On a journey: The Internet, Travel and Crispy Fried Eel

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I’m just back from a jaunt to Hanoi and Halong Bay. Travel was one of the first industries to be shaken up by internet and the reams of information available online have changed where we go, how we book it and what we do once we get there. More people are travelling more often than ever before, and the internet isn’t just facilitating that, it’s indispensable.

I’m part of the generation which came of age just as the internet did — to sum it up, when friends went on gap years before university, they’d send letters and if they went after it was e-mail. When one considers the difference in effort and risk involved in planning a trip then and now, it’s as mind-blowing as Vietnamese traffic.

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An Uber Victory For Consumers

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New York City officials on Wednesday abruptly abandoned plans to rein in Uber, dropping a fiercely contested proposal to cap the company’s growth in its largest market. That’s a good result, because as Mitchell Moss, director of the Rudin Center for Transportation Policy at NYU, commented, it signals “that the days of taxi industry cartels are over.”

Yet the even better lesson is that competition, if left unregulated — without political or regulatory barriers protecting incumbents — can work quickly to correct market failures. The problem in New York for decades has ben a shortage of taxi availability on rainy days and during rush times.  Here:

Consumers have become too attached to apps like Uber’s that now make ordering a car as easy as two clicks on a smartphone. That base of users has now in many cities proven more powerful than the company’s not insignificant opposition, from traditional taxi providers and labor critics.

Uber triumphs as New York City officials abandon plans to limit transportation company | WashPost

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The Disruptive Benefits of Zenefits (and Lemonade Stands)

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You may not have heard of cloud-based business HR and insurance provider Zenefits, but the folks at industry giant Automatic Data Processing Inc. (ADP) certainly have. ADP recently shut off Zenefits’ access to client information needed to run payroll, charging that the startup was gleaning this information in an unauthorized manner and posed a security risk. Zenefits countered with a blog post claiming that ADP was actually shutting off access because it had developed a competing service to Zenefits. ADP took issue with that accusation and then filed a lawsuit against both Zenefits and its CEO Parker Conrad.

The Zenefits story is fascinating, both ADP’s snarky legal reply and the unusual circumstance of a disruptive entrant challenging a de facto monopolist (or duopolist). The two largest U.S. payroll processors — ADP and Paychex — combine for some 40% of the payroll market, which indicates that their share of outsourced payroll services is probably far higher. Analysts have also noted that both firms share lock-in advantages, raising entry barriers, and enjoy what one market observer terms a “rational duopoly,” with ADP focusing on larger businesses and Paychex targeting smaller concerns. The firms are able to lock customers into long-term deals and “consistently raise prices.” And both companies have strong brand identities that help them against upstart, unproven competitors.

As a competition matter, of course, a 40% share does not qualify as monopoly power for antitrust purposes. On the other hand, when a dominant firm uses the legal process as a tool to intimidate or retard the growth of new, upstart rivals, it faces some serious antitrust risks. So while the details remain to be disclosed, the glimpse inside the dynamics of payroll processing provided by ADP’s libel litigation suggests something possibly untoward.

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The Disturbing State of Uber In California and France

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You’ve probably read news reports of two current developments that are directly threatening the continued viability of Uber’s ride-sharing service — California’s ruling that Uber drivers are “employees” of the company, and France’s decision to indict two of Uber’s top French executives on criminal charges of “enabling illegal taxi services” that could bring fines and jail time. The company called the latter “[t]otally unheard of,” and a “piece of pure calumny,” and is appealing the former.

Taxi Drivers Protest Uber. Image Credit/License: Gyrostat (Wikimedia, CC-BY-SA 4.0)

Taxi Drivers Protest Uber. Image Credit/License: Gyrostat (Wikimedia, CC-BY-SA 4.0)

These represent just the latest conflict between the sharing economy and legacy regulations, issues we have explored several times at Project DisCo. Uber, which is in talks to raise more investments at a whopping $50 billion valuation, has rapidly upended entrenched taxi and transportation industries with its model of letting people hail rides via their smartphones. Airbnb has done the same thing to hotels and motels, with similar blowback from local regulators, as in New York City. Tesla’s direct automobile sales model has been opposed at the state level by auto dealers.

All of these examples share the common thread of treating innovative new services as if they were clones of traditional industries with which they compete, and thus subject to the same legal restrictions. But they are not. There’s no public policy or legal difference between asking a friend to drive you to the airport and hailing an Uber driver with the company’s smartphone app; both perform exactly the same function, and neither involves holding the driver or company out as offering “common carriage” transportation to the general public. The fact that modern technology allows on-demand ride-sharing to be organized at scale is precisely why Uber’s service is different from taxi rides. Cabs can cruise the streets, wait at hotels and airports for fares and, in many locales — like Washington’s Dulles Airport — enjoy a franchise monopoly. Uber drivers have none of those benefits, especially the municipal-sanctioned protection from new entry.

