but it will likely also bring innovation to a crawl or a grinding halt. As I have noted in previous posts the way to increase access to high-speed Internet it not through regulation and government intervention, but rather by protecting the rights of tech companies and allowing them the freedom to develop and market their products as they choose.

picture via China Blawg

Creative destruction is never easy for an economy to digest, especially when the industry involved has an exceptionally loud megaphone to amplify its screaming. In a report released on Monday, former Washington Post editor Leonard Downie Jr. (with co-author Michael Schudson) insists that Americans take “collective responsibility” for fostering journalism and news reporting (saving unprofitable, poorly-managed news outfits). Of course, Downie doesn’t directly ask citizens for money – that would be uncouth. Instead, he suggests that universities and nonprofits, internet service providers and telecoms, and (of course) the government cough up the dough.

Downie’s idea of putting news in the hands of universities is destined to fail. Calling on universities to become news institutions is asking already-hard-up-for-cash colleges to take on a responsibility for which they have absolutely no obligation. Universities’ core function is to transform high school graduates into employable professionals or academic researchers (granted, some colleges and certain disciplines achieve this end better than others). Outside of that, many universities already support student journalism in the form of campus newspapers and radio stations. Some student journalists even go as far as to report on local and state issues. However, student reporters can only do so much, and in the wake of this year’s tuition hikes, taking on the responsibilities of failed newspapers is an expense that most public universities can’t afford.

Outrageously, Downie also wants to put telecoms on the hook for bailing out reporting, suggesting that the FCC collect fees from internet service providers to be used for a national “Fund for Local News.” He’s blind to the fact that telecoms and ISPs have done nothing but help disseminate news and information. There is more reporting, more information, more news available to us today than there ever has been in the history of civilization. It’s true that there’s a lot of garbage out there, but there’s a lot of very good online journalism as well. Nearly everything published online is subject to peer-review from a massive amount of people, and the success of sites like Wikipedia are proof that accountability, credibility, and accuracy matter just as much online as they do offline.

Downie’s most unbelievably bad idea is that the government should save journalism by fixing the tax code so that newspapers can operate as nonprofit entities. Whether the government directly bails out big newspapers or allows them nonprofit status, the result is the same: tax money doled out to one group has to be taken from another. But setting aside arguments against higher taxes, there’s an even more important question here: don’t these whining establishment journalists realize that government-supported journalism completely goes against the very idea of the 4th estate, the estate that Burke deemed “more important than them all?” The press are supposed to be the good guys, the ones keeping their eyes on the government, not the guys asking for government handouts. Only a fool would think that direct subsidies or preferential tax status won’t come with any political sanctions, explicit or implied.(And this administration isn’t above threatening legal action against companies that say things it doesn’t like).

It’s no secret that “Big Journo” can’t survive in the information age with its current business model. In his recent WaPo column, Downie proclaims that “preserving independent, original, credible reporting” is paramount to maintaining civil society. Yet his proposed methods for doing so are so far out of line with that goal that it calls his credibility into question, and instead makes him look like a shill for the big papers. CEI’s own Iain Murry explains the situation best: “American society can step in to preserve journalism by buying the papers. If they don’t, they have already said that they don’t want to preserve journalism as it stands. If a paper falls on the doorstep, and no one reads it, does it have a point?”

This week, the New America Foundation called for government-mandated “Truth-in-Labeling” from the nation’s broadband service providers. They’ve even created a mock-up of what they think such a disclosure form should look like. In addition to fees, service limits, and contract terms, NAF would like the disclosures to include information such as minimum reliability, maximum latency, and a service guarantee.

While it’s true that the actual speed a user experiences is often a fraction of the advertised speed, this isn’t secret knowledge. Internet companies oversubscribe their networks – that is, they put more people on one connection than what the router could handle at one time. Because, on average, not all customers will be requesting downloads from the network at the same time, ISPs are able to maximize efficiency and minimize the cost to consumers this way. When this pricing/advertising scheme became standard practice, the most common services were web browsing and email, two activities that do not rely on constant data downloading. Today we live in the era of online video games, streamable video, and internet telephony. However, most ISP’s already provide dedicated video and voice services (i.e. cable TV and phone). Online gamers are among the most technoligically-savvy consumers; presumably, they know what grade of internet access will suit their needs. While most consumers don’t know the exact data rate that they’re getting, they do know that 50 Mbits/second is faster and costs more than 2 Mbits/second, which is faster and generally more expensive than 784 Kbits/second. For less knowledgeable  users, “Broadband” is fast internet. Above a certain limit, it’s becomes difficult for humans to perceive the difference between “fast” and “faster.”

