In a recent post, Tim Lee does a good job of explaining why facilities-based competition in broadband is difficult. He writes,
As Verizon is discovering with its FiOS project, it’s much harder to turn a profit installing the second local loop; both because fewer than 50 percent of customers are likely to take the service, and because competition pushes down margins. And it’s almost impossible to turn a profit providing a third local loop, because fewer than a third of customers are likely to sign up, and even more competition means even thinner margins.
Tim thus concludes that
the kind of “facilities-based” competition we’re seeing in Kansas City, in which companies build redundant networks that will sit idle most of the time, is extremely wasteful. In a market where every household has n broadband options (each with its own fiber network), only 1/n local loops will be in use at any given time. The larger n is, the more resources are wasted on redundant infrastructure.
I don’t understand that conclusion. You would imagine that redundant infrastructure would be built only if it is profitable to its builder. Tim is right we probably should not expect more than a few competitors, but I don’t see how more than one pipe is necessarily wasteful. If laying down a second set of pipes is profitable, shouldn’t we welcome the competition? The question is whether that second pipe is profitable without government subsidy.
That brings me to a larger point: I think what Tim is missing is what makes Google Fiber so unique. Tim is assuming that all competitors in broadband will make their profits from the subscription fees they collect from subscribers. As we all know, that’s not how Google tends to operate. Google’s primary business model is advertising, and that’s likely from where they expect their return to come. One of Google Fiber’s price points is free, so we might expect greater adoption of the service. That’s disruptive innovation that could sustainably increase competition and bring down prices for consumers—without a government subsidy.
Kansas City sadly gave Google all sorts of subsidies, like free power and rackspace for its servers as Tim has pointed out, but it also cut serious red tape. For example, there is no build-out requirement for Google Fiber, a fact now bemoaned by digital divide activists. Such requirements, I would argue, are the true cause of the unused and wasteful overbuilding that Tim laments.
So what matters more? The in-kind subsidies or the freedom to build only where it’s profitable? I think that’s the empirical question we’re really arguing about. It’s not a forgone conclusion of broadband economics that there can be only one. And do we want to limit competition in part of a municipality in order to achieve equity for the whole? That’s another question over which “original recipe” and bleeding-heart libertarians may have a difference of opinion.
To gather some empirical evidence on this question, we recently conducted an online survey of 492 American adults who have flown in the past year. In this sample, 40% said they did not turn their phones off completely during takeoff and landing on their most recent flight; more than 7% left their phones on, with the Wi-Fi and cellular communications functions active. And 2% pulled a full [Alec] Baldwin, actively using their phones when they weren’t supposed to.
Consider what these numbers imply. The odds that all 78 of the passengers who travel on an average-size U.S. domestic flight have properly turned off their phones are infinitesimal: less than one in 100 quadrillion, by our rough calculation. If personal electronics are really as dangerous as the FAA rules suggest, navigation and communication would be disrupted every day on domestic flights. But we don’t see that.
Republican vice presidential nominee Paul Ryan says the federal government shouldn’t interfere with states that have legalized medical marijuana.
The Wisconsin congressman tells KRDO-TV in Colorado Springs that he personally doesn’t approve of medical marijuana laws. But he says that states should have the right to choose whether to legalize the drug for medical purposes.
In response to a reporter’s question, Ryan said: “It’s up to Coloradans to decide.”
Good for him, but I know a certain someone who said the same thing for years ago when he was running for president and is now cracking down on state-legalized dispensaries like there’s no tomorrow.
Flynt is taking out full-page ads in this Sunday’s edition of The Washington Post and Tuesday’s USA Today that promises “up to $1 million” for the dirt on Romney’s “unreleased tax returns and/or details of his offshore assets, bank accounts and business partnerships.” (But before you go calling the Hustler hotline, be aware that Flynt will need “documented evidence of your claims.”)
According to the ad, all correspondence will be kept confidential—so if you’re a former Bain exec with a bone to pick (or without a golden parachute), you might want to get a pen.