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The Digital Single Market and A Duty of Care: Preserving the Transatlantic Legal Foundation of a Thriving Internet

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As part of the Digital Single Market (DSM) communication, the European Commission has discussed the possibility of imposing a “duty of care” on Internet intermediaries, which would require Internet platforms to take a more active role in policing user content.  Forcing Internet intermediaries to monitor and remove their users’ communications is ill-advised from both an economic and human rights standpoint.

The rapid growth of the Internet was not merely the function of technological innovation.  This fundamental restructuring of commerce and communications would not have been possible but for substantive legal reforms that adapted legacy legal concepts to comport with the realities of a hyper-connected Internet age.  Arguably the most important legal and legislative development of the Internet era was the concept of intermediary liability limitations for Internet service providers.  Or, stated in a less legalistic way, the policy choice that Internet services should not bear blame for bad people saying or doing bad things on the Internet.  Given the size and scope of the Internet and the volume of online communications, it is safe to say that Facebook, Twitter, Google, Yelp, YouTube, Allegro, and Dailymotion would not exist today if the law evolved to hold websites and Internet services liable for the actions of their users. Further, imagine operating a telecommunications network with the sum of all this information passing through without being shielded from responsibility for the actions of all of your users.  What venture capitalist in her right mind would invest in a platform that was exposed to liability for billions of websites beyond its control or trillions of posts composed by third parties?  What would Internet business models look like if companies had to pre-screen all user communications before they went live?

Recent developments in Europe, including the Delfi ruling and the DSM “duty of care” proposal, suggest that Internet services may soon be asked to take a more active role in filtering user content. Yet even with advanced filtering tools, unlawful speech is almost always context dependent.  Libel and defamation would not be obvious to a filter.  Even more complex is when lawful speech is used unlawfully, as in the case of copyright and trademark infringement.  Given that rules about these various types of speech are often the product of complex legal cases, even human review of every online communication would not completely shield an Internet company from liability, given that different people can come to different conclusions about whether speech is “harmful.” Not to mention that standards for what is permissible speech vary widely from country to country.

Besides the commercial impact, the implications for free speech would also be disastrous. Protections from intermediary liability enable platforms to give people around the world a simple way to express themselves and to share what they love with the world, and to challenge the restrictions of oppressive governments. One study found that when online platforms are regulated on the basis of content submitted by their users, they remove large amounts of controversial but legal content for fear of facing penalties. The UN’s Joint Declaration on Freedom of Expression on the Internet recognizes the success of laws such as the CDA, DMCA, and the E-Commerce Directive, stating that “intermediaries should not be required to monitor user-generated content and should not be subject to extrajudicial content takedown rules which fail to provide sufficient protection for freedom of expression.”

Even if pre-screening and filtering at scale were feasible, the value of each individual communication — whether it takes the form of a website, a tweet, a Facebook post or a YouTube video — is negligible, where the potential legal exposure is huge; the potential damages for copyright law can reach $150,000 per work infringed.  So, in a world where Internet companies were liable for the communications of their users, a rational company would be incentivized to aggressively censor content, leading to significant blocking of ostensibly legal speech as the costs of under blocking are significantly more than the costs of over blocking.MORE »

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What you learn and who you learn from: the Internet shakes up the workplace

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This column comes from Australia, which I’m visiting for the first time. Let’s do the obvious Aussie tech clichés first: here’s an angry kangaroo swatting a drone out of the air, the realtime tracking app for Melbourne’s fleet of trams, and a selfie competition at Sydney Opera House — where they use the screens for the surtitles to tell audiences to Tweet their thoughts! Love it. Another thing which will strike visitors used to Brussels is how easy to is to pay for everything with cards (as opposed to cash) and that (judging by a week’s holiday) 99% of those cards are contactless — time for Europe to catch up!

One thing I’m really enjoying is the Aussies’ famously laid-back attitude. This shows up in everything from wine tasting — the “cellar doors” in the Hunter Valley are very chilled compared to tasting France, and even come with app recommendations — to business culture. Reading Peter Carey’s Australian epic “Oscar and Lucinda” it’s striking how important the letter of introduction was to those undertaking the perilous journey from London to Sydney and vice-versa. The modern equivalent is as simple as pinging someone on LinkedIn, Academia.edu, Indeed or StackOverflow. Likewise, the journey’s much easier by Airbus A380 than steamship.

