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TL;DR Section 230 of the Communications Decency Act has come under close scrutiny. Section 230 provides important immunity to online platforms for the content of third-party users.
Section 230 of the Communications Decency Act has come under close scrutiny. Section 230 provides important immunity to online platforms for the content of third-party users. Section 230 also guarantees legal immunity when platforms moderate objectionable content on their services: so-called “good samaritan” immunity.
Reform efforts are aimed at creating more carve-outs to Section 230 immunities, and limiting the scope of content platforms can moderate.
Many of these proposals would make bad policy by creating disincentives to moderate content in order to avoid a flood of litigation.
Read the full explainer here.
TL;DR Many competition agencies are considering data portability mandates to increase competition. These would require companies to make customers’ data available to move to other services, or to make their services interoperable with others so that users could share their data between different services on an ongoing basis.
Many competition agencies are considering data portability mandates to increase competition. These would require companies to make customers’ data available to move to other services, or to make their services interoperable with others so that users could share their data between different services on an ongoing basis.
Data portability mandates can be costly and cumbersome for service providers, and provide little benefit to users who do not end up using them. This can mean that innovative businesses end up being less able to control and improve their products. Thus data portability mandates may often end up being either too vague to be useful, or too costly relative to the marginal benefits they deliver.
Presentations & Interviews Starting with the new antitrust investigation from state attorneys to kick off their discussion, Geoffrey Manne and Hal Singer take part in a conversation moderated . . .
Starting with the new antitrust investigation from state attorneys to kick off their discussion, Geoffrey Manne and Hal Singer take part in a conversation moderated by Adam Thierer about “Techlash”. This discussion is the second episode in the Federalist Society’s Tech Roundup podcast series. The full episode is embedded below
TOTM We explain how display advertising fits in the broader digital advertising market, describe how display advertising works, consider the main allegations against Google, and explain why Google’s critics are misguided to focus on antitrust as a solution to alleged problems in the market.
This week the Senate will hold a hearing into potential anticompetitive conduct by Google in its display advertising business—the “stack” of products that it offers to advertisers seeking to place display ads on third-party websites. It is also widely reported that the Department of Justice is preparing a lawsuit against Google that will likely include allegations of anticompetitive behavior in this market, and is likely to be joined by a number of state attorneys general in that lawsuit. Meanwhile, several papers have been published detailing these allegations.
Read the full piece here.
Presentations & Interviews TPRI Conference Slides on Killer Acquisitions & Kill Zones
ICLE’s Geoffrey Manne, Dirk Auer, and Alec Stapp presented at the Technology and Declining Economic Dynamism conference, hosted by Boston University’s Technology and Policy Research Initiative, on the topic of acquisitions by dominant firms. Full video of the panel can be found here, while the the presentation slides are here.
ICLE Issue Brief While data portability may seem like an attractive option in certain markets, experience suggests it is not simple to impose even in cases where the trade-offs seem small.
Lawmakers and regulators are increasingly exploring the imposition of data portability requirements on technology companies, in particular large digital platforms. These would require them to allow users to download their data from those services and/or have it sent to another service on their behalf, either on a one-off or ongoing basis, depending on the proposal.
In this comment, we explore the calls for data portability that arise from distinct and often opposing parts of antitrust law and competition policy, privacy law, and data security. Specifically, we focus on claims that data portability mandates can be used to increase market competition, considering the potential costs and benefits of such requirements, and the relationship between data portability as a pro-competition tool and other moves towards stronger laws governing user privacy.
We begin by discussing the concepts involved in mainstream proposals for data portability. We then examine the various competition issues involved in calls for data portability and discuss the case for and against data portability in these cases. Finally, we discuss in detail the UK’s experience with its Open Banking mandate—the most comprehensive data sharing scheme imposed to effect a compe- tition objective—and assess its effects, both intended and unintended.
Read the full brief here.
TL;DR Criminal justice reform efforts should focus on ending qualified immunity and restoring the constitutional balance between empowering officers to protect the public while also deterring violations of civil liberties.
“Qualified immunity” is a doctrine that protects government officials, such as police officers, from civil rights lawsuits when they are acting in their official capacity. Criminal justice reform efforts should focus on ending qualified immunity and restoring the constitutional balance between empowering officers to protect the public while also deterring violations of civil liberties.
In an age of unrest due to recorded police misconduct, there are calls for criminal justice reform. The debate has primarily focused on slogans, such as Black Lives Matter versus Blue Lives Matter, or Defund the Police versus Defend the Police. While there have been many proposals for outlawing particular police practices and increasing training, one of the most important aspects of holding police accountable for misconduct has received more limited attention: civil rights litigation.
