The last afternoon of Freedom2Connect opened with a political panel featuring Ray Gifford, who heads the Progress & Freedom Foundation, a conservative tech think tank, and Gigi Sohn, who runs Public Knowledge, a liberal advocacy group covering the same subjects.
Isenberg (I)– I was looking forward to a conversation between Jeff Jarvis and Ray. Jeff had a health problem.
First describe PFF.
Gifford (G) – we’re conservative-libertarian
I – You care about having a healthy robust network. Why?
G – Our board chairman, Jay Peters, who was at Hewlett-Packard in the late 80s, thought connected computing was the harbinger of an economic, political and social revolution. That’s bearing fruit. Those waves of creative destruction are happening before our eyes and will continue to happen.,
I – Does PFF put as much weight on the creative side as the destructive side? How do you see creative destruction?
G – We can’t quite make out what is going on. I think most of what is happening is creation. The destruction is the old communications monopolies, old cable monopolies. Traditional means of delivering media are gone. It’s good for consumers and for creators.
It presents fundamental problems of what is the business model. In the time of the Internet Bubble, one thing no one figured out was how to monetize and pay for this stuff. That is a fundamental question of network economics I am fascinated by.
I – You have several old monopolies as members.
G – And we love them dearly.
I – But I see Google has joined, and Apple is a member. There must be robust intramural discussion.
G – There is. We find ourselves opposite many of our supporters on some issues. Google and Microsoft aren’t happy with us on net neutrality. On cable franchising our cable people aren’t happy. That’s the problem with being corporate-funded.
My position on network neutrality. The answer is maybe.
I – That seems to be the consensus
G – What I mean by maybe is if you don’t yet know what the business model is. Price differentiation happens. That’s how you recover your fixed costs. Two sided markets often develop. That’s the broadcasting and Google model. We don’t yet know what the model is for more widespread investment in broadband.
On the other side we have a concern about monopoly leveraging. That’s not to say we support monopoly rents.
The answer may be if we have a competition standard that says, are you abusing your market power to harm consumer welfare, as anti-trust does, then you will be sanctioned and regulated. If you’re engaging in pro-competitive price differentiation, that would be OK and you can do it.
I – The economics go by me. What I don’t hear you saying…I hear you talking about economics and efficiency, but I don’t hear you saying what I see in a network, social good, civil rights, robust dialog, empowerment, the ability of everyone having a voice. I hear you talking more in terms of the business model and the markets.
G – There are two arguments for network neutrality, and you made the Larry Lessig one. My answer is a deep distrust of the ability of regulatory institutions, especially the FCC, to do anything right. We’re very hesitant to let the FCC take on a new regulatory power because we can see throughout its history that it tends to behave lawlessly, it tends to not constrain monopoly power, it tends to serve the constituencies that plead before it, and it tends not to meet the ideal of a progressive era regulator – they don’t act in the public interest, but in private poltiical interests.
What we first want to try is the idea that markets will get us more and better democratic institutions than regulators will. When regulators step in they may give you a network, but to get their arms around it they have to kill it technologically. What we had to do to make rate-setting coherent.
We need to see how we can get more competition and use markets to bring these values, because in markets we tend to see more of the democratic values we hold dear.
If you want to avoid a net neutrality reform, let’s have spectrum reform. Then our net neutrality problems start to evanesce. With three you feel better, with 4-5-6 you get in pretty good shape.
I was chairman of a regulatory commission in Colorado. I saw we couldn’t make the decisions of the 96 Telecommunications Act. Then I encountered the FCC, the most lawless agency I ever encountered. The DC Circuit confirms my intuition. We need to be cautious before putting faith in the Congress or FCC to do right.
I – I learned at ATT that 80% of the profits come from 20% of the customers. I see the telephone companies regulated badly, they want to do that 20% of capx and then stop. And there’s crazy things like the Universal Service mechanism. Still there has to be a way to serve the other 80%, but I don’t see it happening in the pure capitalist model.
G – In some sense it’s an empirical question. It seems to me that competition does not come to all places at the same time. I’m not sure the demand for multi channel video service is that much less in poor neighborhoods than rich ones. There are satellite dishes in poor neighborhoods, paying $60-80/month.
For competition to work its magic it doesn’t have to be ubiquitous.
AT&T took over TCI and started upgrading for broadband around Denver in early 2000. They did it from the head end. There were gaps where there was only one broadband provider. Some had cable only, some had phone only. Those with just DSL had the same price as those with competition.
