Democracy and Technology Blog

Advertisers vs. ad-supported pirate sites

A sampling of 596 web sites that deal primarily in pirated content made an estimated $227 million in annual advertising revenues, according to the Digital Citizens Alliance (See:Good Money Gone Bad: Digital Thieves and the Hijacking of the Online Ad Business – A Report on the Profitability of Ad-Supported Content Theft“). “The 30 largest sites studied that are supported only by ads average $4.4 million annually, with the largest BitTorrent portal sites topping $6 million. Even small sites can make more than $100,000 a year from advertising.”
“It is important to note that the advertising profits garnered by content thieves do not equate with the losses incurred by the owners of the content,” notes the report. “These losses are unquestionably greater by many orders of magnitude…”
Fortunately, the advertising industry is not willing to tolerate intellectual property infringement. “The future health of digital media is at stake,” according to Bob Liodice, head of the Association of National Advertisers, “and we owe it to ourselves, our industry and its brands to attack the issue head-on.”

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The Overblown Case For Retrans Reform

Retransmission consent came under attack again this month, and two long-awaited bills on the subject have finally been introduced–the Next Generation Television Marketplace Act (H.R. 3720) by Rep. Steve Scalise, and the Video CHOICE (Consumers Have Options in Choosing Entertainment) Act (H.R. 3719) by Rep. Anna G. Eshoo. The American Cable Association’s Matthew M. Polka has reiterated his view that the process whereby cable and satellite TV providers negotiate with broadcasters for the right to retransmit broadcast signals is a “far cry from the free market,” and Alan Daley and Steve Pociask with the American Consumer Institute claim that retransmission consent jeopardizes the Broadcast Television Spectrum Incentive Auction. As Jeff Eisenach pointed out at the Hudson Institute, “Congress created retransmission Read More ›



Satellite Carrier Subsidies Are Unwarranted

DISH Network gets another opportunity on Tuesday to plead with Congress for another Satellite Home Viewer Act reauthorization–ostensibly to protect consumers from unwarranted rate increases and program blackouts, but actually to preserve and expand DISH Network’s and DirecTV’s access to broadcast programming at regulated, below-market rates. A couple minor provisions in the Act that have nearly outlived their original purpose are due to expire, but DISH Network is taking advantage of this opportunity to argue that “there is much more that Congress can do to expand consumers’ access to local programming…” DISH’s plea is an example of the narcotic effect of supposedly benign regulation intended to promote competition by giving nascent competitors a leg up. DISH Network, in particular, has Read More ›


Crawford’s Misplaced Nostalgia for Utility Regulation

In her new book, Captive Audience, Susan Crawford makes the same argument that the lawyers for AT&T made in Judge Harold H. Greene’s courtroom in response to the government’s antitrust complaint beginning in 1981, i.e., that telephone service was a “natural monopoly.” In those days, AT&T wanted regulation and hated competition, which is the same as Crawford’s perspective with respect to broadband now. Here is what she said today on the Diane Rehm Show: Diane Rehm: “Is regulation the next step?” Susan Crawford: “It always has been for these industries, because it really doesn’t make sense to have more than one wire into our homes. It is a very expensive thing to install; once it’s there, it has to be Read More ›


FCC Risks Getting Sidetracked on Spectrum Auctions

On Wednesday, the Subcommittee on Communications and Technology will conduct an oversight hearing of the implementation of spectrum auctions by the Federal Communications Commission. The subcommittee members ought to consider the fact that although the mobile wireless industry faces an acute shortage of spectrum (“broadband spectrum deficit is likely to approach 300 MHz by 2014“), the FCC risks getting distracted and mired in a pointless effort to leverage its spectrum auctioning authority to manipulate the structure of the mobile wireless industry. In mid-2011, former Commissioner Michael J. Copps warned of “darkening clouds over the state of mobile competition … we find ongoing trends of industry consolidation.” As Copps saw it, increasing concentration will lead to higher prices for consumers. His Read More ›


