competition

At the end of 2013, Project DisCo hosted its first physical world event, The Disruptive Competition Policy Forum.  Over the next few days, we are going to post the videos of the great panels and keynotes here.

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CCIA launched DisCo (the Disruptive Competition Project) almost a year and a half ago; our first post was June 1, 2012.  Since then, the project has grown, and we’re excited about all of the interesting news and views we’ve had to share with you.

And DisCo is now more than just a blog; we’re having our first event next month, the DisCo Policy Forum 2013, featuring speakers on a lot of the topics we frequently cover.  Please join us in person as we explore several topics, including local restraints on Internet-enabled competition, data policy and 21st century copyright.

The agenda is below.  RSVP on Eventbrite.  (There’s also a Facebook event; invite your friends!)

DISCO POLICY FORUM 2013

Tuesday, December 10th

Arent Fox LLP, 1717 K Street NW

9:45am: Registration Opens

 

10:15am: Welcome, Opening Remarks

Featuring: Stephanie Joyce, Partner, Arent Fox LLP

10:30am: Policymaker Keynote Address

Featuring: Joshua Wright, Commissioner, Federal Trade Commission

11:15am: “Breaking Barriers to Internet-enabled Competition”

The Internet has been a game changer for the average consumer. Its ubiquity and malleability empower entrepreneurs and enhance consumer choice by expanding markets and connecting producers and consumers from all over the world. However, it also displaces traditional middlemen and reshapes markets in ways that have engendered political pushback from traditional incumbents. In this panel, we hope to discuss this trend and policy responses, including the FTC’s recent advocacy focused on anticompetitive local regulations.

Featuring:

  • Jim Chen, VP of Regulatory Affairs and Associate General Counsel, Tesla Motors, Inc.
  • Michael McGeary, Co-Founder and Chief Political Strategist, Engine Advocacy
  • Corey Owens, Head of Public Policy, Uber
  • Patrick Roach, Attorney-Advisor, Office of Policy Planning, FTC
  • Chris Sagers, Law Professor, Cleveland-Marshall College of Law & Advisory Board Member, American Antitrust Institute

12:15pm: Lunch

 

1:15pm: Q&A with Rep Jared Polis (D-Co.)

Moderated by: Rob Pegoraro

1:45pm: “Planning our Data Future: Privacy and Innovation in the 21st Century”

Declining data storage prices, ubiquitous broadband connections and advances in analytical capability have sparked an economic and technological boom over the last couple of years. In fact, advances in data processing and analytics are at the heart of many of the most cutting-edge disruptive technologies and business models. As policymakers and trade negotiators across the world grapple with the 21st century data rules of the road, this panel will discuss not only how these technologies are changing the world around us, but also how lawmakers and regulators should approach these technological advances.

Featuring:

  • John Boswell, SVP, Chief Legal Officer and Corporate Secretary, SAS
  • Josh Galper, Chief Policy Officer and General Counsel, Personal, Inc.
  • Ross Schulman, Public Policy & Regulatory Counsel, CCIA
  • Adam Thierer, Senior Research Fellow, Mercatus Center

3:00pm: “Cutting Edge Commerce and Copyright”

Reflecting the persistent friction between copyright and modern technology, Congress is again contemplating copyright legislation. Increasingly, copyright functions in a regulatory manner, instead of a well-ordered system of property rights. It is timely to discuss how new products and services navigate the uncertain rights and the ever-present threat of litigation in order to bring consumers what they want.

Featuring:

  • Marvin Ammori, Principal, The Ammori Group (counsel to companies including Automattic)
  • Michael Carrier, Professor, Rutgers School of Law
  • Michael Masnick, Founder and CEO, Floor 64
  • John Ossenmacher, CEO, ReDigi

4:15pm: Industry Keynote Address

Featuring: Chet Kanojia, Founder and CEO of Aereo, Inc.

5:00pm: Post-Event Networking Reception

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Are copyright holders allowed to decide without legal constraint to whom they will license their content and on what terms? That is the issue facing Pandora and other new streaming radio firms, for whom music and its associated licensing fees represent the biggest hurdle to commercial success against more established broadcast radio competitors. The answer lies in the sometimes obscure interface between the Copyright Act and antitrust law in the U.S.

In Pandora Media, Inc. v. American Society of Composers, Authors & Publishers, an antitrust case currently pending in federal court in New York, the streaming company is suing ASCAP and some of the major record labels for “withdrawing” their content from the ASCAP joint licensing venture, thus forcing individualized negotiations. It’s a leading-edge dispute, scheduled for trial by year-end, that may help catalyze a new approach to the old question of whether — and if so to what extent — owners of copyrighted digital content are permitted to refuse to deal with competing distribution channels on dramatically different commercial terms.