Someone should tell Flynt about the group that claims to have Romney’s tax returns and is asking for $1 million in bitcoin to withhold (or release) the information. I’m sure Flynt would gladly pay $1 million for the tax returns, but he wants to see the goods first. The alleged burglars seem to want to stay anonymous, hence the bitcoin request, so I doubt there’ll be a meeting of the minds. Hoax or not, this story is doing a great job of reminding everyone that Romney has unreleased tax returns.
More on the Romney tax-return blackmail plot because I find it interesting if preposterous. Apparently PricewaterhouseCoopers does not believe that its systems have been compromised, but the Williamson County, Tenn., Republican and Democratic party offices have indeed received packages with USB thumb drives on which are encrypted files alleged to be Mitt Romney’s pre-2010 tax returns. They also allegedly include an image of Romney’s signature on these files. The Secret Service is investigating.
A couple of things to note. First, as pointed out by Guy McHendry, it’s not clear there was any hacking involved if the series of events published on Pastebin are to be believed. These may not be hackers, just burglars who know how to use encryption. The media should stop saying hackers.
Second, if real, the role of bitcoin here is fascinating. In a world without bitcoin, you could carry out the same scheme, but the million dollars would have to be delivered to you in a suitcase. Bitcoin makes anonymous extortion much easier. That said, it also makes the quid-pro-quo of extortion more unstable. If you pay a ransom, you want some guarantee that the extortionist won’t release the secrets anyway, and that assurance usually comes from knowing their identity so that you can turn them over to the police if they do not keep their end of the bargain. Bitcoin eliminates that assurance, which is why Romney or his supporters shouldn’t pay.
That all said, my money is on this being a hoax. I’m still trying to think through what the motivation is, but one suggestion is that it’s intended to move the bitcoin market.
Allegedly stolen from PricewaterhouseCooper’s Tennessee office on Aug. 25. The group wants $1 million in bitcoins from Romney by September 28 or they say they will make them public. So lulzy if real, but why would they make their extortion demand public if it’s true?
At the conference in December, world governments will consider proposals to increase government control of the Internet. The father of the Internet, Vint Cerf, has warned that “Such proposals raise the prospect of policies that enable government controls but greatly diminish the ‘permissionless innovation’ that underlies extraordinary Internet-based economic growth to say nothing of trampling human rights.”
Sadly, though, those proposals have been kept secret by the International Telecommunications Union (ITU), which is hosting the meeting. WCITLeaks.org gave those in possession of such documents a way to make them available to the public. To date we have published about 11 percent of ITU documents related to the WCIT. But we think there’s more we can do.
The new WCITLeaks also provides a resource bank with links to analysis and advocacy materials from civil society, and a news page populated both with broad overviews of the issue and recent headlines. The hope is that WCITLeaks.org can serve as a clearinghouse for information related to the conference, as well as future efforts by the ITU to regulate the Internet.
In a couple of weeks, the ITU will be holding a press conference to discuss the WCIT because, they say, “there is quite a lot of misinformation being circulated concerning the agenda and process of the conference.” They invite journalists to “Join this global discussion to find out what’s REALLY going to be discussed[.]”
It’s amazing, but they are holding a press conference to dispel “misinformation” about what’s going to be discussed at the conference, and what’s going to be discussed at the conference is—wait for it—in the documents they keep secret! If the ITU is serious about dispelling any misinformation, the best way to do that is not with a press conference but by making all documents related to the WCIT public.
Until then, WCITLeaks.org will continue to serve as a resource where citizens can inform themselves by reading the secret government’s proposals, and now also by perusing news, policy analyses, and advocacy materials from a broad spectrum of civil society groups. We hope you will help us spread the word about the site, and submit documents and links you think should be included. Thanks for your help!
"We hold that the lacquered red outsole, as applied to a shoe with an ‘upper’ of a different color, has ‘come to identify and distinguish’ the Louboutin brand and is therefore a distinctive symbol that qualifies for trademark protection," U.S. Circuit Judge José A. Cabranes wrote in a 31-page opinion.
