Stillborn Thoughts

News, Issues, and Analysis on the intersection of Law and the Internet

Thursday, March 16, 2006

Cultural Environmentalism at 10

Sadly, I missed the second day of the Cultural Environmentalism at 10 symposium at Stanford University, which included what looked to be a very promising paper by Boalt Hall's Molly Van Houweling exploring how voluntary manipulation of intellectual property rights relates to both the conservation movement and the notion of cultural environmentalism. If, by the way, you want to check out the paper on the second enclosure movement that the symposium was on (based on the book Shamans, Software, and Spleens: Law and the Information Society), you can get it here.

So the two speakers I had the privilege of hearing were Madhavi Sunder of UC Davis Law and Susan Crawford of Fordham Law School.

Prof. Sunder spoke about intellectual property law and how cultural environmentalism relates to the relationship between IP law, our understanding of forms of knowledge, and the third world. Much of the paper centered around the GATT/WTO's Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and India. The paper was ambitious in its scope, calling for what seemed to be a complete restructuring of the way IP law is applied to third world countries. For example, one of the main tenets of Sunder's changes would be to better respect local laws regarding property based on different cultural understandings of property rights. This would be a response to current IP law, which requires written evidence of the origination of an idea in order to press charges, thereby treating orally communicated ideas as unprotected. But, as more than a few members of the audience pointed out, the application of such broad changes seems impossible on a pragmatic level. While the commentary agreed that IP law wrongly treats traditional forms of knowledge as static, there didn't seem to be a workable alternative to the current IP framework. I thought the relationship between IP law and the third world was interesting, but framing the debate in terms of knowledge didn't strike me as more persuasive than the economic or human rights. Furthermore, because Prof. Sunder didn't have any specific examples (or what I felt would be specific examples) of when citizens of the third world have been exploited by IP law, it was hard to render any sense of urgency.

Prof. Crawford spoke about the telecommunications industry and the effects of the recent mergers, a topic I've taken a recent interest in. It was a call for a new social theory, or at least a new rhetoric with which to challenge the force of the telecos. Her suggestion was that the language of this new movement be articulated in terms of the public interest... which to me, made perfect sense, given both Boyle's emphasis on language in his essay on Cultural Environmentalism and the telecos' constant making property rights claims. The public interest is both a framework that brings seemingly disparate issues together (lack of access in rural America to broadband, lack of competition, innovation issues, etc.), and one that has the strength to counter the moral claims made by the telecos. Over the weekend, I emailed Prof. Crawford a couple of questions on her paper, and if/when I hear back from her, I'll discuss the mega-merger stuff more.

Attribution for Photo: The photo is Prof. Jamie Boyle, and comes directly from his website at

Thursday, March 09, 2006

Random: Recent stories of interest

There's a lot out there that's happening, but I don't feel compelled to write in-depth on any of them, so this post is sort of a news-in-brief. By the way, if anyone's curious, my sources for stories and news are primarily: law email newsletters (Prof. Michael Geist's BNA News Highlights, Martin Samson's Internet Law Update, Declan McCullagh's Politech Newsletter, EFFactor EList, CDT Newsletter), online news sources (Wired, CNET, NYTimes, Wall Street Journal, Salon, ect.), Blogs (Technorati, Boing Boing, ARS Technica, the blogs listed on the links page), and some other assorted sites. Almost all of it is freely available online...

I was inspired to mention my sources after reading this article in the New York Times about Wal-Mart's recent practice of using bloggers in its PR campaign. Interestingly, the article shows Wal-Mart in a fairly positive light, noting that the mega-corporation has been extremely forthcoming about what information it disseminates. The only issue was that the bloggers themselves often didn't mention where the information came from... although I don't know of any journalistic or PR platform that is completely transparent with its sources (one would assume this would dampen public discourse somewhat).

Speaking of the New York Times, there was an article yesterday about a deal reached by New York City on online cigarette vending. The settlement between Mayor Bloomberg and esmokes will allow the city to pursue residents for up to $35 million. From the article:
The most recent settlement was filed last Wednesday in Federal Bankruptcy Court in Tampa, Fla. The online cigarette vendor, eSmokes, agreed to give the city an electronic database of all its sales to addresses in New York State from 2000 to mid-2003. The company also agreed to stop selling cigarettes to customers in New York State. The company, which began operations in 1999, filed for bankruptcy protection last May.
...another example of the information gathering ability of the Internet used to persecute law-breakers. Also, there's the question of whether or not this sort of regulation remain in the realm of state (not federal) power for long (Supreme Court Case?). For more on this, check out my post on the recent actions of the Phillip Morris company.

