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For those in the DC area interested in telecom regulation, there is another great event opportunity coming up next week.

Join TechFreedom on Thursday, December 19, the 100th anniversary of the Kingsbury Commitment, AT&T’s negotiated settlement of antitrust charges brought by the Department of Justice that gave AT&T a legal monopoly in most of the U.S. in exchange for a commitment to provide universal service.

The Commitment is hailed by many not just as a milestone in the public interest but as the bedrock of U.S. communications policy. Others see the settlement as the cynical exploitation of lofty rhetoric to establish a tightly regulated monopoly — and the beginning of decades of cozy regulatory capture that stifled competition and strangled innovation.

So which was it? More importantly, what can we learn from the seventy year period before the 1984 break-up of AT&T, and the last three decades of efforts to unleash competition? With fewer than a third of Americans relying on traditional telephony and Internet-based competitors increasingly driving competition, what does universal service mean in the digital era? As Congress contemplates overhauling the Communications Act, how can policymakers promote universal service through competition, by promoting innovation and investment? What should a new Kingsbury Commitment look like?

Following a luncheon keynote address by FCC Commissioner Ajit Pai, a diverse panel of experts moderated by TechFreedom President Berin Szoka will explore these issues and more. The panel includes:

  • Harold Feld, Public Knowledge
  • Rob Atkinson, Information Technology & Innovation Foundation
  • Hance Haney, Discovery Institute
  • Jeff Eisenach, American Enterprise Institute
  • Fred Campbell, Former FCC Commissioner

Space is limited so RSVP now if you plan to attend in person. A live stream of the event will be available on this page. You can follow the conversation on Twitter on the #Kingsbury100 hashtag.

When:
Thursday, December 19, 2013
11:30 – 12:00 Registration & lunch
12:00 – 1:45 Event & live stream

The live stream will begin on this page at noon Eastern.

Where:
The Methodist Building
100 Maryland Ave NE
Washington D.C. 20002

Questions?
Email contact@techfreedom.org.

As it begins its hundredth year, the FTC is increasingly becoming the Federal Technology Commission. The agency’s role in regulating data security, privacy, the Internet of Things, high-tech antitrust and patents, among other things, has once again brought to the forefront the question of the agency’s discretion and the sources of the limits on its power.Please join us this Monday, December 16th, for a half-day conference launching the year-long “FTC: Technology & Reform Project,” which will assess both process and substance at the FTC and recommend concrete reforms to help ensure that the FTC continues to make consumers better off.

FTC Commissioner Josh Wright will give a keynote luncheon address titled, “The Need for Limits on Agency Discretion and the Case for Section 5 UMC Guidelines.” Project members will discuss the themes raised in our inaugural report and how they might inform some of the most pressing issues of FTC process and substance confronting the FTC, Congress and the courts. The afternoon will conclude with a Fireside Chat with former FTC Chairmen Tim Muris and Bill Kovacic, followed by a cocktail reception.

Full Agenda:

  • Lunch and Keynote Address (12:00-1:00)
    • FTC Commissioner Joshua Wright
  • Introduction to the Project and the “Questions & Frameworks” Report (1:00-1:15)
    • Gus Hurwitz, Geoffrey Manne and Berin Szoka
  • Panel 1: Limits on FTC Discretion: Institutional Structure & Economics (1:15-2:30)
    • Jeffrey Eisenach (AEI | Former Economist, BE)
    • Todd Zywicki (GMU Law | Former Director, OPP)
    • Tad Lipsky (Latham & Watkins)
    • Geoffrey Manne (ICLE) (moderator)
  • Panel 2: Section 5 and the Future of the FTC (2:45-4:00)
    • Paul Rubin (Emory University Law and Economics | Former Director of Advertising Economics, BE)
    • James Cooper (GMU Law | Former Acting Director, OPP)
    • Gus Hurwitz (University of Nebraska Law)
    • Berin Szoka (TechFreedom) (moderator)
  • A Fireside Chat with Former FTC Chairmen (4:15-5:30)
    • Tim Muris (Former FTC Chairman | George Mason University) & Bill Kovacic (Former FTC Chairman | George Washington University)
  • Reception (5:30-6:30)
Our conference is a “widely-attended event.” Registration is $75 but free for nonprofit, media and government attendees. Space is limited, so RSVP today!

Working Group Members:
Howard Beales
Terry Calvani
James Cooper
Jeffrey Eisenach
Gus Hurwitz
Thom Lambert
Tad Lipsky
Geoffrey Manne
Timothy Muris
Paul Rubin
Joanna Shepherd-Bailey
Joe Sims
Berin Szoka
Sasha Volokh
Todd Zywicki

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Please join us at the Willard Hotel in Washington, DC on December 16th for a conference launching the year-long project, “FTC: Technology and Reform.” With complex technological issues increasingly on the FTC’s docket, we will consider what it means that the FTC is fast becoming the Federal Technology Commission.

The FTC: Technology & Reform Project brings together a unique collection of experts on the law, economics, and technology of competition and consumer protection to consider challenges facing the FTC in general, and especially regarding its regulation of technology.

