Law, Policy, and Regulation 2.0

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You Are Not Worth Much

I’ve said again and again that we undervalue how much we are unmoored from traditional and historic notions of privacy.

The undervaluing is clear when one looks at some data that the FT has collected on how much it costs to buy info about you and me.

Cost of buying a list per thousand people:

$260 – people with cancer

$85 – identifying new parents

$85 – new house owners

$3 – movie choices

$2.11 – people looking to buy a car

$1.85 – TV viewing data

$1.35 – past purchases

$.50 – age or location

Over a decade of collecting this info by hundreds of players has driven down prices so much, and yet governments around the world have barely started thinking about the question.

In other words, there is now very little cost to buy information that violate your privacy.  Where market prices don’t reflect social costs, the government often steps in to correct the externality.

Basic economics; basic policy.

 

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A Penalty-Free Cushion

Larry Page, reminiscent this past week of my view on innovation sandboxes and five yard safe zones for permission-free innovation:

“There are many exciting things you can’t do because they are illegal and not allowed by regulation,” he said. “That makes sense – we don’t want the world to change too fast.

Nonetheless, Mr Page said he wished there was a “small part of the world” where such laws did not apply, akin to the anarchic Burning Man festival, held in the Nevada desert every August.

“Technologists should have some safe places where we can try out some new things and figure out the effect on society and people without having to deploy it on the whole world,” he said, citing the limited progress of Google Health as an area where regulations constrained his ambitions.

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“Clarify and Even Change”

Following on the last post, about engaging regulation, Airbnb’s arc is instructive.

Following the demand of its growth, it went from not asking permission, to turning a blind eye by putting responsibility on its users, to engaging with regulators:

So have apartment-sharing services, which have fallen foul of zoning regulations and other rules governing temporary rentals in which the property owner or occupier are not present. Many American cities ban rentals of less than 30 days in properties that have not been licensed and inspected. Some Airbnb renters have been served with eviction notices by landlords for renting their apartments in violation of their leases. In Amsterdam, city officials point out that anyone letting a room or apartment is required to have a permit and to obey other rules. They have used Airbnb’s website to track down illegal rentals.

Officials in San Francisco have raised similar red flags. The city’s treasurer ruled in April 2012 that Airbnb and other similar sites were not exempt from the city’s 15% hotel tax. Airbnb responded that the regulations, dating back to 1961, should not apply to internet-era business models. The city’s mayor, Ed Lee, has championed the notion of the “sharing economy” as a means to stimulate economic growth. City officials have promised to work out a regulatory and tax framework, but for the time being Airbnb and other such services remain in a legal grey area.

In New York, meanwhile, a landlord faces fines of as much as $30,000 after one of his tenants sub-let his room in an East Village apartment via Airbnb while going out of town for a few days in September 2012. (A law passed in 2010 does not allow the renting out of homes or rooms in them for less than a month unless the usual occupant is also resident at the time.) Having previously taken the position that it is up to hosts to ensure that they are complying with local laws and taxes, Airbnb has recently shifted its stance in response to a growing regulatory backlash. In October 2012 it appointed David Hantman, previously the head of government relations at Yahoo, as its head of public policy. He says Airbnb is now working with governments around the world “to clarify and even change” the patchwork of laws that apply to its hosts. “The more policymakers and neighbours learn about our service, and the better they understand it, the more they realise that this activity should not be prohibited,” he adds.

 

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Less Permission Regulation

As the Internet moves more and more into disrupting traditional sectors, there is more and more need for sophisticated regulatory strategies, to walk the balance between consumer protection and allowing innovation.  From an Economist leader on the “sharing economy:”

The main worry is regulatory uncertainty. Will room-renters be subject to hotel taxes, for example? In Amsterdam officials are using Airbnb listings to track down unlicensed hotels. In some American cities, peer-to-peer taxi services have been banned after lobbying by traditional taxi firms. The danger is that although some rules need to be updated to protect consumers from harm, incumbents will try to destroy competition. People who rent out rooms should pay tax, of course, but they should not be regulated like a Ritz-Carlton hotel. The lighter rules that typically govern bed-and-breakfasts are more than adequate.

A critical aim of such a regulatory strategy is to assure that incumbents do not use the old regulatory structure in order to quash new innovation.

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A Trillion (From) Here, A Trillion (To) There

On a day when our politician are wrestling each other on the so-called fiscal cliff to avoid $600 billion in automatic spending cuts, we are reminded that a trillion dollars still matters.