As long as we're talking about questionably legal online commerce, I should mention this CNET article about a new company designed to allow the swapping of physical audio CDs, much like NetFlix allows the swapping of DVDs. The venture-backed company, La La Media, hopes that such a system will avoid the legal pitfalls of p2p networks.

And that's it for this week. Next week, I'll report on this weekend's IP law conference at Stanford entitled "Culture Environmentalism at 10." Featured speakers include Stanford's Lawrence Lessig, Duke's Jamie Boyle, Boalt Hall's Pamela Samuelson, Cardozo's Susan Crawford, among a long list of fantastic law professors. Plus, starting March 29th, the Supreme Court will hear arguments from Ebay and MercExchange regarding the issue of permanent injunctions. Should be good.

Friday, March 03, 2006

Continued: On broadband competition...

As I noted last week at the end of my post, the testimony from the Congressional hearing on net neutrality boiled down to the issue of competition. Will banning broadband companies from access-tiering through legislation better serve consumer welfare? Well, that all depends on how much competition currently exists in the telecom industry. The logic goes that if there is ample competition, then the market will regulate itself, and any actions that internet providers take that harm consumer welfare will be deterred by the threat of losing customers to competition. If there is NOT ample competition then that opens up the potential for all sorts of abuses.

The question of competition, however, is different from whether or not access-tiering is a legitimate business model for internet providers... its more accurately articulated as an issue of whether access-tiering, if implemented, will become the ONLY business model available. If that happens then, as many commentators have written, innovation and the very values that have driven the internet will be threatened.

Much of this debate centers around the effects of the telecommunication mega-mergers of SBC/AT&T and Verizon/MCI. As Consumer Union, a consumer advocacy non-profit writes,

"“By allowing the top two telecommunications giants to buy up their competitors, the Justice Department told consumers they deserve little to no choice when it comes to phone, wireless and high-speed Internet providers," said Mark Cooper, Consumer Federation of America research director.

The groups also said the mergers will stymie the competition of Voice Over Internet Protocol (VOIP), which uses high-speed Internet connections to offer consumers other choices in the local and long-distance market.

"These small companies that are aggressively trying to offer alternative phone service will be big-footed by the new AT&T and Verizon,” Cooper said. For the two-thirds of American consumers who can't afford or do not take the bundle of voice, video and data services these companies package together, prices for each of these services are likely to climb."”

So by the looks of it, there may not be sufficient competition, especially for lower-income families and rural areas (a Free Press report with the straightforward title "Telco Lies and the Truth About Municipal Broadband Networks" goes through erroneous claims against community and local broadband providers made by telecom corporations and the responses). And if there is little choice, then there's also little recourse from access-tiering and monopoly pricing schemes. Particularly disturbing is Verizon/MCI's domination of the underlying backbone of the internet. According to a June 2005 report by Consumers Union entitled "Broken Promises and Strangled Competition", AT&T protested against the Verizon merger, recognizing,
[T]he hierarchical nature of the business makes it possible for top-level suppliers who become dominant in terms of installed based to turn erstwhile "competitors" (e.g. secondary peering backbones) into "customers." Any competitor that can be transformed into a customer when it is convenient to do so is a poor candidate for the type of alternative supplier that could defeat a monopolistic price scheme.
So Verizon/MCI can essentially control the business model of the internet because it controls the cables that its competitors use. Competition, therefore, needs to happen at the backbone level, not just at the provider level. Attorney General Eliot Spitzer explains the implications:
The core risk in this regard is that, post-merger, Verizon will have an Internet backbone that carries its own products in first class, while competitors ride in coach - or, indeed, never get to ride at all. As noted above, Verizon plans to utilize the Internet backbprovides provie "IP connectivity for VoIP services today and other IP-based services tomorrow." This approach dovetails with MCI's own pre-merger strategy of "converging Internet, data, and voice onto a common IP backbone... The sort of products envisioned by this Verizon strategy consumes relatively large amounts of Internet bandwidth. And a combined Verizon/MCI entity would be well positioned to create an Internet infrastructure that could severely diminish the capacity available to competitive providers of these services that need to use Verizon's Internet backbone... there exists today a process known as "tagging," which allows a provider to use rule-based and policy-based filtering to limit the flow of data packets... Using tagging, Verizon could assign a higher transit priority - first class status - to data packets originating on its own system, while relating a lower priority - coach status - to data packets from outside traffic that needs to access Verizon's backbone.
Doc Searls (whose article "Saving the Net" I reference often) believes that the first/second class separation that the merger presents is a symptom of a greater and more threatening vision of the telecoms. He believes that such companies are trying to impose a cable television model on internet access, where consumers lack control at every level of infrastructure (the underlying pipe level, the content level, and the access point [i.e. cable box]). Searls writes in "Net Neutrality vs. Net Neutering",

