An independent, "expert agency," like the FCC, is at its most effective when it is focused on keeping the industries it regulates running smoothly, in the interests of consumers, by filling policy "potholes." On the other hand, nothing incites partisan rancor like addressing "problems" that look a lot more like ideological crusades, rather than good faith efforts to address genuine consumer grievances.
Under Chairman Tom Wheeler, the FCC became a battlefield for "proxy wars" pitting business interests against each other in the name of ideology--that, itself, was a disguise for transparent political favoritism. These battles were fought not by the traditional strength of evidence and argument, but instead through PR campaigns, produced social media outrage, and 3rd party Hessians claiming the "public" or "progressive" interest mantle. This approach has devalued the deliberative process and the role of the majority and minority commissioners in driving consensus at the expert agency.
A Regulatory "Pothole"
A good example of a regulatory "pothole" is the agency's response to rapid adoption of VoIP technology by consumers in the early 2000's. Though VoIP calls were a cheaper substitute for PSTN calls in most respects, because VoIP calls didn't use the PSTN, consumers could not access E911 service.
After some well-publicized tragedies, the FCC quickly focused on this specific issue (out of a larger number of issues) in its already-pending 2004 VoIP NPRM. Acting quickly, and unanimously, the FCC issued an Order in 2005, adopting some interim measures to: 1) better inform consumers of the limits of nomadic VoIP services, and 2) to ensure that "interconnected" VoIP providers quickly became able to offer E911 service to their customers by terminating calls through CLECs.
But, if the VoIP 911 matter was an example of interested stakeholders (carriers and public safety/law enforcement) forthrightly putting their interests on the table, and the FCC balancing those interests to find the best solution for consumers, the FCC's recent Broadband Privacy Order provides a good illustration of the exact opposite type of proceeding.
Broadband Privacy ≠ Internet Privacy
The Commission's classification of broadband Internet access service as a "telecommunications service," in its 2015 Open Internet Order, in turn, allowed the FCC to define what information, with respect to this service, it would define as "customer proprietary network information" ("CPNI") under Section 222 of the Act. Section 222 defines CPNI as, essentially, information that the service provider knows by virtue of providing a telecom service to a customer, and requires the carrier to obtain customer permission before selling the customer's CPNI to a third party.
The Interent Service Providers ("ISPs") argued that consumer Internet usage information is not information uniquely held by the ISP, in the way that CPNI was uniquely in possession of a telecommunications carrier in 1996 (when Congress wrote the law). See, e.g., AT&T Comments pp.9-30. Rather, the primary market for consumers' internet usage information is the online advertising market. , in which the ISPs do not possess sufficient unique, or valuable, consumer information to even possess a measurable share of the market.
The ISPs explained that, despite the FCC's rhetoric in its NPRM about consumer "privacy,"
[n]o matter what the Commission does in this proceeding, major actors in the Internet ecosystem will continue to track and use all of the same information the proposed rules would keep ISPs from efficiently tracking and using.
See, e.g., AT&T Comments at p. 35 (emphasis added). Thus, they argued, the FCC's proposed rules would not enhance consumer privacy, but merely foreclose competition in the online advertising market.
Party Participation vs. Proxy Participation
Given the competitive significance of the FCC's proposed rules, you might think the record in this proceeding would pit edge providers and ISPs against each other, with each side trying to show why the ISPs do/don't possess some unique information about their customers that is worthy of rules protecting its disclosure. If this was your guess, you'd be half right; the ISPs definitely showed up with their best information/arguments.
On the other side, though, neither Google/Alphabet, nor Facebook appears in any search of this docket. Yet, the FCC had no trouble finding support in the record for its contention that it is the ISPs from whom consumers' information needed protection, and not the two dominant firms in the business of collecting and selling that information. If you look through the Order, you'll see that a majority of the support the FCC cites is supplied by parties with ties to Google, Facebook, or other edge providers.
Princeton University Professor, Nick Feamster comments, but doesn't disclose that he has received $1.6 million from Google over the past 5 years. Other Princeton faculty members filed comments similar to Feamster's. And, in May, Princeton's Center for Information Technology Policy, of which Feamster is Acting Director, was a co-sponsor, along with Google-funded Center for Democracy and Technology, of a policy conference on the topic of "broadband privacy." The Google Transparency Projectnotes that 5 of the 7 panelists at the event had received support from Google.