Civil rights lawsuits have limited ability to hold officers accountable due to the doctrine of qualified immunity. In a civil rights lawsuit, the goal is to make the victim (or their families) of a rights violation whole by awarding monetary damages. But in many cases, qualified immunity protects police from liability by imposing nearly insurmountable procedural hurdles. This protects a large swath of police misconduct from accountability by civil rights lawsuits.
TL;DR While there are possible useful reforms to be made to Section 230, forcing major changes to an important law on the basis of a political quarrel would let petty politics reshape one of the most important laws that governs the Internet.
President Trump recently demanded the National Telecommunications and Information Administration (NTIA) request that the FCC undertake a major reinterpretation of CDA Section 230 to make it more difficult for digital platforms to receive liability immunity for the content of third parties and for their own content moderation decisions. The FCC has granted the petition and is seeking public comment.
The petition is driven by a political dispute between the Administration and the platforms. What’s more, the Administration is evading constitutional restrictions in order to cajole the FCC into serving its ends.
While there are possible useful reforms to be made to Section 230, forcing major changes to an important law on the basis of a political quarrel would let petty politics reshape one of the most important laws that governs the Internet.
Regulatory Comments The central question presented by this docket is: How does the FCC properly incentivize the economically efficient rollout of broadband on existing infrastructure in order to optimize the process to ensure deployment as quickly as possible?
Thank you for the opportunity to comment on this important, though often underappreciated, issue. All parties concerned believe that rural broadband connectivity must remain a top priority for the FCC as it fulfills its mandate to connect all Americans. Finding an equitable and cost-effective way to share the expense associated with pole attachments is part and parcel of that process. The challenge confronting both the FCC and industry alike is how best to realize this goal in a timely and economically sustainable fashion.
The pace of broadband rollout is contingent upon its cost. The more expensive deployment becomes, necessarily, the more difficult it is to realize sustainable profits on that deployment. This dynamic invariably leads to a more selective use of scarce resources to the detriment of rural deployment.
Thus, the central question presented by this docket is: How does the FCC properly incentivize the economically efficient rollout of broadband on existing infrastructure in order to optimize the process to ensure deployment as quickly as possible?
Current estimates suggest that as much as twenty-five percent of the cost of broadband deployment in rural areas comes from attachers dealing with pole replacement and upgrade issues.[1] That’s a massive expense.
As the NCTA noted in its petition, part of the cost of pole replacement arises as a result of pole owners allowing some substantial portion of their pole inventory to remain in use after their useful life has ended.[2] When attachers, like broadband providers, endeavor to add their equipment to those poles, the owners seek to offload the cost of replacing or repairing the poles onto the attachers.[3] In other cases, pole owners make demands for “betterment” of existing poles that are not quite past their useful lifespan before new equipment can be installed.
The net effect of these inequitable practices is the unreasonable enrichment of pole owners, not just at the expense of attachers, but also at the expense of consumers – since broadband providers must necessarily pass along at least some of this cost. This is not a surprise. For example, a review of the pass-through literature published by the United Kingdom’s Office of Fair Trading, reports that 56-70% of increased wholesale price increases are passed through to consumers and 5.0-6.4% of increased commodity prices are passed through to consumers.[4]
And even where the cost is partially internalized by the broadband provider, this cost-shifting from pole owners to attachers forces a tradeoff for attachers which, in the end, results in slower and more expensive rollout. This ultimately results in rural customers receiving speed upgrades more slowly than their suburban and urban counterparts, while facing potentially higher prices when those upgrades happen.[5]
Allowing this situation to go on only encourages pole owners to continue to shift costs and introduce delays, to the detriment of consumers. Both the current administration, as well as the Biden campaign have announced 5G deployment as an important priority.[6] This bipartisan vision can only be realized if broadband is deployed in a cost-effective manner — including by requiring equitable sharing of pole replacement costs.
Continuing to permit pole owners to shift the cost of replacing their property onto broadband providers and other attachers violates both legal and economic logic.
First, Section 224 of the Communications Act requires that the FCC enforce “just and reasonable” terms for pole attachment requirements:
[T]he Commission shall regulate the rates, terms, and conditions for pole attachments to provide that such rates, terms, and conditions are just and reasonable[.][7]
If pole owners are able to shift all improvement costs of their poles onto attachers, pole owners are forcing others to pay to replace their own property—a clear violation of a requirement that pole attachment conditions are “just and reasonable.”
Second, even a rudimentary understanding of economics demonstrates that broadband deployment will become more expensive and slower if pole owners are not required to equitably share in the costs of replacing their own property. A simple and straightforward illustration shows why requiring firms to pay the entire cost of a pole replacement will result in lower replacement rates than a policy in which the costs are equitably distributed.