Roosevelt Tried To Abolish the FCC

No doubt you are aware that the Communications Act of 1934 eastablished the Federal Communications Commission, which has profoundly affected the broadcast, cable, telecommunications and satellite industries. You will recall that the legislation was signed into law by President Franklin D. Roosevelt. What you may not realize is that President Roosevelt made two subsequent attempts to abolish the Federal Communications Commission. On Jan. 23, 1939, Roosevelt wrote similar letters to Senator Burton K. Wheeler and Congressman Clarence F. Lea urging dramatic FCC reform. I am thoroughly dissatisfied with the present legal framework and administrative machinery of the [Federal Communications] Commission. I have come to the definite conclusion that new legislation is necessary to effectuate a satisfactory reorganization of the Commission. Read More ›


No More Backscratching Between Phone Companies

An ad campaign urged residents of Butler, GA to “Stop AT&T From Raising Your Rates” by planning to attend a public hearing earlier this month at the Taylor County Courthouse to provide testimony in Docket #35068, Rate Cases on the Track 2 Companies. The Georgia Public Service Commission sets the phone rates in Butler, but politics are politics, and AT&T is a better scapegoat for an ad campaign. AT&T doesn’t even provide the town’s phone service, although the telecom giant does help finance it. That’s because Georgia consumers pay a hidden tax on their phone bills that subsidizes the phone service provided by Public Service Telephone Co. in Butler. You guessed it, PST paid for the ads. >Continue reading


Still Seeking Advantageous Regulation in Telecom

One of the most egregious examples of special interest pleading before the Federal Communications Commission and now possibly before Congress involves the pricing of “special access,” a private line service that high-volume customers purchase from telecommunications providers such as AT&T and Verizon. Sprint, for example, purchases these services to connect its cell towers. Sprint has been seeking government-mandated discounts in the prices charged by AT&T, Verizon and other incumbent local exchange carriers for years. Although Sprint has failed to make a remotely plausible case for re-regulation, fuzzy-headed policymakers are considering using taxpayer’s money in an attempt to gather potentially useless data on Sprint’s behalf. Sprint is trying to undo a regulatory policy adopted by the FCC during the Clinton era. Read More ›


Government cares more about politics than the tech economy

The hottest companies in Washington, DC right now include Netflix, Sprint and T-Mobile. What do these firms have in common? They are all marketplace losers.
A few years ago, the Supreme Court said that the Sherman Act “does not give judges carte blanche to insist that a monopolist alter its way of doing business whenever some other approach might yield greater competition” (see: Verizon v. Trinko, 2004). Yet this is precisely the course of action that technocrats are taking as a result of accepting invitations from Netflix to conduct a “wide-ranging antitrust investigation” of the cable industry and from Sprint and T-Mobile to find a way to block Verizon Wireless’ acquisition of additional spectrum.
Netflix built a successful mail order DVD business when it wasn’t very practical to download movies over the Internet. Fortunately for Netflix, consumers can send and receive, but they cannot rent DVDs from the Post Office. There are legal and political constraints that prevet the U.S. Postal Service from diversifying into new lines of business, and these restrictions conferred a significant degree of monopoly protection on Netflix. Incidentally, saving the Postal Service requires diversification, among other things. What was great for Netflix wasn’t so good for the postal system (upon which we all depend).
Although some advocates of network neutrality wanted to postalize broadband, the Federal Communications Commission said no. Apparently, we are going to have that debate all over again.
Cable companies obviously will not be prevented from competing against Netflix and other online video providers. But a drive to eliminate any conceivable competitive advantage that cable providers may have would ultimately lead to extensive regulation, including, most likely, infrastructure sharing rules like those the Supreme Court looked at in AT&T v. Iowa Utilities Board (1999). In his separate opinion, Justice Stephen Breyer warned that “rules that force firms to share every resource or element of a business would create, not competition, but pervasive regulation, for the regulators, not the marketplace, would set the relevant terms.”
The current administration promised to reinvigorate antitrust enforcement. What that means is a return to the economic stagnation of the 1970s, when antitrust forced consumers to do business with uncompetitive, inefficient firms. It is no exaggeration to speak of antitrust as a form of corporate welfare financed by hidden taxes on consumers. The reality is that government cannot create competition; it can only suppress competitors.

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