One Australian who has made a career in the Brussels bubble has made impressive connections both online and off. Ryan Heath was previously spokesman for EU Tech Queen (sorry, EU Commissioner for the Digital Agenda) Neelie Kroes. Now he writes Politico’s daily Playbook — where connections are everything.*

“The truth is that I was able to have a ready-made group of friends when I first moved to London thanks to email, and later when Facebook started it was much easier to juggle a new life and old friends still back in Australia,” Mr. Heath says. “That simply wasn’t an option when my parents travelled.”MORE »

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Quote of the Day: The Apple eBooks Decision, On Windowing

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Today a federal court of appeals in New York upheld an antitrust judgment against Apple, affirming a trial court’s finding that the technology company had coordinated a price-fixing scheme among five major publishers when launching its ebook store in 2010.  DisCo has covered the antitrust aspects of the ebook case before [1], [2], but there is a non-antitrust thread in the opinion, regarding windowing, that deserves attention.

As I noted in a previous post, windowing is a content distribution strategy of releasing the same content in different formats and venues at different times. By delaying consumer access to digital content as long as possible, rights holders aim to maximize returns from more traditional distribution outlets.  My previous post explored windowing in the motion picture industry, but windowing is practiced in the ebook market as well, with publishers holding back the digital distribution of their catalogue in the hopes that consumers would purchase hardcovers.  One of the problems with this windowing business model is that it induces copyright infringement.

Today’s decision by the appeals court notes that publishing executives knew this quite well, but couldn’t bring themselves to break the practice.

Ultimately, however, the publishers viewed even this [windowing] strategy to save their business model as self‐destructive. Employees inside the publishing companies noted that windowing encouraged piracy, punished ebook consumers, and harmed long‐term sales. One author wrote to [a publishing executive] in December 2009 that the “old model has to change” and that it would be better to “embrace e‐books,” publish them at the same time as the hardcovers, “and pray to God they both sell like crazy.”

(emphasis mine)

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Supreme Court Declines to Hear Oracle v. Google Case Over Java Copyrights

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This morning the Supreme Court issued an order indicating that it was declining to hear an appeal of the copyright case between Oracle and Google.  The appeal concerned the copyrightability of “application programming interfaces” (APIs).  Oracle launched the suit against Google shortly after acquiring Sun, which held copyrights and patents on the Java computer language, in 2010.  It claimed that Android infringed Java copyrights because Android replicated elements of the Java API in the Android API.  (Oracle’s suit also advanced patent claims, which came up remarkably short.)

The trial court sided with Google, but the U.S. Court of Appeals for the Federal Circuit disagreed, in a May 2014 ruling discussed previously here, here, and here.  Google appealed to the Supreme Court, arguing that the appellate court had incorrectly held that the system and methods of the Java API could be protected under U.S. copyright law.  The U.S. Copyright Act withholds protection from any idea, procedure, process, system, or method of operation. Processes, systems, and methods are usually the domain of patent law, not copyright; courts have long noted the lack of copyright protection for interface specifications encourages interoperability across software environments.

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Start Up Your Startup: the Internet vs. Admin Nightmares

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“Jobs and growth” has been the mantra of politicians across Europe since the start of the crisis. If, every time they said it, one job and a corresponding unit of growth had been created, Europe would be a glittering beacon of full employment and double-digit expansion. But it isn’t — the situation is still pretty dire. One way policymakers are trying to tackle this is to encourage everyone to find their inner entrepreneur, and set up a company.

“It will be small businesses and web startups that will create the ideas and jobs that we need for our economic growth,” wrote EU Digital Single Market chief Andrus Ansip on his blog. “No industry, no SME, no government can maximise its performance and competitiveness without going digital.”

Among his bright ideas: a new type of pan-European small tech company licence, which anyone could set up in under 24 hours, with unified requirements across all EU countries. There’s already a wealth of apps, websites and software out there which help make setting up a business infinitely simpler than in the pre-Internet era.

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The Layered Playing Field

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Recently Politico reported on Deutsche Telekom CEO Timotheus Hottges calling for “free competition” while reporting the company’s strong financial results, reliable dividend and strong free cash flow. But “free competition” in what? Mobile telephony?

Deutsche Telekom (DT) spokesman Philipp Blank clarified that “What we want are open platforms and inter-operability” apparently a reference to messaging applications such as WhatsApp, Apple’s FaceTime, Skype and Viber. DT wants such apps to be made interoperable with SMS. These demands have also been made by Telefonica and coincide with the European Commission’s recent release of the Digital Single Market strategy. Both companies want the European Union to bring about a ‘level playing field’.

Is this a good idea?

Rather than think about a level playing field, something the firms above have called for, a better way to approach this debate would be to think about a layered playing field.

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