Specifically, by provisioning big bandwidth downstream and narrow bandwidth upstream, while blocking ports 25 and 80--in crass violation of the Net's UNIX-derived network model, in addition to the end-to-end principle--the carriers prevent customers from running their own mail and Web servers and whatever server-based businesses might be possible. Again, all the carriers can imagine is Cable TV. That's been their fantasy from the beginning.

So, while pro-Net advocates wish to liberate the Net by burning neutrality into law, anti-Net advocates wish to neuter the Net by preserving the current regulatory regime--or by otherwise re-regulating it to favor the Cable TV model they've built their infrastructure for since the beginning.

...but I'm digressing from the competition issue. I went into the issue of broadband competition with a fairly open mind. I figured from what I'd read that broadband was basically controlled by a couple large corporations that owned the underlying backbone of the internet, but I assumed that the net neutrality advocates vastly underestimated the competition that exists between DSL, cable, and wireless. And its true, cable (led by Comcast and Time Warner) has outstripped DSL in popularity... suggesting a fairly robust market in urban areas, and growing access and competition in rural areas. However these figures don't tell the whole story of the cable v. DSL war. For one, despite the so-called "price war" in 2005, internet access actually cost MORE for the average consumer (the same is predicted for 2006). And second, a combination of defensive tactics by the telecoms, and sluggish progress towards laying fiber, have deterred a more competitive market. Thomas Bleha explores this in a May/June 2005 Foreign Affairs article entitled "Down to the Wire." Taking a long excerpt, Bleha explains why the United States hasn't progressed further and faster,

Unfortunately, vigorous multiplatform competition is unlikely to emerge soon. True, there are signs of competition between the cable-modem broadband offered by cable television companies and the DSL service offered by telephone companies. Comcast plans to provide reliable Internet-based telephone service by doubling the speed of its broadband offerings from 1.5 megabits to 3 megabits per second over the next three years. Verizon and SBC Communications have dropped the cost of their broadband service to about $30 a month. And to compete directly with cable, some phone companies have begun to talk of developing their own Internet telephone service and providing higher broadband speeds to deliver video.

But these new services will probably appear only slowly, and competition between the telephone and cable companies will remain limited. The reasons are simple: cheap, high-speed broadband would lead to widespread use of Internet telephones and thus threaten the phone companies' lucrative voice-telephone business, and more inexpensive broadband would multiply outside video and movie offerings and endanger the cable companies' profitability. So, although both the telephone and cable companies could provide cheap, high-speed broadband if they chose to, they are not rushing to develop it.

The lack of strong incentives to encourage competition has, in other words, doomed broadband in the United States to remain much slower and more expensive than in Japan. Over the next five years, service is likely to get only marginally faster and cheaper. Meanwhile, at current transmission speeds, the next "killer" application -- Internet telephone service -- will remain shaky and unreliable.