Facepalmiest thing of the day (so far). Et tu also trademark law?
A modest proposal for improving the release of employment data
This morning I was listening to the most recent episode of Planet Money, which looked at the extensive security measures taken by the Bureau of Labor Statistics to guard against the early release of its monthly jobs numbers. (Did you know, for example, that TV reporters who are let in on the secret minutes before they go on air are only allowed to say Bureau-specified nonsense phrases to do their mic checks for fear that they might otherwise send out coded messages?) One thing the episode didn’t address was why the Bureau goes to such great lengths. They simply said that if someone got the numbers ahead of time they would stand to make a lot of money.
But what’s wrong with making lots of money, I thought. Nothing from the perspective of the windfall recipient, I’m sure, and nothing from the perspective of the markets, which happily assimilate the new information. There wouldn’t be anything inefficient about early release, I thought.
So I asked my Mercatus Center colleague Keith Hall who until earlier this year headed the BLS. He said it was not about efficiency, but about fairness. Even if you’re skeptical of laws against insider trading (because, after all, such trading only gets information to markets quickly about the reality of a corporation), the jobs numbers are different. They are not just information about a company, but an market-moving estimate developed with taxpayer dollars. To give anyone and advantage would be unfair.
Fair enough, I say, but here’s how I would improve the system: Why not hold a monthly lottery among all taxpayers and the winner gets the data a day in advance? The winner can’t tell anyone, but he’s allowed to trade on the information. We can even have part of the prize be that the winner gets to announce the numbers live on TV with a very big smile. Again, there would be no inefficiency, and as long as we are all eligible for the drawing, and we all have an equal chance of winning, then it’s still completely fair.
Why aren’t we doing this? This would be one government program I could get behind.
I’m working on a project looking at libertarian views on copyright (more on that soon), and I’d like to solicit your feedback on an analogy I’m developing. I’ve set up a comment thread at Google+ and I’d sincerely appreciate your thoughts on this post. Email feedback is also appreciated. Here goes…
Libertarians, conservatives and other supporters of a free market tend to be critical of government programs that subsidize particular industries. For example, the loan guarantees that allowed Solyndra to set up shop. We don’t like them because they distort the market and tend to lead to rent-seeking, if not corruption.
Why do we have loan guarantees for renewable energy projects like Solyndra’s solar power technology? Quite simply it’s because we’d like to see more renewable energy technology developed; more than is profitable to develop right now. So, the government offers a subsidy to incentivize the creation of such technology, which will eventually benefit the public at large. So far so good, but there are problems with this kind of government privilege.
First, there is a knowledge problem. How do we know that we’re not already getting the right amount of investment in renewable technologies? Without a government subsidy, there would still be investment in renewable energy technologies. We just think it’s not enough. But even putting aside how we can know that, the other question is, how much investment is optimal? Without a market process to guide investment, we don’t know how much is enough. So when the government offers subsidies, it’s guessing. It’s likely offering too little or too much, with each error introducing its own inefficiencies.
Good insight into what makes Tumblr tick. This is spot on:
In the beginning, most traffic came to Tumblr from without; but now more than 70 percent of the traffic on Tumblr occurs in the dashboard zone, where users read, react to and repurpose one another’s posts. The upshot is “the mullet theory of social software design,” summarizes Chris Muscarella, a tech-entrepreneur friend of Karp’s. “It’s all business in the front: you have your blog that looks like any other blog, although usually prettier. And then the real party is in the back, through the social interaction on the dashboard.”
I don’t think they’ll have trouble monetizing the dashboard without pissing anyone off. In addition to figuring out how to make money, though, they need to also focus on developer relations. This tale of woe is the latest in a long line, and they know it. I’ve been begging for a long time for an answer to whether we can post to the queue from the API. Help us help you.
But a curious thing happened almost immediately. They began by trying to replicate some classic experiments – such as the jam study, and a similar one with luxury chocolates. They couldn’t find any sign of the “choice is bad” effect.
Will be awkward for new editions of several best selling books.