NAF’s demands for the disclosure of certain technical aspects are also unnecessary. Minimum reliability is problematic because some broadband technologies are less reliable than others. For example, satellite internet connections are known to be affected by interference from weather and other unpredictable environmental conditions. Maximum latency can be affected by many different factors, enough that giving a “maximum” amount of time (even if it only occurs 1% of the time) could force companies to cast their own service not in a “realistic” light, but in a poor light. A service guarantee would mean that an ISP would refund customers for any amount of time that their connection is disrupted. In my personal experience, home broadband connections aren’t usually out for more than a few hours. A three-hour outage on a $49.99/month internet service would equal roughly a $0.21 refund per consumer.

The folks at NAF may mean well, but you know what they say about good intentions. Government micromanagement of ISPs’ advertising practices is another small step in the erosion of the real free nature of the ‘net.

Your host Richard Morrison welcomes returning guest co-host William Yeatman and special guest commenter Ryan Radia to the program for Episode 61 of the LibertyWeek podcast. We start with the FCC’s just-announced proposal for “net neutrality,” Treasury documents that reveal the true cost of cap-and-trade legislation and the plan for getting over California’s great depression. We then move on to the G20 Summit’s potential path to prosperity and the ever-expanding scandal that is ACORN.

This story just hit the Drudge Report’s front page.  Declan McCullagh at CNET writes today about the latest revision of S.773, a bill that would give the president “emergency control” of the internet in case of a “cybersecurity emergency.”  Wayne Crews, CEI Vice President for Policy,  released a statement on the naming of the cybersecurity chief and wrote an article on this back in May.  See an excerpt below:

Policy makers should avoid collectivizing and centralizing risk management, especially in frontier industries like information technology. Yes, we need government-backed “police forces” to protect private networks and infrastructure, but we also need the “barbed wire” and “door locks” which private companies continuously compete with each other to improve. When government overrules market competition for information/electronic security, it creates barriers to innovative private security solutions. We become less secure, not more.

Some reports indicate that the administration and Congress are seeking government authority over private networks-like power grids and computer networks-in the event of breaches. The very term “cyber” at once means everything and therefore nothing: American telecommunications, the power grid; virtually anything networked to some other computer is fair game to a new czar. The dominant tenor of the cybersecurity debate today is toward greater federal control over private infrastructure.

Washington has a proper role. It entails protecting government’s own networks and setting internal security standards, not regulating private networks. It involves arresting computer criminals and avoiding creating threats to data security in the form of data retention mandates, national ID schemes, proposals to re-regulate encryption, and czars that set terms for all they survey.

Security is an industry, and industries-and abstract concepts like “technology”-do not need czars in Washington. Innovation in information security and privacy protection do not flow from D.C. Rather, a government tech czar would likely grow in “stature” as a target for lobbyists. A federal technology chief could all too easily become an agent for establishing government authority over frontier technologies.

Both suppliers and customers increasingly demand better security from all firms. Improving private incentives for information sharing is at least as important as greater government coordination to ensure security and critical infrastructure protection. That job will entail liberalizing critical infrastructure assets-like telecommunications and electricity networks-and relaxing antitrust constraints so firms can enhance reliability through the kind of “partial mergers” that are anathema to today’s antitrust enforcers.

Private cybersecurity initiatives will gradually move us toward thriving liability and insurance markets for cutting-edge sectors. Heavy-handed cyber-czar gestures and legislation cannot address the lack of authentication and inability to exclude bad actors that is at the root of today’s cybersecurity problems.

Like everything else in the market, security technologies-from biometric identifiers to firewalls to encrypted databases-and cybersecurity services-from consulting to liability insurance to network monitoring-benefit from competition. Corporate information and security officers deal with cybersecurity concerns every day. It’s not clear what government could really fix-but it could break a lot.

See the statement release here.

Your host Richard Morrison welcomes back returning guest co-hosts Michelle Minton and Jeremy Lott for Episode 54 of the LibertyWeek podcast. We start with ominous hints of new taxes, California state employees making strike threats and the possible antitrust implications of the Microhoo partnership. We continue with a double-dipping pay scandal, the suppression of dissent in Venezuela and some fully transparent Olympic News.