Consider three hypothetical companies deciding how many polls to install. Each company (A, B, and C), values the marginal benefit of each poll differently. For example, Company A values the first pole at $3,000 while Company B values the first pole at $2,500. Each company faces a diminishing marginal benefit: the first poll is more valuable than the second, and so on.
Assume the cost of installing a pole is $4,000 and poles are a public good, in which case the market “demand” is given by the vertical summation of each company’s marginal benefit schedule.[8] Combined, the companies value the first poll at $7,500. If the first pole were installed, the three companies would have a surplus of $3,500 ($7,500 – $4,000).
But, no single firm values the first poll at $4,000. Thus, in the absence of coordination, no polls would be installed.
However, if the installation cost is split three ways, the cost to each company would be $1,333 per pole. Because each company’s share of the cost is less than its marginal benefit, each company would enjoy a surplus from installing the first poll. So, at least one poll will be installed.
It’s also possible that coordination could allow for the installation of a second poll. If the cost is split evenly across the three firms, Companies A and B would enjoy a surplus, but the cost to Company C would exceed the benefits it would receive. With coordination, some of the benefits to A and B could be used to compensate C sufficiently to entice C to participate.
Moving from the example back into concrete terms, two lessons may be extrapolated. First, that unappreciated pole costs for poles not yet ready for replacement should be shared between pole owners and attachers and, second, that pole owners should be compensated equitably for the cost of replacement of end-of-life inventory, and should not reap a windfall. By connection, new attachers should be responsible for the incremental costs associated with attachment.
Thus, on the complementary bases of the facial legal reasoning of the NCTA petition and straightforward economic judgment, we support the recommendations and conclusions of the NCTA’s petition to the Commission.
On a related basis, we believe that a system should be employed to ensure that cases and controversies involving access to, and the costs of replacing, poles are resolved in an expeditious manner. Pole attachment issues are ripe for such treatment by virtue of the relatively limited universe of facts and analysis that may be determinative in related disputes. What’s more, a system already exists within the remit of the FCC to accomplish that objective in the form of Accelerated Docket Proceedings, which find resolution within 60 days.[9] The goal of closing the digital divide should not be subverted by largely superfluous procedural wrangling and, to that end, the Commission should direct staff to place more pole attachment disputes on the accelerated docket.
The changes proposed by NCTA are “just and reasonable” and, therefore, comport with the requirements of Section 224. Moreover, they also comport with sound economics, and will serve to further the timely deployment of broadband to all Americans. It is not every day that the FCC can undertake such seemingly small steps while having such an outsized impact on closing the digital divide.
[1] Petition of NCTA for Expedited Declaratory Ruling, In the Matter of Accelerating Wireline Broadband Deployment by Removing Barriers to Infrastructure Investment, WC Docket No. 17-84 (July 16, 2020), at 5-9, available at https://www.ncta.com/sites/default/files/2020-07/071620_17-84_NCTA_Petition_for_Declaratory_Ruling.pdf.
[2] Id.
[3] Id.
[4] RBB Economics, Cost Pass-through: Theory, Measurement, and Potential Policy Implications
A Report Prepared for the Office of Fair Trading 156-57 (Feb. 2014), available at https://assets.publishing.service.gov.uk/government/uploads/system/uploads /attachment_data/file/320912/Cost_Pass-Through_Report.pdf. One reason for the wide variation of pass-through rates is the nature of competition and vertical arrangements that govern the relationship between upstream and downstream firms.
[5] Hearing Before the Senate Committee on Commerce, Science, and Transportation on Oversight of the Federal Communications Commission, 114th Cong. (2015) (testimony of Commissioner Ajit Pai), available at https://www.govinfo.gov/content/pkg/CHRG-114shrg98498/html/CHRG-114shrg98498.htm (Because of increased fees on broadband providers, “the reduction competition that Title II is going to work across this country, but especially in rural America, is going to be substantial. You’ve heard our exchanges about how some of these smaller ISPs, in particular, are going to have to either, you know, suck up the cost or go out of business altogether.”)
[6] See White House, President Donald J. Trump Is Unleashing America’s 5G Potential (Aug. 10, 2020), available at https://www.whitehouse.gov/b7riefings-statements/president-donald-j-trump-unleashing-americas-5g-potential/ ; see also Joseph R. Biden, Jr., Why America Must Lead Again, Foreign Affairs (Mar./Apr. 2020), available at https://www.foreignaffairs.com/articles/united-states/2020-01-23/why-america-must-lead-again
[7] 47 U.S.C. § 224 (2018).
[8] This is in contrast to the market demand for private goods, which is the horizontal summation of individual demand schedules.
[9] 47 C.F.R. § 1.736(a) (2018).