Gigi Sohn, Public Jnowledge president
Sohn (S) – We agree on some areas. First government’s role ought to be limited. heavy handed government regulation often favors incumbents. Except I’m not sure they agree with copyright and technology mandates. I’m surprised they haven’t opposed the broadcast flag and plugging the analog hole. That’s the heaviest level of government involvement in keeping an oligopoly strong in the marketplace.
The second point where we agree is the communications laws are out of date. The silo system makes no sense. I admire your digital age communicatoins project, I’d love to do the same thing with copyright.
Where we part ways is where the standard should be. After the Trinko case (Verizon vs. Trinko) gutted antitrust law, so that a monopolist can do anything as long as it’s in its own interest, so antitrust law has been gutted by the Supreme Court. While we are for the light touch, we don’t think government should always stay out.
We think there should be a non-discrimination standard and someone to enforce it.
The third thing we agree on is the Internet has been a terrific driver of economic growth, education, speech and a host of other things – creativity. The Internet is not the be-all, but it’s still pretty damn fantastic. It’s an incredibly empowering mechanism. The difference we have is how do we assure it stays that way? We are in favor of a codified principle of non-discrimination – no one has a better name for it than net neutrality – and we’d like to see people able to file complaints and have them assessed with penalties.
G – On the unfair competition standard, I think there’s more common law antitrust history to that under the FTC Act. We’re just ignoring Trinko and saying the FTC law applies, the unfair compeittion standard that is technologically neutral, after the fact regulation.
If I’m blocking VOIP you can get an injunction then get a time limit on the case. We have to do cases in Colorado in 270 days.
S – One complaint process that looks quite well, works so well that Verizon filed a complaint against Rainbow Media Holdings, because Rainbow programming it wasn’t making available to FIOS on non-discriminatory terms. The 1992 Cable Act requires that vertically-oriented cable operators make their programming available to competitors. How ironic that Verizon sought access to Rainbow’s programming. That’s exactly what we’re looking for. If someone is being discriminated against, file a complaint.
There are models for this complalint process and they work pretty darn well. But I haven’t heard anyone talk about a 10 year rulemaking for net neutrality.
G – I’m the second worst person at PFF to defend the broadcast flag. As a personal matter I heard Mike Godwin speak and learned it has no statutory basis as a legal matter. No orthodoxy – we’re very protestant.
S – We won the case that the FCC has no authority telling mfgs how to build its devices. Now Hollywood and the recording industry are in Congress asking to codify the broadcast flag, essentialy reinstate it. This is a cynical thing.
In November 2003 the FCC decided to implement the broadcast flg. We filed to sue, but they had a certification process where the manufacturers had to get their technologies approved. Despite our lawsuit being pending, they had this process and approved 13 technologies. We won our case and several of the consumer electronics manufacturers who’d gotten certification switched to being pro-broadcast flag, because they’d started manufacturing, an implied recognition that their competitors’ devices were more consumer friendly.
Our filings were taken from Philips, which switched positions.
I -- Do you think it’s good policy for government to dictate how machines are designed and in the process limit the lawful uses to which consumers can use them?
G – All law defines how things are architected. Any legal rules will determine how things are or are not designed. Your liability rule for ISPs -–if you change that rule you have different networks.
S – That’s different from the government saying build things this way to read this series of bits and you shall come to us for permission.
I was on a panel with Slingbox and he said nothing scares a venture capitalits more than seeing on the first page of prospectus must receive government permission.
G – We have said that the state can outlaw burglary tools.
Brad Templeton – That’s not a libertarian position.
G – So what else would you propose for digital media to be broadcast? The real problem is TV, but we won’t go down that path. If I am a content provider, and I have a legitimate concern that my content is going to be pirated, and will lose its value, then what would you propose I do? You can sue anyone, as the RIAA did. The best defense of the broadcast flag is it’s the least-cost way to allow digital content to be widely viewed and protected.
S – The broadcast flag and DMCA are legally indefensible. If you’re going to use DRM put it out there so consumers can express themselves, as they did with the Sony Rootkit. DRM by itself is no more evil than anything else. Bu tif you have mandates consumers can’t express themselves. We’re willing to let people protect their ocntent, and if it’s too draconian people will go to illegal sources.
If you haven’t read the paper by Tim Lee of the Cato Institute about why the anti-circumvention provisions are bad policy, he says they’re like outlawing fence jumping. There may be perfectly legitimate reasons to jump the fence.
S – (Making a pitch for donations and membership) We have memberships, cool t-shirts.
Me (as Gifford was leaving the stage) -- Good thing you didn’t ask about spectrum policy
G -- Privatize it.
Me -- You would have gotten lynched
G -- I know