The development of ultra-high-speed fiber broadband service, which is just beginning to appear in the United States, will also lag. Barely more than 600,000 U.S. offices and homes had fiber connections at the end of 2003. Verizon plans to bring fiber to 3 million of the United States' 115 million households by the end of this year, with speeds ranging from 5 to 30 megabits per second. SBC Communications, which dominates the Midwest and Southwest markets, and BellSouth, the leader in the Southeast, are also laying fiber, although at a much slower rate. But they plan to stop the work after spending about $10 billion (the estimated cost of bringing fiber close to about 10 million U.S. homes and offices) and then examine whether further investment is justified. As a result, the pace of rollout will be slow. And the emergence of the substantial market needed to inspire innovative new products and services for those with fiber Internet access remains years away.

Last year, another Brookings economist, Charles Ferguson, argued that perhaps as much as $1 trillion might be lost over the next decade due to present constraints on broadband development.

Bleha's most important point here is connecting the lack of competition to a decline in United States internet access (and, therefore, a decline in global economic power). This is not new news- in fact an FCC report on telecommunication competition reports that "we still lag behind many foreign countries in [internet] penetration rates."

This may very well be the argument that wins over a lot of voters and politicians.

Wednesday, February 22, 2006

Congressional Hearing on Net Neutrality and NYTimes editorial

The New York Times ran an editorial this week on net neutrality. Granted, the piece doesn't add anything new to the debate that's raging between the neutrality advocates and corporate defenders like Verizon's CEO, but the newspaper with the largest circulation weighing in on what was once an obscure debate is, well, pretty cool. The Times concluded,
If access tiering takes hold, then Internet providers, rather than consumers, could become the driving force in how the Internet evolves. Those corporations' profit-driven choices, rather than users' choices, would determine which sites and methodologies succeed and fail. They also might be able to stifle promising innovations, like Internet telephony, that compete with their own business interests.
The editorial followed a Feb. 7th Congressional Hearing on Net Neutrality in which a number of corporate representatives, Congresspeople, and Law Professors testified. The NYTimes editorial articulates the gist of the argument for network neutrality. However, can regulation be promoted on the basis of an assertion that access tiering "might be able to stifle promising innovations"? That seems like a fairly loose basis for legislation that regulates the ISP market. As Kyle McSlarrow, President and CEO, National Cable & Telecommunications Association testifies,
Government, by its nature, is ill-equipped to make judgements about the best business models for an industry... in the absence of any problem calling for a legislative solutution - and since the boadband services marketplace is characterized by robust competition - Congress should refrain from premature legislative action and allow the marketplace to continue to grow and change so network and applications providers can offer consumers the fullest range of innovative service options.
...hmmm, ok, McSlarrow's words make sense right up until "robust competition." And THIS is where the serious debate is, and where I think lessons from the past are most striking. The net neutrality side now articulates their case in a way that echoes Doc Searls' Saving the Net article, which is to say the focus is on the economic, not the philosophical. This shift suggests that there will be a lot more direct clash between the sides. Lawrence Lessig, one of the invited panelists, concisely summarized the issue of tiering (whether it be access tiering or consumer tiering):
Consumer-tiering, however, should not discriminate among content or application providers. There's nothing wrong with network owners saying "we'll guarantee fast video service on your broadband account." There is something wrong with network owners saying "we'll guarantee fast video service from NBC on your broadband account." And there is something especially wrong with network owners telling content or service providers that they can't access a meaningful broadband network unless they pay an access-tax... i mean "wrong" in the sense that such a policy will inevitably weaken application competition on the Internet, and that in turn will weaken Internet growth.
This is a fairly intuitive argument. The internet, because it is an "end-to-end" network, allows any application to be run on it. That means that for every successful application- VOIP, email, instant messaging, chat rooms, community boards, even fantasy football- there have been dozens, if not hundreds, of attempts leading up to the products we have now. And the way that these products became BETTER was because the free nature of the internet allowed CONSTANT INNOVATION. For example Wired Magazine named Firefox its product of the year, noting its exceptional rise in popularity. The force behind such a brilliant product? User feedback, both from average users and tech gurus.

But, if AOL or another ISP provider was able to access-tier, the economics of the internet change. No longer is innovation free, in fact the more users are attracted to a product, the more that product costs. While that may make sense in the long run, there is no long run if products can't get off the ground.