The D.C. Council gave tentative approval Tuesday for nearly $33 million in tax breaks for LivingSocial to keep the growing company in the District after members deemed it essential to city efforts to brand itself as a hub for start-up and technology companies. In a unanimous vote, the deal will save the five-year-old company about $32.5 million in taxes over a five-year period beginning in 2015. In exchange, the company will agree to mentor D.C. students interested in careers in science and technology, hire city youths to internships and offer support to businesses affected by ongoing street construction projects. …
Mayor Vincent C. Gray (D) proposed the incentives in April after LivingSocial co-founder and Chief Executive Tim O’Shaughnessy expressed concern about the company’s growing operating costs in the District. O’Shaughnessy, 30, is the son-in-law of Washington Post Co. Chairman Donald E. Graham.
In case you’re doing the math, that’s $50 per D.C. resident.
That’s the proposition I am defending in a week-long online debate at The Economist versus Symantec CTO Greg Day. Please check out our opening statements, and by all means feel free to vote for my side.
By the way, didn’t it just come out inThe Washington Post that the United States helped attack Iran with Flame, Stuxnet and related programs? If they did this to us, wouldn’t we consider it an act of war? Didn’t we just take a major step toward militarizing the internet? Doesn’t it seem plausible to you that the cyber-assault is not yet over and thus we face immediate questions looking forward? Won’t somebody fairly soon try to do it to us? Won’t it encourage substitution into more dangerous biological weapons?
Those are good questions. Let’s take them in turn.
If they did it to us, would we consider it an act of war? I tend to agree with Franz-Stefan Gady’s perspective that Stuxnet should not be considered an act of war. One of the most overlooked aspects of the great reporting done by the NYT and WaPo uncovering the details of Stuxnet is that the U.S. did not “hack in” to Iran’s nuclear facilities from thousands of miles away. Instead it had to rely on Israel’s extensive intelligence apparatus to not only understand the target, but to deliver the worm as well. That is, humans had to physically infiltrate Iran’s operations to engage in the spying and then the sabotage.
Espionage is not an act of war under international law. Nations expect and tolerate espionage as an inevitable political practice. Spies are sometimes prosecuted criminally when caught, sometimes traded for other spies, and often simply expelled from the country. Sabotage I’m less certain about, but I think it inhabits a similar space as espionage: frowned up, prosecuted criminally, but not an act of war per se. (I’ve been trying to find the answer to that question in vein, so if any international law experts would like to send me the answer, I’d appreciate it.)
So what do we have with Flame? It’s essentially spying, albeit in a frighteningly efficient manner. But, it’s not act of war. Stuxnet is similarly not an act of war if we assume sabotage is not. There’s little difference between Stuxnet and a spy infiltrating Natanz and throwing a wrench into the works. Stuxnet is just the wrench. Now, it’s key to point out what makes Stuxnet political sabotage and not terrorism, and that is that there were no deaths, much less civilian deaths.
Did we take a big step in militarizing the Internet? Won’t somebody fairly soon try to do it to us? Well, it’s already happening and it’s been happening for years. U.S. government networks are very often the subject of espionage—and maybe even sabotage—by foreign states. If something feels new about Stuxnet, it’s that for the first time we have definitive attribution to a state. As a result, the U.S. loses moral high ground when it comes to cybersecurity, and if someone doing it to the U.S. gets caught, they will be able to say, “You started it.” But they’re already doing it. Not that it’s necessarily a good thing, but the militarization of cyberspace is not just inevitable, it’s been well underway for some time.
Finally, Tyler asks, Won’t it encourage substitution into more dangerous biological weapons? The answer to that, I think, is a definitive no. “Cyber weapons” are completely different from biological weapons and even chemical or conventional, and certainly nuclear. For one thing, they are nowhere nearas dangerous. No one has ever died from a cyber attack. Again, short of already being in a shooting war, these capabilities won’t be employed beyond espionage and surgical sabotage like Stuxnet.