You Need Not Be Present to Win
The reasons behind some parties' participation doesn't mean that their advocacy/arguments were wrong, but the FCC woud have benefited more from a direct exchange between both sides with first-hand knowledge of the consumer information they track. And, why weren't Google and Facebook in the record, making these points, themselves?
One reason could have been that more information about these firms' dominance in online advertising came out over the summer, including a paper by one of the Princeton academics in this proceeding, noting that Google and Facebook controlled all the top 10 third-party trackers. Another reason for Google's absence may have been that it went back on its self-imposed ban on using consumers' personally-identifiable information in its web tracking, according to this ProPublica report.
Would it have been embarrassing for the leading edge providers to ask the government for protection from competition? Maybe, but consumers deserved the ability to transparently see which side--between two interested parties--the government was choosing, and why.
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The FCC's leadership has been willing to undertake ideological crusades for the sole purpose of advantaging politically-favored firms. The transparent nature of the FCC's actions ensure that they will quickly be undone by a subsequent Commission. The legacy of such leadership leaves only acrimony among the majority of Commissioners trying to put consumers first. Hopefully, the next FCC will learn from history.
Unfortunately for Internet users, the reality is that--on the Internet--privacy is binary; you either have it, or you don't. Moreover, as the Erin Andrews case demonstrates, on the Internet, when your information is lost to one person, it's available to everyone. What is most concerning is not that the Chairman's proposed ISP privacy rules can't deliver on these fantastic promises, but that in the Chairman's Set Top Box NPRM, consumers are actually losing privacy that they used to have.
Your Information Is Already on the Internet
It's no secret that, "your information is the commodity that drives the internet economy." Nor is it any secret that this is the price the largest "free" websites/services charge for their services--such as those provided by Apple, Google, Facebook, and Microsoft.
Likewise, Google is the leading online advertiser because it knows the most about you--and, according to the NY Times it is only getting better at gathering your information. If you're interested, and have a Google account, here's an article with some links that allow you to see how much Google knows about you, based on your self-identified use of its apps. But, these links don't tell you how much "pretty close to personal" data Google has collected on you, or what it has acquired through your use of its Android mobile operating system and mobile apps--which now account for 60% of mobile devices in the U.S.
The firms mentioned above are just the ones that you know have your information. There is a whole industry comprised of firms, the names of which most people wouldn't recognize, called "data brokers." These data brokers also track your Internet usage--and combine that information with other, personal information that they buy from your online merchants--to form a pretty accurate personal profile of all your online activity, which they make available to anyone willing to pay.
ISP Privacy Rules Won't Give You "More" Privacy
Not surprisingly, according to experts, your ISP doesn't have any information about you that isn't already available from multiple other sources. In fact, Professor Peter Swire of Georgia Tech says that, due to consumers' increased use of encryption, multiple connected devices, and proxy services, like VPNs, your ISP may actually know less about your Internet behavior than the websites you visit.
Of course, every expert doesn't agree completely with Prof. Swire's conclusions. In a thorough article presenting the opposing side, Computerworld reports that some experts disagree with Prof. Swire about how much of a consumer's Internet traffic ISPs can see--because encryption isn't always as effective as consumers might think, and even VPNs/DNS proxy services can be configured poorly. Thus, Computerworld counsels readers to assume the worst, and that, "[m]uch like Google, your ISP knows everything about you."
Now you all know everything about me . . .
Said differently, "the Internet" will not know one less fact about me if my ISP stops being the nth company to tell advertisers that I'm the leading YouTube viewer of "Lancelot Link: Secret Chimp" videos. Rather, as Roslyn Layton explains, the effect of the proposed rules will be confined mostly to the ISPs, who must rely on consumers to pay an even larger share of the network costs, and the online advertising market--which needs more competition, not less. But, as for me, I get no "more" privacy than I have now.
Set Top Boxes Aren't Cheaper If You Pay with Your Privacy
Almost 30 years ago, during the politically polarized Senate confirmation hearings on President Reagan's Supreme Court nominee--Judge Robert Bork--some of the Judge's opponents were able to obtain his video rental history from his video store. His opponents didn't find anything embarrassing, but they sparked a bi-partisan public outcry for laws to protect citizens from this type of repulsive invasion of privacy. Here's a contemporary article from the Chicago Tribune.