For many, new technologies represent “challenges” to the agency, a continuous stream of complex threats to consumers that can be mitigated only by ongoing regulatory vigilance. We view technology differently, as an overwhelmingly positive force for consumers. To us, the FTC’s role is to promote the consumer benefits of new technology — not to “tame the beast” but to intervene only with caution, when the likely consumer benefits of regulation outweigh the risk of regulatory error. This conference is the start of a year-long project that will recommend concrete reforms to ensure that the FTC’s treatment of technology works to make consumers better off. Continue Reading…

The Children’s Online Privacy Protection Act (COPPA) continues to be a hot button issue for many online businesses and privacy advocates. On November 14, Senator Markey, along with Senator Kirk and Representatives Barton and Rush introduced the Do Not Track Kids Act of 2013 to amend the statute to include children from 13-15 and add new requirements, like an eraser button. The current COPPA Rule, since the FTC’s recent update went into effect this past summer, requires parental consent before businesses can collect information about children online, including relatively de-identified information like IP addresses and device numbers that allow for targeted advertising.

Often, the debate about COPPA is framed in a way that makes it very difficult to discuss as a policy matter. With the stated purpose of “enhanc[ing] parental involvement in children’s online activities in order to protect children’s privacy,” who can really object? While there is recognition that there are substantial costs to COPPA compliance (including foregone innovation and investment in children’s media), it’s generally taken for granted by all that the Rule is necessary to protect children online. But it has never been clear what COPPA is supposed to help us protect our children from.

Then-Representative Markey’s original speech suggested one possible answer in “protect[ing] children’s safety when they visit and post information on public chat rooms and message boards.” If COPPA is to be understood in this light, the newest COPPA revision from the FTC and the proposed Do Not Track Kids Act of 2013 largely miss the mark. It seems unlikely that proponents worry about children or teens posting their IP address or device numbers online, allowing online predators to look at this information and track them down. Rather, the clear goal animating the updates to COPPA is to “protect” children from online behavioral advertising. Here’s now-Senator Markey’s press statement:

“The speed with which Facebook is pushing teens to share their sensitive, personal information widely and publicly online must spur Congress to act commensurately to put strong privacy protections on the books for teens and parents,” said Senator Markey. “Now is the time to pass the bipartisan Do Not Track Kids Act so that children and teens don’t have their information collected and sold to the highest bidder. Corporations like Facebook should not be profiting from the personal and sensitive information of children and teens, and parents and teens should have the right to control their personal information online.”

The concern about online behavioral advertising could probably be understood in at least three ways, but each of them is flawed.

  1. Creepiness. Some people believe there is something just “creepy” about companies collecting data on consumers, especially when it comes to children and teens. While nearly everyone would agree that surreptitiously collecting data like email addresses or physical addresses without consent is wrong, many would probably prefer to trade data like IP addresses and device numbers for free content (as nearly everyone does every day on the Internet). It is also unclear that COPPA is the answer to this type of problem, even if it could be defined. As Adam Thierer has pointed out, parents are in a much better position than government regulators or even companies to protect their children from privacy practices they don’t like.
  2. Exploitation. Another way to understand the concern is that companies are exploiting consumers by making money off their data without consumers getting any value. But this fundamentally ignores the multi-sided market at play here. Users trade information for a free service, whether it be Facebook, Google, or Twitter. These services then monetize that information by creating profiles and selling that to advertisers. Advertisers then place ads based on that information with the hopes of increasing sales. In the end, though, companies make money only when consumers buy their products. Free content funded by such advertising is likely a win-win-win for everyone involved.
  3. False Consciousness. A third way to understand the concern over behavioral advertising is that corporations can convince consumers to buy things they don’t need or really want through advertising. Much of this is driven by what Jack Calfee called The Fear of Persuasion: many people don’t understand the beneficial effects of advertising in increasing the information available to consumers and, as a result, misdiagnose the role of advertising. Even accepting this false consciousness theory, the difficulty for COPPA is that no one has ever explained why advertising is a harm to children or teens. If anything, online behavioral advertising is less of a harm to teens and children than adults for one simple reason: Children and teens can’t (usually) buy anything! Kids and teens need their parents’ credit cards in order to buy stuff online. This means that parental involvement is already necessary, and has little need of further empowerment by government regulation.

COPPA may have benefits in preserving children’s safety — as Markey once put it — beyond what underlying laws, industry self-regulation and parental involvement can offer. But as we work to update the law, we shouldn’t allow the Rule to be a solution in search of a problem. It is incumbent upon Markey and other supporters of the latest amendment to demonstrate that the amendment will serve to actually protect kids from something they need protecting from. Absent that, the costs very likely outweigh the benefits.

Critics of Google have argued that users overvalue Google’s services in relation to the data they give away.  One breath-taking headline asked Who Would Pay $5,000 to Use Google?, suggesting that Google and its advertisers can make as much as $5,000 off of individuals whose data they track. Scholars, such as Nathan Newman, have used this to argue that Google exploits its users through data extraction. But, the question remains: how good of a deal is Google? My contention is that Google’s value to most consumers far surpasses the value supposedly extracted from them in data.