That raises the question, however, if we’re in a shooting war with a Lybia or a Syria, say, will they resort to cyber? Perhaps, but as Thomas Rid has pointed out, the more destructive a “cyber weapon” the more difficult and costly it is to employ. Massively so. This is why it’s probably only the U.S. at this point who has the capability to pull off an operation as difficult as Stuxnet, and then only with the assistance of Israel’s existing traditional intelligence operation. Neither al Qaeda, nor Anonymous, nor even Iran will be able to carry out an operation on the same level as Stuxnet any time soon.
So, Tyler, you can sleep well. For now at least. ;o) Yes, we should have a national discussion about what sorts of weapons we want our government employing, and what sort of authorization and oversight should be required, but we should not panic or think we’re a few keystrokes away from Armageddon. The more important question to me is, why does one keeps $2.85 million in bitcoin?
“Democracy is like a puppy. It looks all sweet and fluffy when you’re looking at it in the shop window, but one day it will crap all over your carpet and widdle in your favorite slippers before proving disappointingly simplistic in conversation, increasingly attention-seeking and expensive, and then eventually, it will die.”—Andy Zaltzman
Bitcoin is anonymous, but transparent, so you can see the balances associated with individual addresses in the system. Jon Matonis points us to the top ten balances, which are pretty astounding. He writes:
But why leave your wealth in a distributed proof-of-work system instead of a traditional bank? In a broad sense, bitcoin wealth offers protection from unpredictable political risk such as sovereign confiscation, excessive taxation, and capital controls at the border. In addition to preservation of value when compared to national fiat currencies, bitcoin wealth eliminates bank solvency risk and the risk of exogenous shocks to the uber-leveraged financial pyramid. Remember, a pyramid was not a monument but a tomb.
I’m not sure I buy this completely. Bitcoin at this point is not risk free, to say the least, and I can think of much better hedges against the collapse of fiat currencies. It would be fascinating to discover who these folks are.
“Very happy to announce that as of this morning, Heather and I are legally married (at least in DC). 20 years to the day after our first date.”—Dick Cheney’s daughter, Mary • Revealing that she got married to her longtime partner, Heather Poe, on Friday. The couple, which has two children, lives in Northern Virginia, but got married in Washington DC, one of the areas where gay marriage is legal. Congrats guys!
From the cry-me-a-river department, the NYT has an update on 115 Cubans who had been imprisoned in Cuba and to whom Spain gave asylum after it negotiated their freedom. Bottom line, they’re not happy:
Some of the Cubans have held protests in downtown Madrid, as well as in other cities like Málaga, to demand that their government support payments be extended, and critics and opponents of the government have accused it of abandoning the former dissidents.
Which gives credence to my theory that Cubans are Republicans by accident and are, at heart, social democrats.
The UN's 'Internet takeover' and the politics of Kumbaya
When it comes to the UN exerting greater control over Internet governance, all of us who follow Internet policy in the U.S. seem to be on the same page: keep the Internet free of UN control. Many folks have remarked how rare this moment of agreement among all sides—right, left, and center—can be. And Congress seized that moment yesterday, unanimously approving a bi-partisan resolution calling on the Secretary of State to “to promote a global Internet free from government control[.]”
However, below the surface of this “Kumbaya moment,” astute observers will have noticed quite a bit of eye-rolling. Adam Thierer and I wrote a piece for The Atlantic pointing out the obvious fact that when a unanimous Congress votes “to promote a global Internet free from government control,” they are being hypocrites. That’s a pretty uncontroversial statement, as far as I can tell, but of course no one likes a skunk at the garden party.
Today a key committee in the US Congress approved a resolution opposing United Nations “control over the Internet.” While some in the Internet community have dismissed the bipartisan effort as mere political grandstanding, recent actions by some UN Member States show that lawmakers have good reason to be worried.
For the record, I fully support, commend, and endorse the Congressional resolution and the idea that the UN and all governments should keep their paws off the Internet. I certainly don’t dismiss the effort. That said, because I am capable of critical thought, I can simultaneously entertain the idea that politicians in Congress are also engaging in grandstanding and will likely forget their august resolution next time they vote on cybersecurity, copyright, privacy, net neutrality, or child safety bills.