Congress, though, was in front of the public this time, and Judge Bork's enemies could not have obtained his TV viewing records (if he was even a cable subscriber at the time), because in 1984 Congress had passed the Cable Communications Policy Act, protecting video subscribers' privacy. 47 U.S.C. 631 Since then, the FCC has had rules in place preventing the disclosure of personally-identifiable viewer information to third parties.
In its Set Top Box NPRM, the Commission asserts that it will not totally ignore the requirements of the law, but the proposed rules would require the regulated entity (your cable or satellite MVPD) to send your personally-identifiable information to an unregulated third party providing a video navigation service. The Commission suggests just asking Google and the data brokers to "self-certify" that they are complying with the legal obligations that apply to cable/satellite companies. See, NPRM at paras 73-74, 78.
Putting aside the dubious legality of the FCC's proposal, the Commission is exhibiting an almost-willful disregard for the purpose of the statute--or even worse, the importance of television as a shared medium. The very nature of specific, viewer-tracked, ad delivery--of the kind Google proposes--is invasive. Unless everyone gets the ad for [insert embarrassing product], then only the consumer gets embarrassed--when his friends watching March Madness ask, "why do I only see this ad at your house?"
More than a year before the Chairman's "unlock the box" initiative, the Chairman had a different idea: if the FCC made it easier to become an over-the-top ("OTT") multi-channel video programming distributor ("MVPD"), then more companies would enter the market, and this competition would benefit all subscription video consumers. You might think this would appeal to a new entrant with TV ambitions, like Google.
After all, the subscription TV market is devilishly hard to penetrate even if you can get the capital to build a distribution system. A year ago, Google had 20,000 customers in Kansas City--after 5 years of trying. But, Google wasn't in love with the Chairman's idea. Why not?
The Market Is Internet Advertising . . . on TV Screens
Google is the dominant company in Internet advertising because it sells information about you--that it learns from your use of its applications, and devices--to advertisers. If you're using the Internet, whether on a computer, mobile phone, or tablet, then there's a 70-85% likelihood that you're looking at Google ads (according this WSJ article re: the FTC Bureau of Competition 2012 staff recommendation on Google's abuse of its market power in online advertising).
When you watch TV, however, the ads you see are not targeted at you personally, because they haven't been placed by Google. This is something Google has been trying to fix since shortly after it first announced plans to build a fiber network. Google, through its Google TV, and then Android TV, project makes "smart TVs" (with Google software built into the TV) and "buddy boxes" (set top boxes that work with a cable box/cable remote) available to consumers. But none of these efforts have been particularly successful--leading industry observers to conclude that Google needed "another path to the TV screen."
Then, a year ago, Google decided to try an "experiment" in Kansas City in which it combined its TV customers' content, and viewing history, with its advertising algorithms in order to sell targeted ads on the customers' TV screens. Most likely, Google discovered that the content itself was the secret ingredient that would allow it to integrate the TV screen into its advertising universe.
So why not become an OTT MVPD in the proceeding that Chairman Wheeler had initiated in December of 2014? One obvious problem with this strategy is that MVPDs have long been subject to extremely strict FCC rules about disclosing customers' personally-identifiable information--rules that don't apply to edge providers like Google. The other problem with this approach is that the subscription TV market is devilishly hard to penetrate--just to get access to the customer's video content. Thus, shortly after Google announced its Kansas City TV experiment, it (along with several of its Google TV partners, trade associations, and pressure groups) formed the Consumer Video Choice Coalition ("CVCC") and began lobbying the Commission on a new set of issues.
The FCC Unbundles Video to Create "Device Market" Competition?
On February 18th, after 6 months of intensive lobbying by the CVCC, the FCC voted to require multichannel video programming distributors (hereinafter "MVPDs") to, effectively, "unbundle" the video stream going to and from the customer's television. See, "Set Top Box NPRM". The Commission explains that its proposed rules requiring video stream unbundling are necessary "because MVPDs offer products that directly compete with navigation devices and therefore have an incentive to withhold permission or constrain innovation, which would frustrate Section 629's goal of assuring a commercial market for navigation devices." Set Top Box NPRM at para 12.