That's the innovation/competition stifled argument. The response to this argument is, as articulated by Gregory Sidak, visiting professor at Georgetown Law Center,
the overarching reason why anticompetitive behavior of any sort is implausible is that competition will constrain the market power of any given carrier. In most geographic markets, four or more separate firms will supply broadband Internet access.
Now, put into context, this conclusion comes after a long analysis of the traditional economic reasons that ISPs ought to be allowed to alter the business model as they see fit. Essentially it boils down to 1) ISPs bear the costs if Google launches a video service that takes up more bandwidth, so 2) Google should have to pay extra (The reverse is, of course, ISPs grow because of content like Google, so ISPs should pay for content). And Prof. Sidak's testimony is logical, reasonable, and based on sound economic models (their applicability to internet business models, however, is questionable). If Sidak is correct in his analysis, Google won't have to worry much about paying that access tax, because over time if an ISP tried to tax them, they'll likely lose their dominance in the ISP market.

...and there's the rub. The two sides VEHEMENTLY disagree on whether or not there exists sufficient competition in the market. This was the battle cry Saving the Net was making. Kyle Dixon, Senior Fellow and Director of the federal Institute for Regulatory Law & Economics, The Progress & Freedom Foundation, argues,
The FCC reports that nearly all zip codes are served by at least one braodband provider, and a solid majority is served by several... There is no single, dominant broadband network provider and none seems likely to emerge in the immediate future. Instead, cable and phone companies vie to expand their respective, substantial market shares and to defend against wireless and other firms who hope to use less established technologies to enter new markets and expand existing footholds.
...well, not really. The section of the FCC report that Dixon is citing reads:
The Commission's data collection program also requires service providers to identify each zip code in which the provider has at least one high-speed service subscriber. As of December 31, 2004, subscribers to high speed services were reported in 95% of the nation's zip codes. In 83% of the nation's zip codes more than one provider reported having subscribers.
So there is no single, dominant server. I think most people would agree with that... in fact there are TWO dominant servers, AOL/Time Warner and AT&T/MCI (see Saving the Net). Which means that "several" may be a stretch. And this idea about wireless and other forms of service is contradicted by the very same report he cites (i'll get to that later). So Dixon's argument sort of falls flat when considered in context... and I have NO idea what Prof. Sidak bases his assumption of "at least four providers" being available to every houshold on. Vint Cerf, the ubiqitous voice of internet evangelicalism and Google's mouthpiece, slammed the opposing side's analysis:
Most American consumers today have few choices for broadband service. Phone and cable operators together control 98 percent of the broadband market, and only about half of consumers actually have a choice between even two providers. Unfortunately, there appears to be little near-term prospect for meaningful competition from alternative platforms.
In 2004, the Commission reported that only 53 percent of Americans have a choice between cable modem service and DSL service. Of the remaining consumers, 28 percent have only one choice, and 19 percent have no choice at all. Thus, nearly half of all consumers lack meaningful choice in broadband providers.
Cerf's footnotes are, however, conspicuously absent when it comes to verfying these fun factoids. And after looking through the 2004 FCC report, I'm not sure where the 53 percent figure comes from (they do, after all, note that in 73% of zip codes more than one company offers services, although I suppose they might only cover part of a zip code). Given the half-truths of both sides, it appears that while some competition exists, there are huge barriers to having the robust marketplace that the anti-regulation advocates claim. One point that Vint Cerf makes, grounding this point in a seemingly unescapable reality, is that broadband providers require an enormous infastructure, a characteristic that even ISP management admits prevents small company competition. Earl Comstock. President and CEO, CompTel., clarifies the economic side of the debate by hammering on this issue:
The FCC's reversal is predicated on a flawed assumption, namely that the barriers to entry for transmission networks are so low that anyone who wants to compete can build their own network. Nothing is further from the truth. The truth is that all three of the ubiquitous wired networks - telephone, cable, and power - were built in a monopoly environment... The FCC points to wireless and powerline operators (both of which have signifigant facilities) as potential competitors. But an examanation of the facts regarding broadband over powerline (BPL) and wireless make clear they are not real competitive threats for the foreseeable future... Nowhere in the world are BPL or wireless being commercially used as the primary means for data or video communications. In the US, the latest FCC report on broadband shows that wireless, BPL, and satallite account for less than 3 percent of the market, and their share of the market is actually declining.
So the economic model that Sidak is so aggressive in applying doesn't quite work... unfortunately, neither side strikes me as having a strong foundation for their claims of competitiveness or lack thereof. In the next post, I'll do some research to try and explore the issue of broadband competition a little more...