A trillion dollars is what the OPEC cartel countries have pocketed in net oil revenues in 2012.  This is a record account, both nominally and in real terms.  In fact, a decade ago, net oil revenues for the OPEC cartel countries were less than a mere $200 billion.

Common sense tells us that money flows of that size from more innovative, more democratic countries to non-innovative, non-democratic countries must matter.  It’s worth reflecting on that today.

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China Versus The Net

I have blogged about how I think “real names,”i.e, a widespread comfort-level of pushing your identity on the net, marks one of the big divides between Web 2.0 versus 1.0.  Moving from anonymity and pseudonyms to real names opened up a new era with social, as a new generation was at the vanguard of inculcating  a comfort level with being outselves on the Internet.

But the thing is that anonymous versus real names is neither unidirectional or unipolar.  Having and retaining the choice is critical, allowing for different comfort levels at the intersection of user and content.

In China, we have a potentially profound move in the other direction.  More than any country, weibo or Twitter-like networks such as Sina, Tencent, Baidu, and Sohu have led to a spread of information under the cloak of pseudonyms about the state, scandal, and corruption unlike anything else, with hundreds of millions of people spreading and receiving information in this way.

Now, the Chinese have enacted a new law that forces internet companies to require those signing up to use their real names in a bid to tamp down the spread of information and opinion that anonymity enabled, making it easier for the state to censor and punish disfavored content.

As a further footnote, this is an expansion of an existing policy that prevented the publication of certain types of content,  As the FT reports:

In 2000, legislation was adopted requiring internet companies to censor the content users published on their sites. A long list spells out the many kinds of posts internet companies must spot, erase and report – ranging from information that threatens national security to that which violates ethnic harmony.

Sina, Baidu and their peers complied by hiring armies of censors. The authorities also started adding their voice to the online cacophony, signing up freelancers with the job of making comments in favour of the government.

We should note with interest that the way a government accomplishes a policy of state censorship in the Internet age is through a distributed network method, by putting the burden on the services themselves to censor in exchange for permission to operate.

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Googling For Knowledge

In May, this blog discussed the problems stemming from student debt and the massive inflation in college tuition.  I noted — in particular — the problem of the availability of student debt being funneled into for-profit schools :

It finally delves into the fake innovation that has taken place where for-profit schools shamefully game the availability of financial aid and the desire for education, deriving 90+% of their revenues from government money, providing laughable education to their students, and saddling these “graduates” with debt that cannot be paid off when students re-enter the work force with the dubious training that they have received.

I just did a spot check on search advertising tracking firm SpyFu’s site today.  It turns out that 4 out of Google’s top 8 advertisers are related to online education.  The number #1 Google advertiser is the University of Phoenix, spending over $275,000 a day on Google’s search advertising.  This represents a run rate of Google advertising of over $100 million annually from a single firm going to fuel the student debt three-card Monte.

Just remarkable on many levels.

 

 

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Spectrum In the Hands of Unreasonable Men

I have written before — on this site and elsewhere — about the sorry state of mobile broadband and how it threatens our entire innovation ecosystem.

The FCC has the typical bureaucratic blindness to this, not even understanding there is an issue.

So we’re lucky that we have two of the most unreasonable entrepreneurs alive who are going to make a run at disrupting the industry’s coziness.

The WSJ today has a story about the unconventional Masayoshi Son and his desire to revitalize Sprint:

When Mr. Son announced the deal last month in Tokyo, he didn’t mince words about his ambitions: “I’m a man, and I think every man wants to be No. 1.”

That is easier said than done. Sprint is struggling with an expensive network upgrade, a $15.5 billion commitment to subsidize iPhones for customers and a heavy debt load. Sprint also is well behind the market leaders in its so-called spectrum holdings—its right to use chunks of the airwaves to transmit phone calls, Internet traffic and other data. AT&T and Verizon Wireless—a joint venture between Verizon Communications Inc.  Vodafone—have the most valuable spectrum holdings in the U.S., with more than 100 megahertz each. Sprint holds 56 megahertz, a deficit that isn’t as bad as it looks given Sprint’s lower subscriber count. The company is using funds injected by Softbank to acquire more, including a deal this month with U.S. Cellular.

Softbank’s acquisition would inject $8 billion directly into Sprint and give the carrier more flexibility to buy spectrum or acquire smaller rivals. The money also could help Sprint to continue offering plans that let subscribers use as much data as they desire for a flat rate—the kind of appealing deal for customers that AT&T and Verizon have all but dropped.

At the same time, one of this blogger’s favorites, Charlie Ergen, the satellite tv gladiator, is looking to use his spectrum to create a terrestrial wireless competitor.