Most Project DisCo readers likely know about Pandora, a prominent start-up in the Internet radio space — one of the hottest markets around these days, especially given the launch of iTunes Radio by Apple. What is less understood is that streaming music on the ‘Net is fraught with legal issues surrounding copyright, constraints that effectively function as a barrier to the more widespread adoption of such disruptive technologies.

Pandora's Box via Wikipedia

That’s not a lot different from the case of streaming Internet television pioneer Aereo, which as Ali Sternburg points out is caught in legal limbo between different rules (from conflicting judicial decisions) in different regions of the county: and a whopping legal defense bill as well. Copyright in addition plays a key role in the current exemption of traditional over-the-air radio stations from licensing music, an implicit subsidy the recording industry has been lobbying to change for years.

The Pandora-ASCAP fight represents a tricky issue at the intersection of intellectual property (IP) and antitrust. The ASCAP litigation actually dates to 1941, when the government entered into a consent decree settling a complaint that alleged monopolization of performance rights licenses.  The settlement, still in place more than 60 years later, requires the organization to license “all of the works in the ASCAP repertory.” A month ago, presiding District Judge Denise Cote (who also issued the decision finding Apple’s e-book pricing deals a violation of the antitrust laws) entered summary judgment for Pandora. She reasoned that the consent decree gave Pandora the legal right to a blanket license

even though certain music publishers beginning in January 2013 have purported to withdraw from ASCAP the right to license their compositions to “New Media” services such as Pandora. Because the language of the consent decree unambiguously requires ASCAP to provide Pandora with a license to perform all of the works in its repertory, and because ASCAP retains the works of “withdrawing” publishers in its repertory even if it purports to lack the right to license them to a subclass of New Media entities, [Pandora must prevail].

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The Commerce Department released a long-awaited green paper today, arising from a 2010 “Internet Policy Task Force” initiative, titled “Copyright Policy, Creativity, and Innovation in the Digital Economy”.  The paper weighs in at an impressive 112 pages, which the copyright bar will no doubt digest over some time.  It reflects an extensive discussion of various current copyright subjects, providing a useful study of the vast complexity of current copyright law and practice, reaching from the controversy over cell phone unlocking to digital first sale.  After an initial review, I am impressed that the importance of balanced copyright is identified throughout the paper; the Administration adds to the growing consensus around balanced copyright policy, and discusses both the importance of protection and reasonable limitations.

(An aside: I couldn’t help but notice the paper gets off on the wrong foot by suggesting that copyright was a response to the invention of the printing press.  This fosters the myth that early copyright was actually rooted in author’s rights.  It wasn’t.  William Caxton set the first English press up in Westminster in 1476.  The Statute of Anne wasn’t enacted until 1709 or 1710, however.  (Depends on how you count. It’s complicated.)  So, did it take over two centuries for the law to respond to technological change?  And people claim Congress can’t get things done?  In reality, something entirely different was going on.  As Prof. Ray Patterson pointed out long ago in his authoritative 1968 book, Copyright in Historical Perspective, early copyright had less to do with our modern intentions — promoting authorial creativity — and more to do with censoring seditious and heretical texts in England and abroad.  On this point, Patry’s ‘94 Copyright Law treatise points to the English governor of Virginia, saying in 1671: “I thank God there are no free schools nor printing, and I hope we shall not have these hundred years; for learning has brought disobedience, and heresy, and sects into the world, and printing has divulged them, and libels against the best government.”  The response to the press was not copyright; it was censorship and regulation.  Modern copyright is the nobler outgrowth of this dubious ancestry.)

But back to our scheduled programming: historical objections aside, the report’s descriptive components are worthy reading, sourced with the intensity generally reserved for footnote-fetishizing legal academia.  The study’s policy recommendations on online infringement, however, do not all reflect the same insight.

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Foundem Has Lost It

by Glenn Manishin on May 23, 2013

In the ongoing saga of governmental antitrust investigations of Google, recent weeks have witnessed a new level of rhetoric and disingenuous use of the regulatory process to handicap, rather than promote, competition and innovation. The current case in point relates once again to search neutrality, but this time complaining rivals remarkably object to getting exactly what they’ve asked for over many years.

Just a little less than four months after the U.S. Federal Trade Commission (FTC) closed its monopolization investigation into alleged “search bias” by Google, the European Commission (EC) — the pan-European competition authority for the 30-nation European Economic Area (EEA) — released a set of proposed commitments by Google designed to resolve the competition “concerns” preliminarily outlined by EC competition chief Joaquin Almunia. That set off a firestorm of criticism from so-called “vertical” competitors (e.g., travel booking or consumer shopping sites), led by UK firm Foundem, a plaintiff against Google in its own antitrust lawsuit in England.