...But before I end this post, I want to note one other claim Cerf makes that worries me. He writes
Network neutrality need not prevent anyone - carriers or applications providers - from developing software solutions to remedy end users concerns such as privacy, security, and quality of service. The issue arises where the network operator decides to place the functionality in the physical or logical layers of the network, rather than in the application layer where they belong.
Although putting faith in carriers or application providers to "remedy" (remedy?) privacy, security, and quality concerns might sound reasonable, by restricting such actions to the application layer, you create a lot of insecurity. That's exactly the problem that Jonathan Zittrain writes about in "Without a Net" (my coverage here).

Tuesday, January 31, 2006

Quick Follow Up: Prof. Tim Wu's Take On Google

I wish I'd seen Tim Wu's article in Slate before I wrote about the Google subpoena and the associated privacy implications.

In it, he writes about how the disturbing trend of information storage by search engines in the name of a better product. A long excerpt:

The better, more enduring question is: Why is all this information being kept in the first place?

Google and other search engines argue, —with some justification, —that preserving search records is important to making their product the best it can be. By looking at trillions of search-result pages, Google, for example, can do things like offer a good guess when you've spelled something wrong: "Did you mean: Condoleezza Rice?" And Google's "Zeitgeist" feature is able to tell you what the top searches are every week and year, —a neat way of tracking other people's passing obsessions. But even though keeping such logs may make their product better, or more fun on the margin, the justifications for keeping so many secrets in such a vulnerable place are just too weak.

Imagine we were to find out one day that Starbucks had been recording everyone's conversations for the purpose of figuring out whether cappuccino is more popular than macchiato. Sure, the result, on the margin, might be a better coffee product. And, yes, we all know, or should, that our conversations at Starbucks aren't truly private. But we'd prefer a coffee shop that wasn't listening, and especially one that won't later be able to identify the macchiato lovers by name. We need to start to think about search engines the same way and demand the same freedoms.

It all goes back to this basic point: How free you are corresponds exactly to how free you think you are. And Americans today feel great freedom to tell their deepest secrets; secrets they won't share with their spouses or priests, to their computers. The Luddites were right—our closest confidants today are robots. People have a place to find basic anonymous information on things like sexually transmitted diseases, depression, or drug addiction. The ability to look in secret for another job is not merely liberating, it's economically efficient. But all this depends on our feeling free to search without being watched.

Wu's most interesting point, however, is that he calls on private companies to protect our privacy, not the government. He argues that Google should immediately delete the IP address data it has collected over the past 5 years, and cease its current practice of collecting... the position echoes that of network neutrality advocates... that all of the intelligence in a network should be kept in the ends, everything else should be kept stupid. I tend to agree, but I am deeply skeptical of Google's willingness to chance its business model.

Saturday, January 28, 2006

Article: Private interests Intervene in Tax Loophole for Cigarettes

It's been long known that websites like have offered extremely low cost cigarettes worldwide. They can do so by undermining tax law- the way it works is that you purchase two packs of cigarettes off yessmoke for, say, 40 cents a pack. Added to that is 2.00 or so in shipping and handling charges. They send the product 2 packs at a time to avoid postal office scrutiny, and although they follow the law in printing the fact that cigarettes are in the package and should be taxed, they make this statement in what appears to be Swiss-German (evidently not many postal service people speak Swiss-German).

So the package comes through, and the product is never taxed. What to do about it? Well, such business has aroused the ire of the government, but the postal service is too understaffed and overworked already to take on the responsibility of scanning every cigarette pack sized package that comes through. This week, however, Phillip Morris has stepped in, agreeing not to supply illegal internet vendors with their product. It is the latest in moves to curb illegal cigarette distribution, including limitations by credit card companies in March that crippled many online vendors, and actions by private companies (for example Phillip Morris' successful attacks on which have essentially destroyed the company's main avenue of business).