The FCC seems to believe that if it can imply that the MVPDs were responsible for the failure of the Commission's CableCARD rules, and that the MVPDs would likely frustrate any future rules to facilitate device interoperability, then it will be justified in implementing full-scale video stream unbundling. So, on the thinnest of grounds--a couple of anecdotes, and a facially absurd theory--the FCC asserts that that MVPDs "offered poor support" for the CableCARD rules, and have the ability and incentive to frustrate the manufacture/sale of navigation devices by third parties. Set Top Box NPRM at paras 7, 12, and 28. The actual answer to the Commission's question was already available--but it wasn't the right answer.
The Commission's theory regarding MVPD's "incentive and ability" to foreclose third party sales of navigation devices has been litigated through trial in two separate consumer class action antitrust cases, and this theory has never been found to be supported by any evidence. See, Jarrett v. Insight Communications Co., (W.D. Ky. July 14, 2014) and Healy v. Cox Enterprises (W.D. Ok. Dec. 15, 2015). If you bother to read either of these cases, you may also be surprised to learn that the device manufacturing market is very competitive--with at least 5 major vendors competing for each cable system.
So, as was the case with the Commission's reclassification of broadband Internet access, a very small number of privileged entities (Google, its partners and pressure groups) benefit from rules designed to address conduct that is not even hypothetically rational--much less, likely. Still, you might think, who cares if the TV providers now have to compete with Google to sell ads to viewers? But, Google won't be competing with your TV provider.
Don't Expect Much New Competition in the Device, or Online Advertising, Markets
One of the issues from the Commission's Net Neutrality Order (currently on appeal) is whether the FCC could, as part of reclassifying broadband Internet access as a "telecommunications service," classify all of an Internet user's formerly non-confidential information (the kind Google sells to advertisers) as "Customer Proprietary Network Information" ("CPNI") under Section 222 of the Act. The statutory definition of CPNI is fairly broad, and includes information "made available to the carrier by the customer solely by virtue of the carrier-customer relationship." 47 USC 222(f)(1).
If the DC Circuit agrees with the FCC that previously non-confidential customer data is now CPNI, as the result of the Commission's change in service definitions, then the FCC could limit the ability of ISPs to provide customer usage information to advertisers. This was exactly the position that was being urged on the Commission by the Eric Schmidt/Google-funded pressure group New America, only a week before Chairman Wheeler put his "unlock the box" editorial on Recode.
Last Wednesday, in a Senate Judiciary Committee Oversight Hearing, FTC chair, Edith Ramirez, was grilled on why the FTC overrode the recommendations of its Bureau of Competition and closed an investigation into Google's abuse of its market dominance in the online advertising market. Not un-ironically, two days later, the FCC released a "fact sheet," describing its proposed rules to prevent ISPs from competing in that market by providing the same kind of ads that Google does--over your computer, mobile, and now, TV screens.
With sincere apologies to the members of the Google Nation, let me be clear about my last post. I was not "hating on" Google. My only point was to try to mollify some of the "irrational exuberance" that emerged on the Net (and in the press) as a result of Google's understated "announcement" of its plans for a broadband experiment. For those that didn't read my last post, one week ago (Wednesday, February 10th), Google stated on their corporate blog that they would like to build a fiber network to deliver 1 Gigabit speeds to anywhere from 50,000 to 500,000 homes. Most ensuing stories on the Net and in the press reported on/reacted to this announcement as if the project was already under construction.
For those who want to believe in the existence of a "Google-Claus", I strongly recommend the dose of reality that you can get from reading Harold Feld's post from yesterday, where he does an excellent job of providing a detailed account about Google's success through the years of "bluffing" and "slow-playing" regulators and network operators in order to get network operators and their end-users to front the cap-ex to support the transmission speeds that will enable Google to offer more services with which to economically advance their business. There is little reason to believe that this announced "experiment" will bring Google any closer to being a broadband ISP than any of their previous rhetoric.
