Archive for November, 2011

Privacy Again

Thursday, November 17th, 2011

The Wall Street Journal had a long article-debate on privacy earlier this week.  The strongest pro-privacy is Christopher Soghoian of the Open Society Institute.  He confuses commercial privacy with government privacy:

“The dirty secret of the Web is that the “free” content and services that consumers enjoy come with a hidden price: their own private data. Many of the major online advertising companies are not interested in the data that we knowingly and willingly share. Instead, these parasitic firms covertly track our web-browsing activities, search behavior and geolocation information. Once collected, this mountain of data is analyzed to build digital dossiers on millions of consumers, in some cases identifying us by name, gender, age as well as the medical conditions and political issues we have researched online.”

When asked “Why is that a problem” he replies

“Many of the dangers posed by digital dossiers do not occur regularly, but are incredibly destructive to people’s lives when they do. An unlucky few will be stalked, fired, surveilled, arrested, deported or even tortured, all as a result of the data kept about them by companies and governments. Much more common are the harms of identity theft or public embarrassment. Even when companies follow best practices—and few do—it is impossible to be completely secure.”

Note that “parasitic firms” are collecting the data which is then used for arrest, deportation, and torture.  A bit of a disconnect. Identity theft is a problem, but the risk is decreasing and the costs are almost always low.  Moreover, identity thieves are crooks, not firms.

What is particularly interesting about the article is the survey data reported.  It demonstrates peoples’ confusion about the issues.  92% of the adults surveyed  “Think that there should be a law that requires websites and advertising companies to delete all stored information about an individual” but between 32% and 47% would like websites to provide information of some sort (ads: 32%, discounts: 47%, or news: 40%) “tailored to their interests.”  But of course these numbers are totally inconsistent.  If websites cannot keep any information about an individual, then they cannot provide tailored information since there will be nothing on which to base the tailoring.  The relevant questions are tradeoff questions, but the reported survey does not address these.

Cross-posted from the Truth on the Market blog

FCC Reform Bills

Friday, November 4th, 2011

Politico’s Morning Tech reported Thursday that the release of the text of the already-approved USF order would be delayed probably until next week.  The delay of yet another adopted FCC order in being released to the public makes legislation recently introduced all the more appropriate. 

Wednesday, Rep. Walden and Sen. Heller released legislation aimed at improving agency transparency and process at the FCC.  Although  some interest groups have voiced concern that the proposed reforms on transaction reviews would benefit telecom companies, or overall would curtail the agency’s ability to protect the public interest, the proposals concerning  a cost benefit analysis of regulations are sensible – and desperately needed. 

The reforms, as described in Sen. Heller’s press release, would:

Require the Commission to survey the state of the marketplace through a Notice of Inquiry before initiating new rulemakings to ensure the Commission has an up-to-date understanding of the rapidly evolving and job-creating telecommunications marketplace.

Require the Commission to identify a market failure, consumer harm, or regulatory barrier to investment before adopting economically significant rules. After identifying such an issue, the Commission must demonstrate that the benefits of regulation outweigh the costs while taking into account the need for regulation to impose the least burden on society.

Require the Commission to establish performance measures for all program activities so that when the Commission spends hundreds of millions of federal or consumer dollars, Congress and the public have a straightforward means of seeing what bang we’re getting for our buck.

Apply to the Commission, an independent agency, the regulatory reform principles that President Obama endorsed in his January 2011 Executive Order.

Prevent regulatory overreach by requiring any conditions imposed on transactions to be within the Commission’s existing authority and be tailored to transaction-specific harms.

Identifying an actual market failure a regulation is attempting to address should be a given for policymakers but, unfortunately, the FCC rarely takes that approach. Even if attempts at pre-emptive regulation are well-intended, it is virtually impossible to analyze the effects of a regulation without some measurable outcome.   TPI President Tom Lenard echoed both the need for an identified market problem and a cost-benefit analysis before enacting regulation in comments to the FCC in response to the Open Internet Order NPRM and in comments to the FTC regarding their proposed privacy framework, illustrating that such principles can, and should, apply across regulatory agencies. Recently, Scott Wallsten showed how the FCC could incorporate cost-effectiveness analysis into its decision-making process in the context of universal service reforms.

I’m crossing my fingers that some iteration of Rep. Walden and Sen. Heller’s legislation actually passes.  It’s a great start at sensible, meaningful reform to the agency.

Use the Market to Allocate Spectrum

Wednesday, November 2nd, 2011

TPI President Tom Lenard has a post on The Hill’s Congress Blog discussing the benefits of allocating spectrum via voluntary incentive auctions.  Authorizing the FCC to hold auctions would not only make more spectrum available for the development of wireless broadband, but will also be a big step in creating a more efficient, market oriented spectrum regime.

Purchasers of spectrum through an FCC auction receive an “exclusive license” allowing them to use the spectrum for whatever purpose they want, so long as they don’t interfere with other licensees.  Those uses can change as new technologies emerge—e.g., as subscription TV overtakes over-the-air TV.  This is why this market-based system is flexible and can be expected to achieve an efficient allocation over time.  Moreover, these quasi-property rights are necessary for providers to invest the tens of billions of dollars necessary for advanced wireless services.

Lenard also addresses calls to allocate a significant portion of spectrum freed-up by incentive auctions to unlicensed uses.

Under the unlicensed model, the FCC establishes rules—such as power limits for approved devices—under which any device and any user can operate.  While this approach has yielded benefits—WiFi most notably—as with the legacy command-and-control model, there is no market mechanism in an unlicensed regime to move spectrum to its highest-valued uses.  It is also extremely difficult to determine the opportunity cost of allocating spectrum to unlicensed uses, and no way—other than relative lobbying clout—to determine how much, if any, should be so allocated.

Lenard warns that the amount of spectrum obtained from incentive auctions that is set aside for unlicensed uses would have a direct impact on the amount of funds available for reducing the federal deficit.

The Congressional Budget Office estimates that incentive auctions would yield about $16 billion assuming proposals on the table to allocate spectrum and money to a public safety network are adopted.  The net contribution of incentive auctions to deficit reduction would be reduced substantially if any significant part of the spectrum is not auctioned and instead is set aside for unlicensed uses.

Read the entire post on The Hill’s Congress Blog.