The first and most basic competition concern asserted by the EC was that Google gives preference to its own services, like travel search, by placing those “specialised” (in European spelling) search results above “organic” or “natural” search results. Google proposes to label these specialized results as paid placements and to add equally prominent links to vertical rivals alongside. Under the commitments Google would auction links for commercial services to qualifying rivals using a lengthy set of rules for transparent and equal treatment. It is precisely the paid link insertion remedy that Google critic and long-time legal adversary Gary Reback called for at an April 2013 FairSearch.org event in Washington, DC.

Foundem opposes that solution. But making heads or tails of Foundem’s rather incoherent response to Google’s EC settlement proposal is difficult. In part that’s because the response is a hodge-podge of discredited claims, incorrect assumptions and fuzzy reasoning. In part it’s because Foundem’s use of over-the-top language and Chicken Little predictions makes it impossible to decipher facts and reality from mere opinions and sour grapes. For instance:

If the Commission were to adopt Google’s proposals in anything like their present form, it would be unwittingly playing into Google’s hands — aiding and abetting Google in its long running strategy to transition commercial searches away from its natural search results and into its paid advertisements. Under these proposals, Google would not only continue to profit from the traffic it hijacks from rivals, but it would now also profit from the traffic it sends to rivals…. Any vertical search companies that survive the transition to such a radically altered and unfavourable marketplace would be left eking out a living on the slimmest of margins from the scraps left over from the traffic, and now revenues, that Google would be diverting to its own services.

If one separates the adjectives from Foundem’s substantive criticisms, there are four principal contentions it makes.

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The Verge pointed out in a blog post today a new service from one of my favorite websites, Docracy (a website that takes a GitHub approach to drafting contracts? How could that not be a straight shot to my heart?). I hadn’t heard of the service yet, and it fits neatly into a series of posts [1, 2, 3] that Rob, Matt, and I wrote around a month ago. As The Verge details, the service scrapes a large number of terms of service every day, stores them, and highlights changes.

The Verge sees the opportunity here for people to catch companies who silently change the terms that bind their users, and that’s true. This service, though, can also serve to help the competition in terms of service that we were discussing in our previous blog posts. Companies that are proud of their terms should start linking to their page at Docracy to show that they will be transparent about how and when their ToS change.

Any companies that wanted to take it to the next level could use Docracy as a collaborative space to design changes to the terms alongside their users, allowing them to propose changes and discuss their impact. The end result would clearly not necessarily be the result of that collaboration, but companies that even went so far as to have the discussion would get plenty of points with discriminating users.

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Clearly the Internet isn’t fundamentally necessary to the sort of competition we like to talk about here on a regular basis, but there can be no doubt that a free and open Internet with low barriers to entry encourages the sort of business approaches that lead to disruptions in markets. That’s why so many of the companies we talk about here are Internet related, and why we have been closely tracking the ITU’s World Conference on International Telecommunications (WCIT).In fact, I was there for the past two weeks as a part of the United States Delegation (these thoughts are my own, of course, and I’m not speaking for the US government), and blogged here at DisCo about some of the proposals a while ago.

The WCIT was a forum for the UN’s International Telecommunications Union to review one of its underlying treaties, the International Telecommunications Regulations (ITRs). The ITRs were written in 1988 and addressed low level questions of interconnection between international telephone and telegraph networks, including such details as who should pay who. This year, however, the ITU called a conference to update that treaty and some governments saw it as a chance to achieve what they had so far been unable to do: gain more control over the workings of the Internet. For a great behind-the-scenes look at what happened at WCIT, check out Eli Dourado’s summary over at Ars Technica from yesterday.

The final treaty text has a few provisions that cause concern for competition on the Internet. Mostly they give license to countries that already are looking for ways to control content on the Internet. For example, the treaty now has language on spam and cybersecurity in it, both of which clearly address the question of content of communications. We also gave you an update during the conference on the Internet-related provisions in the treaty. When governments get tacit permission to start toying with traffic across the network based on its contents, all sorts of evils become possible.

The Internet is such a great force for disruption because it is flat and open. Gatekeepers are not able to keep out smaller competitors, which forces all the parties to work to make a better product instead. When governments have international blessing to start investigating the contents of communications, they start picking winners and losers and disruption is often sacrificed.

That’s why it was great to see the US and many other nations refuse to sign the resulting document. While not a perfect resolution to the conference, the US government did a lot to keep the worst of the worst out of the treaty. Still, vigilance on this topic is of the utmost importance. The WCIT was just one battle in an ongoing war between those who prefer governments to control everything on the Internet and those who believe in an open and free exchange of ideas. We will be there to fight those future battles and we hope the Internet community will be too.

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Ars Technica reported earlier this month that Bitcoin, the open source cryptographically secured alternate currency, was back to trading at 9 US dollars per bitcoin. The currency had experienced a bubble last year, trading as high as almost 30 USD before crashing spectacularly. Since then, however, it has regained stability and traded within a fairly small range around 5 USD. If Bitcoin can keep its stability, what might it mean for disruptive competition?
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