The importance of this goes beyond cigarettes... its at the heart of one of the largest issues on the internet: who will be the force behind regulating commerce. On one hand, you have those that want to raise taxes on the internet to close the loophole that many online enterprises employ. On the other, some argue that such taxation would create further problems. Gary Becker argued in May on the Becker-Posner blog,
I oppose taxation of the internet not because it is an “infant industry” that needs artificial stimulation to grow, nor because sales taxes of a few per cent alone would destroy this industry. Rather, my reluctance to interfere with the dynamics of the growth of the internet largely explains my opposition to taxation of transactions and other activities on the internet. I fear that the additional regulation of the internet that would inevitably accompany efforts to enforce taxation of transactions by either American states or the federal government would have a negative effect on internet growth in the United States.

Any significant sales tax on internet transactions would induce sellers and buyers to find ways to evade paying the tax. That includes setting up offices outside the United States, perhaps while shipping from places within the country, false invoicing, and still other methods from creative minds intent on evasion. All taxes induce avoidance and evasive actions, but internet transactions are particularly difficult to police, as seen, for example, from the proliferation of internet pornography. Hence attempts to collect taxes is likely to lead to substantial regulations that would slow down the so-far remarkable rate of innovation on the internet.

However, I can't agree that the slippery slope argument justifies a policy of non-taxation. As Becker points out, "ALL taxes induce avoidance and evasive action"- and the idea that transactions are particularly difficult to police isn't a political objection, its a pragmatic one. In other words..if internet taxation were easier to regulate, would that then make it justified? Perhaps what's needed then is a model of enforcement that is not likely to lead to the "substantial regulations" that Becker worries about.

I'd like to take a second and look at the other side of this equation: what happens if there is no model of enforcement. Then you have what amounts to private enforcement, on the part of big companies like Phillip Morris, and individuals bringing lawsuits against internet vendors. Is this sort of hodge-podge of enforcement preferable to attempting to create a workable model?

Off the top of my head, here's one possible model of net tax regulation which combines the flexibility of private companies with the structural power of government. Pass some sort of legislation that requires credit card companies to obey with state a fed tax laws. In other words, if a company doesn't sign some sort of documentation that notes they follow tax guidelines, then they can't work with the companies that provide secure credit card transactions, such as Verisign. This creates a burden on those that don't tax. If a consumer wants to purchase gray market products, they do so with the risks of unsecure transactions. It wouldn't destroy the gray/black market online, but it would curb it.

Tuesday, January 24, 2006

Thoughts: On the outrage over the Google subpoena

Ok- if you've read (you haven't, trust me, I track this stuff) the past few articles I've written you might have gotten a sense that my main ambition is to balance necessary constraints on the liberties granted by the internet with the characteristics necessary for innovation and relatively free communication. This includes everything from encryption law to network neutrality to those pesky cookies I have on my browser from visiting sites like

In the wake of the Google subpoena, I have decided that one of the HUGE overarching problems that face the evolution of the internet is a decisive trend towards retroactive, as opposed to proactive measures. "Of course!" You might very well exclaim. "The government is pretty bad at fixing problems AFTER they happen, what makes anyone think that they can accomplish anything BEFORE it happens?"

The rub is, I'm talking about private companies, not the government. Quickly though, a synopsis on what's going on from the San Francisco Gate:
In an effort to revive a 1998 pornography law struck down by the U.S. Supreme Court two years ago, the Bush administration filed papers with a San Jose judge Thursday asking the popular search engine to hand over millions of records. The data, it contends, will help the government "understand the behavior of Web users" and prove that the law is more effective in protecting minors from pornography than filtering software.

I'm a fairly stringent advocate of structuring the internet in a manner where explicit material is kept separate from the rest of the data on the internet- thus my support for measures like ICANN's .xxx domain. However, trying to gauge the exposure of children to internet pornography by tracking the seemingly infinite list of search terms used by internet users is like trying to track violence among young children by searching what people rent at the video store: the causal link is so blurry it's insignificant. Just because x or y search term might generate a few links to pornography does not show 1) that children are using the search term 2) that children are not supervised by adults when using the search term and 3) that children, upon using the search term, are either affected directly (i.e. by suffering some tort-like damage from even viewing the porn link) or indirectly (i.e. by clicking on said porn-link).

In short, the administration's reasoning for tracking the information sucks.

