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Popular Media It would not be reasonable for service providers to be held culpable for every possible misuse of copyright material in the vast amount of user-generated content they . . .
It would not be reasonable for service providers to be held culpable for every possible misuse of copyright material in the vast amount of user-generated content they carry. That would create massive risk of lawsuits, with ill effects for internet users and even for copyright holders who benefit from the legal distribution of their content.
But proper safe harbors should encourage online companies to help prevent copyright content from being improperly disseminated in the first place. For example, such rules could encourage online companies to license content upfront, which they can do more easily than copyright holders can with each of the service providers’ many users.
Read the full piece here.
Scholarship This chapter takes the 2001 D.C. Circuit opinion in Microsoft as an inflection point in digital antitrust enforcement. With that case we can first clearly see all of the various threads pulled together that run through modern antitrust enforcement in high tech cases.
Antitrust enforcement in digital and high-tech markets is not disconnected from traditional antitrust theory or practice. Yet, unique features of firms operating in digital and other high-tech markets can necessitate modification of doctrine. For example, modern antitrust enforcement in digital markets needs to take seriously the presence of network effects in two-sided markets and the procompetitive justifications for various kinds of product design decisions that may otherwise appear to harm competitors under older models of antitrust enforcement. The goal, however, remains enforcement of the consumer welfare standard, even if enforcers and courts must be sensitive to features particular to digital markets.
This chapter takes the 2001 D.C. Circuit opinion in Microsoft as an inflection point in digital antitrust enforcement. With that case we can first clearly see all of the various threads pulled together that run through modern antitrust enforcement in high tech cases. This chapter begins with a brief overview of the precursor cases that informed enforcement up until the late 1990s before devoting attention to Microsoft and the subsequent cases that shape modern antitrust enforcement in digital markets.
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 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).
Regulatory Comments We submit this statement in support of IIPA’s petition to review South Africa’s GSP eligibility in light of South Africa’s failure to provide “adequate and . . .
We submit this statement in support of IIPA’s petition to review South Africa’s GSP eligibility in light of South Africa’s failure to provide “adequate and effective protection” to intellectual property as required by the GSP statute and, in particular, profound concerns with draft legislation that will, if enacted, further erode the protection of intellectual property in South Africa for U.S. and South African creators alike.
While we support IIPA’s petition, we note at the outset our reluctance to take such a position: We believe that trade sanctions are harmful to the country imposing them (and on which they are imposed, of course), and, as far as possible, should be avoided. Both the U.S. and South Africa benefit from the GSP that currently affords South African producers unilateral, tariff-free access to U.S. markets for some goods. As such, we caution that the USTR should withdraw South Africa’s GSP designation only as a last resort.
But we also believe that both the United States and South Africa share a strong interest in sustaining creators through adequate and effective protection of intellectual property, thereby promoting economic development and the production of culturally diverse materials. And, unfortunately, removal of GSP is one of the few tools available to the U.S. to protect the interests of U.S. creators of intellectual property in global markets. The USTR is legally obliged to faithfully discharge its congressional mandate by taking action to defend U.S. intellectual property in accordance with various trade laws, including by ensuring that GSP beneficiary countries provide adequate and effective protection within the meaning of the statute.
In submitting this statement, we are mindful that South Africa’s President has not yet signed into law the Bills that motivated the IIPA’s petition. If he does so, South Africa would fail to meet the conditions for GSP eligibility and USTR will be obliged to revoke all or some of its GSP benefits. We note, however, that numerous local actors have voiced concerns regarding the constitutionality of the proposed legislation and the harm that it will to do to the community of creators in South Africa. It is possible that President Ramaphosa will heed these concerns, reject the draft legislation and send it back to Parliament for reconsideration, with directions to adapt or remove its numerous provisions that conflict with South Africa’s Constitution and the country’s international treaty obligations. So doing could result in a text more consistent with South Africa’s (and the U.S.’s) cultural and economic interests. Most importantly from the perspective of this submission, by rejecting the draft legislation President Ramaphosa would at the very least defer any action on the part of USTR to revoke South Africa’s GSP eligibility.