On the other hand, Google has been quite straightforward about their business plan, which is to create applications that allow them to capture more and more customer information that they then "monetize" through (essentially) resale to advertisers. Therefore, I come not to bury Google, but to praise them . . . for their honesty in dealing with users of all their services, including Google "Buzz" (which coincidentally was really launched on the same day that their broadband network plans were announced). In a reaction that is surpassing strange, the outrage on the Net and in the "blogosphere" over Google Buzz is comparable to the enthusiasm surrounding Google's 1 Gig "broadband network."
But why do I say the outrage about the Google "Buzz" product is as perplexing as the enthusiasm over the non-existant, broadband network? Well, it's simple. Google has never been in the business of being a telecom network operator. In fact, if Google has read the newspapers over the last 10 years--and it's clear they have--we can assume Google knows that entering the retail broadband Internet access market (even at efficient scale) is very often a good way to make a small fortune (out of their current large fortune). To the contrary, though, Google is in the business of obtaining and selling Internet user information.
In short, if consumers decided to continue to avail themselves of Google's "free" services (like Gmail or Google Search), even after Google's December clarification that consumer privacy concerns take a back seat to Google's policy of using consumer information generated by use of its products for its commercial purposes, then it's a little difficult to understand all the "outrage" surrounding Google's Buzz product. When one considers that many of these same critics are also arguing for rules to keep the Internet "open", the complaints are even more difficult to indulge. Do these outraged privacy watchdogs really want an "open" Internet, or just an extension of the "Nanny-state" that relieves them of any personal responsibility with respect to how they use the Internet?
On this controversy, Google is in the right. They've given consumers enough information to make up their own minds. If consumers choose not to use this information, then what is the point of an "open" Internet? What is Google's incentive to continue to innovate and provide "free" services to those customers that have nothing to hide, and are happy to trade information for applications?
If we regulate Google's online behavior, next thing you know, we're regulating the ability of legitimate Nigerian businessmen to use the Internet to raise capital--just to get at the few fraudsters that abuse the gullibility of some Internet users. But how does this "outrage" do anything to promote commerce, jobs, innovation and openness? It doesn't, and it's about time for the "Internet police" to dial back the schadenfreude, and lay off the last guardian of the open Internet.
And if you say to me tomorrow Oh, what fun it all would be then what's to stop us, pretty baby but what is and what should never be -Led Zeppelin, "What Is And What Should Never Be"
With profuse apologies to Led Zeppelin for blaspheming their iconic song title to do a telecom policy blog, this is essentially what Google announced to DC policy makers, via its corporate/policy blog, on Wednesday--except that the policymakers and the press didn't hear the last line. But, boy, did they eat up the first few . . . you can tell that Valentine's is in the air.
I say the "announcement" was targeted toward policy makers, because absolutely no relevant business information was provided in the announcement--you know . . . costs, prices, projected revenues, technology to be used, etc. No vendors, competitors, or even Google's Clearwire partners (a venture from which--according to news reports--Google has been backing away) were interviewed or consulted. No, but that's OK, because this wasn't a business "announcement."
What the "announcement" really says is how much political clout Google carries in Washington. On a day when the Gub'ment is closed for a fourth consecutive day, some of the most important Government officials involved in technology policy were intrigued enough to very quickly issue "statements" in reaction to Google's blog post.
For example, the New York Times story actually contains a "statement" from Chairman Genachowski reacting to the Google blog post, and the statement reacts to Google's announcement like it were an "official" announcement--like a firm commitment to enter a market in a specific way, explaining product terms and prices, entry timing, costs, and projected revenues. The Hill even contains a statement from Senator John Kerry, Chairman of the Senate Commerce Committee's Subcommittee on Communications, Technology, and the Internet. Moreover, just about every story you'll read really "drank the Kool-Aid." From the articles I saw on line, only Computerworld got it right.
But what gives me the right to question Google's ambitiously-admirable, but vaguely-defined, "experiment", the belief of the bulk of the press, and some of the most important officials in Washington? Well . . . there's this small problem of the facts and the logic. First, Google's blog never says exactly how they plan to offer this 1 gigabit/sec (1,000 megabit/sec) broadband service at a "competitive price." Second, the whole theory seems to contain a pretty glaring logical flaw: wouldn't Google deciding to become a broadband ISP allow other Broadand ISPs into Google's monopoly business?