But, and here's where the pro/retro-active stuff comes in, the government's action does not necessarily violate the ever-ambiguous right of privacy. The Detroit Free Press claims that
"Such a blanket release by Google would clearly violate the privacy rights of its users." Not necessarily, and part of the reason is tied up with what actions Google itself has done.

First, Google has been collecting this information for as long as they've been in existence, as have the other large search engines companies: AOL, MSN, Jeeves, ect. And privacy advocates have been pretty quiet until the big scary government steps in because hey, THEY want this information too! I don't understand the double standard that a private company can essentially track the search terms I use for their own uses but the government can't. I'm not a supporter of the Bush Admin, and I think that frankly much of their conservative-inspired-free-speech-jeopardizing policies on the internet are loathsome. But that doesn't make this particular policy illegal (even if misguided) as many assert. It is necessary to note that in Google's response to the subpoena (scroll down a bit for the long letter by Ashok Ramani, Exhibit B) its main reasons for not giving up the search results are 1) the feds can receive this information from other sources like (the feds, of course, claim they can't) and 2) to disclose this information would expose trade secrets of the company. Words like "privacy" and "civil liberties" don't appear.

Second, if Google responded using a privacy argument there might be a slight philosophical contradiction between the companies defense and their approach to Google Library. As I wrote earlier, one of the main objections to Google library is that it allows a search of books without the authors consent- implying that such a search does not constitute a breach of privacy. Same thing with Google maps- Google can make satellite pictures of my house available, and I can't do anything about it. So with all this information gathering, to claim that concerns with "privacy" are the basis for objecting to the gov's request might backfire. I'm not saying search terms, books, and maps constitute the same level of intimacy or data, but the underlying philosophy that an information search does not violate privacy remains the same. as far as I see it, there's no real protection for such information. Either its a problem for the company to be collecting data without my consent, or its not a problem for the gov to access that data. In a well articulated take on the legal aspects of the case, law professor Daniel J. Solove writes:

One enormous problem is that the Supreme Court has established an immensely troubling doctrine in Fourth Amendment law known as the "third party doctrine." In United States v. Miller, 425 U.S. 435 (1976), the Supreme Court held that people lack a reasonable expectation in their bank records because "[a]ll of the documents obtained, including financial statements and deposit slips, contain only information voluntarily conveyed to the banks and exposed to their employees in the ordinary course of business."” Employing analogous reasoning, in Smith v. Maryland, 442 U.S. 735 (1979), the Supreme Court held that people lack a reasonable expectation of privacy in pen register information (the phone numbers they dial) because people "know that they must convey numerical information to the phone company,"” and therefore they cannot "“harbor any general expectation that the numbers they dial will remain secret."” When there's no reasonable expectation of privacy, the Fourth Amendment provides no protection.

The problem with the third party doctrine is that in the Information Age, countless companies maintain detailed records of people'’s personal information: Internet Service Providers, merchants, bookstores, phone companies, cable companies, and many more. The third party doctrine thus severely limits Fourth Amendment protection as more of our personal information winds up in the hands of businesses.

He seems to conclude that Google's opposing the request is a good thing, albeit Fourth Amendment protection is fairly weak. In a , he makes the argument:
there's another reason why revealing to the government even de-identified search queries might pose a privacy problem -- the act of complying might chill people in the future from conducting searches on Google. Why? Because it may be possible later on for the identities to be reattached. Thus, if the goverment obtains the search records, isolates certain searches as "troubling" and then issues another subpoena to Google for the IP addresses connected to those searches, there's a chance that the searches can be identified. In other words, the government's subpoena now need not be the final step in the dancesubpoenasbpeonas may follow. And knowing this, people may be chilled in their searches.
Does the slippery slope argument hold up? I'm not sure, because it doesn't follow that just because LATER events that take place might violate privacy make current actions unjustified. Yes, I don't want searches to result in the government pushing for further disclosure on searches that it deems troubling, but that's not what's at issue here. In the end, a lot of outrage does not = a legally sound argument... and privacy, sadly, is not going to be the argument that wins this case. To be plausible, Google would have had to set out to protect privacy in the first place, which it hasn't. If Google succeeds, I imagine it will be due to a very well thought out position on private property and protection of trade secrets, with little to do with the 4th amendment.

(image from PC World)