In short, we argue that:
Scholarship If the Supreme Court’s recent decision in Apple Inc. v. Pepper (Apple) had hewed to the precedent established by Ohio v. American Express Co. (Amex), . . .
If the Supreme Court’s recent decision in Apple Inc. v. Pepper (Apple) had hewed to the precedent established by Ohio v. American Express Co. (Amex), it would have begun its antitrust inquiry with the observation that the relevant market for the provision of app services is an integrated one, in which the overall effect of Apple’s conduct on both app users and app developers must be evaluated. A crucial implication of the Amex decision is that participants on both sides of a transactional platform are part of the same relevant market, and the terms of their relationship to the platform are inextricably intertwined.
We believe the Amex Court was correct in deciding that effects falling on the “other” side of a tightly integrated, two-sided market from challenged conduct must be addressed by the plaintiff in making its prima facie case. But that outcome entails a market definition that places both sides of such a market in the same relevant market for antitrust analysis.
As a result, the Amex Court’s holding should also have required a finding in Apple that an app user on one side of the platform who transacts with an app developer on the other side of the market, in a transaction made possible and directly intermediated by Apple’s App Store, is similarly deemed to be in the same market for standing purposes.
Under the proper conception of the market, it is difficult to maintain that either side does not have standing to sue the platform for alleged anticompetitive conduct relating to the terms of its overall pricing structure, whether the specific terms at issue apply directly to that side or not. Both end users and app developers are “direct” purchasers from Apple—of superficially different products, but in a single, inextricably interrelated market. Both groups should have standing and should be able to establish antitrust injury—harm to competition—by showing harm to either group, as long as they can establish the requisite interrelatedness of the two sides of the market.
As we discuss, such a result would have been consistent with the way antitrust doctrine has long evolved—in both its substantive and its procedural aspects—to reflect new economic knowledge, particularly with respect to such “nonstandard” business models.
Regulatory Comments We begin our analysis of the California Consumer Privacy Act (“CCPA”) with a discussion of the standardized regulatory impact assessment (SRIA) prepared for the AG’s Office by Berkeley Economic Advising and Research, LLC.
We begin our analysis of the California Consumer Privacy Act (“CCPA”) with a discussion of the standardized regulatory impact assessment (SRIA) prepared for the AG’s Office by Berkeley Economic Advising and Research, LLC. The bottom-line cost figures from this report are staggering: $55 billion in upfront costs and $16.5 billion in additional costs over the next decade. The analysis includes large benefits as well, but as we show in the full comments, the actual costs are even higher than the SRIA estimates and the benefits fall far short of making up for those costs.
We also draw on the the early evidence coming out of the EU related to GDPR enforcement and compliance to highlight some potential pitfalls that California is facing. In particular, after its first twelve month period in force, the compliance costs were astronomical; enforcement of individual “data rights” led to unintended con- sequences; “privacy protection” seems to have undermined market competition; and there have been large unseen — but not unmeasurable — costs in forgone startup investment.
Finally, we note that, despite the DC Circuit trimming the FCC’s 2018 Restoring Internet Freedom Order, the fact remains that the FCC still retains a conflict-preemption authority to specifically preempt state laws that are incompatible with its regulations. The DC Circuit only limited the FCC’s ability to generally preempt all potentially conflicting state laws, requiring that each preemption be challenged in a fact-intensive inquiry. Similarly, it is also possible that the broad extent of the CCPA’s rules, and their impositions on firms outside of California’s borders could lead to Dormant Commerce Clause challenges. Activities that “inherently require a uniform system of regulation” or that “impair the free flow of materials and products across state borders” violate the Dormant Commerce Clause. As the FCC noted in its RIF Order, Internet-based communications is such a type of activity.
We therefore offered the following suggestions:
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TOTM Kochland is a quick read that presents a gripping account of one of America’s corporate success stories. Even those who hate the Koch brothers on account of politics would do well to learn from the model of entrepreneurial success that Kochland cannot help but describe in its pages.
A recently published book, “Kochland – The Secret History of Koch Industries and Corporate Power in America” by Christopher Leonard, presents a gripping account of relentless innovation and the power of the entrepreneur to overcome adversity in pursuit of delivering superior goods and services to the market while also reaping impressive profits. It’s truly an inspirational American story.