So what is the recent action that DelBianco says should have lawmakers worried?
Last month, UN voting member Ethiopia made it a crime — punishable by 15 years in prison — to make calls over the Internet. The Ethiopian government cited national security concerns, but also made it clear that it wants to protect the revenues of the state-owned telecom monopoly.
And this gets to the next point of contention. Milton Mueller has been getting some heat because he is pointing out the also obvious fact that the UN is not about to take over the Internet, and that the issues around WCIT are much more subtle than the headlines would lead you to believe. The fact that Ethiopia is enforcing such a terrible law is evidence itself that state governments are the real threat to the Internet, and that they don’t need permission from the UN to regulate the Internet.
And even if they did need it, they have it. As ITU Secretary-General Houman Touré pointed out in his speech yesterday, “Such restrictions are permitted by article 34 of the ITU’s Constitution, which provides that Member States reserve the right to cut off, in accordance with their national law, any private telecommunications which may appear dangerous to the security of the State, or contrary to its laws, to public order or to decency.”
But all this does not mean that folks like Milton, Adam, Eli Dourado, and I are not in complete agreement with DelBianco, FCC Commissioner Robert McDowell, Gigi Sohn, and the rest who are sounding the alarm about WCIT. It’s just that we want to be more specific about what the exact threats are, and we don’t want to overstate the case because we fear that could eventually backfire.
The real threat is not that the UN will take over the Internet per se, but that autocratic states like Russia, China and Iran will use the process to further legitimize their existing programs of censorship, as well as the idea of interconnection charges.
In a happy accident of history, the Internet was designed by academics and engineers, not governments and telcos. Now they want to say, “Thanks for setting it up, we’ll take it from here.” They can’t take control overnight at a single conference—and maybe never given the Internet’s decentralized architecture—but they can start setting the stage for more and more government regulation, perhaps even resulting splinternets (an issue beyond the scope of this post). That’s the subtle threat WCIT and subsequent conferences pose.
The question then is, why update the ITRs at all? All evidence suggests that the only reason to revisit the ITRs is to bring the Internet under their umbrella. The main thing to be negotiated at WCIT, it seems, is how much regulation of the Internet the ITRs will legitimize, not whether to do so at all. I know it will be hard for our diplomats to acknowledge other states’ concerns about security, piracy, fairness, etc., and at the same time be firm that WCIT is not the place to deal with those issues, but that’s what they should do.
Yours truly writing with Adam Thierer in The Atlantic about the bipartisan congressional resolution that passed today against UN regulation of the Internet:
From the tone of the hearing, and the language of the House resolution, we are being asked to believe that “the position of the United States Government has been and is to advocate for the flow of information free from government control.”
If only it were true. The reality is that Congress increasingly has its paws all over the Internet. Lawmakers and regulators are busier than ever trying to expand the horizons of cyber-control across the board: copyright mandates, cybersecurity rules, privacy regulations, speech controls, and much more.
Perhaps the lesson here is that Congress is commendable only when it is being hypocritical.
A little torn on this. Granted, we tend to be reflexively anti-Microsoft at times, but this probably is the most-aggressive attempt to take on Apple we’ve seen yet, and it’s worth taking seriously. They took Apple’s biggest iPad weakness — the lack of physical keyboard — and banked the entire device on it. It’s a smart approach, but you know, it’s one that seems like it’d be simple for a Kickstarter to copy completely. It’ll be interesting to see how this affects third-party vendors, too. Either way, this seems like an attempt to take out the netbook — if they price it right, at least.
And that’s just it: they didn’t announce a price. Unless they take a loss, I don’t see it matching the iPad’s $499, in which case it is not competing with the iPad. So with what is it competing? Perhaps the lesson Microsoft did learn from Apple is that if your market is going to get disrupted, it might as well be you who does it. So I think this might be competing against themselves (and their partners). A PC for the post-PC world.