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The FCC’s proposed broadband privacy rules: The harmful effects of regulating without evidence or analysis PDF Print E-mail

Last week the International Center for Law & Economics filed comments on the FCC’s Broadband Privacy NPRM. ICLE was joined in its comments by the following scholars of law & economics:

  • Babette E. Boliek, Associate Professor of Law, Pepperdine School of Law
  • Adam Candeub, Professor of Law, Michigan State University College of Law
  • Justin (Gus) Hurwitz, Assistant Professor of Law, Nebraska College of Law
  • Daniel Lyons, Associate Professor, Boston College Law School
  • Geoffrey A. Manne, Executive Director, International Center for Law & Economics
  • Paul H. Rubin, Samuel Candler Dobbs Professor of Economics, Emory University Department of Economics

As we note in our comments:

The Commission’s NPRM would shoehorn the business models of a subset of new economy firms into a regime modeled on thirty-year-old CPNI rules designed to address fundamentally different concerns about a fundamentally different market. The Commission’s hurried and poorly supported NPRM demonstrates little understanding of the data markets it proposes to regulate and the position of ISPs within that market. And, what’s more, the resulting proposed rules diverge from analogous rules the Commission purports to emulate. Without mounting a convincing case for treating ISPs differently than the other data firms with which they do or could compete, the rules contemplate disparate regulatory treatment that would likely harm competition and innovation without evident corresponding benefit to consumers.

In particular, we focus on the FCC’s failure to justify treating ISPs differently than other competitors, and its failure to justify more stringent treatment for ISPs in general:

In short, the Commission has not made a convincing case that discrimination between ISPs and edge providers makes sense for the industry or for consumer welfare. The overwhelming body of evidence upon which other regulators have relied in addressing privacy concerns urges against a hard opt-in approach. That same evidence and analysis supports a consistent regulatory approach for all competitors, and nowhere advocates for a differential approach for ISPs when they are participating in the broader informatics and advertising markets.

With respect to the proposed opt-in regime, the NPRM ignores the weight of economic evidence on opt-in rules and fails to justify the specific rules it prescribes. Of most significance is the imposition of this opt-in requirement for the sharing of non-sensitive data.

On net opt-in regimes may tend to favor the status quo, and to maintain or grow the position of a few dominant firms. Opt-in imposes additional costs on consumers and hurts competition — and it may not offer any additional protections over opt-out. In the absence of any meaningful evidence or rigorous economic analysis to the contrary, the Commission should eschew imposing such a potentially harmful regime on broadband and data markets.

Finally, we explain that, although the NPRM purports to embrace a regulatory regime consistent with the current “federal privacy regime,” and particularly the FTC’s approach to privacy regulation, it actually does no such thing — a sentiment echoed by a host of current and former FTC staff and commissioners, including the Bureau of Consumer Protection staff, Commissioner Maureen Ohlhausen, former Chairman Jon Leibowitz, former Commissioner Josh Wright, and former BCP Director Howard Beales.

Our full comments are available here.

FCC's proposed set-top box rules would violate US free trade agreements PDF Print E-mail

This week, the International Center for Law & Economics (ICLE) submitted Reply Comments to the FCC in which we highlight a crucial but overlooked defect of Chairman Wheelers proposed set-top box rules: They would violate at least nine separate United States free trade agreements.

Multiple U.S. free trade agreements contain provisions that prohibit the government from permitting the unauthorized retransmission of copyrighted television shows over the Internet (e.g., Article 18.4(10)(b) of the Korea-U.S. Free Trade Agreement and Article 17.4(10)(b) of the U.S.-Australia Free Trade Agreement).

The proposed set-top box rules would permit precisely such unauthorized retransmissions. What’s more, as discussed in our initial Comments, compliance with the rules would require MVPDs to facilitate the resulting copyright infringements, making them secondarily liable under U.S. copyright law.

As Geoffrey Manne, ICLE Executive Director said, “The FCC is not free to violate treaties that bind the U.S. government. Chairman Wheeler’s proposed rules would require U.S. companies to facilitate the Internet retransmission of copyrighted content in violation of U.S. obligations under at least nine free trade agreements -- to say nothing of U.S. copyright law.

“The proposed rules are aimed at enabling devices and apps to provide copyrighted TV shows in precisely the manner prohibited by a number of U.S. free trade agreements.” said Kristian Stout, ICLE Associate Director for Innovation Policy. “This could subject the United States to protracted international trade disputes, and, potentially, to the reimposition of tariffs or other trade barriers under the treaties.”

ICLEs initial Comments explored the disconnect between the stated goal of set-top box competition and the proposed mechanism to implement it. We analysed the unintended results, the vast underestimation of the existing vibrant video marketplace, and the fatal inconsistencies in the logic used to justify the Chairman’s set-top box NPRM.

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