First off, it is unlikely that Google and its advertisers make anywhere close to $5,000 off the average user. Only very high volume online purchasers who consistently click through online ads are likely anywhere close to that valuable. Nonetheless, it is true that Google and its advertisers must be making money, or else Google would be charging users for its services.

PrivacyFix, a popular extension for Google Chrome, calculates your worth to Google based upon the amount of searches you have done. Far from $5,000, my total only comes in at $58.66 (and only $10.74 for Facebook). Now, I might not be the highest volume searcher out there. My colleague, Geoffrey Manne states that he is worth $125.18 on Google (and $10.74 for Facebook). But, I use Google search everyday for work in tech policy, along with Google Docs, Google Calendar, and Gmail (both my private email and work emails)… for FREE!*

The value of all of these services to me, or even just Google search alone, easily surpasses the value of my data attributed to Google. This is likely true for the vast majority of other users, as well. While not a perfect analogue, there are paid specialized search options out there (familiar to lawyers) that do little tracking and are not ad-supported: Westlaw, Lexis, and Bloomberg. But, the price for using these services are considerably higher than zero:

legalsearchcosts

Can you imagine having to pay anywhere near $14 per search on Google? Or a subscription that costs $450 per user per month like some firms pay for Bloomberg? It may be the case that the costs are significantly lower per search for Google than for specialized legal searches (though Google is increasingly used by young lawyers as more cases become available). But, the “price” of viewing a targeted ad is a much lower psychic burden for most people than paying even just a few cents per month for an ad-free experience. For instance, consumers almost always choose free apps over the 99 cent alternative without ads.

Maybe the real question about Google is: Great Deal or Greatest Deal?

* Otherwise known as unpriced for those that know there’s no such thing as a free lunch.

Susan Crawford recently received the OneCommunity Broadband Hero Award for being a “tireless advocate for 21st century high capacity network access.” In her recent debate with Geoffrey Manne and Berin Szoka, she emphasized that there is little competition in broadband or between cable broadband and wireless, asserting that the main players have effectively divided the markets. As a result, she argues (as she did here at 17:29) that broadband and wireless providers “are deciding not to invest in the very expensive infrastructure because they are very happy with the profits they are getting now.” In the debate, Manne countered by pointing to substantial investment and innovation in both the wired and wireless broadband marketplaces, and arguing that this is not something monopolists insulated from competition do. So, who’s right?

The recently released 2013 Progressive Policy Institute Report, U.S. Investment Heroes of 2013: The Companies Betting on America’s Future, has two useful little tables that lend support to Manne’s counterargument.

skitch

The first shows the top 25 investors that are nonfinancial companies, and guess who comes in 1st, 2nd, 10th, 13th, and 17th place? None other than AT&T, Verizon Communications, Comcast, Sprint Nextel, and Time Warner, respectively.

skatch

And when the table is adjusted by removing non-energy companies, the ranks become 1st, 2nd, 5th, 6th, and 9th. In fact, cable and telecom combined to invest over $50.5 billion in 2012.

This high level of investment by supposed monopolists is not a new development. The Progressive Policy Institute’s 2012 Report, Investment Heroes: Who’s Betting on America’s Future? indicates that the same main players have been investing heavily for years. Since 1996, the cable industry has invested over $200 billion into infrastructure alone. These investments have allowed 99.5% of Americans to have access to broadband – via landline, wireless, or both – as of the end of 2012.

There’s more. Not only has there been substantial investment that has increased access, but the speeds of service have increased dramatically over the past few years. The National Broadband Map data show that by the end of 2012:

  • Landline service ≧ 25 megabits per second download available to 81.7% of households, up from 72.9% at the end of 2011 and 58.4% at the end of 2010
  • Landline service ≧ 100 megabits per second download available to 51.5% of households, up from 43.4% at the end of 2011 and only 12.9% at the end of 2010
  • ≧ 1 gigabit per second download available to 6.8% of households, predominantly via fiber
  • Fiber at any speed was available to 22.9% of households, up from 16.8% at the end of 2011 and 14.8% at the end of 2010
  • Landline broadband service at the 3 megabits / 768 kilobits threshold available to 93.4% of households, up from 92.8% at the end of 2011
  • Mobile wireless broadband at the 3 megabits / 768 kilobits threshold available to 94.1% of households , up from 75.8% at the end of 2011
  • Access to mobile wireless broadband providing ≧ 10 megabits per second download has grown to 87%, up from 70.6 percent at the end of 2011 and 8.9 percent at the end of 2010
  • Landline broadband ≧ 10 megabits download was available to 91.1% of households

This leaves only one question: Will the real broadband heroes please stand up?

With Matt Starr, Berin Szoka and Geoffrey Manne

Today’s oral argument in the D.C Circuit over the FCC’s Net Neutrality rules suggests that the case — Verizon v. FCC — is likely to turn on whether the Order impermissibly imposes common carrier regulation on broadband ISPs. If so, the FCC will lose, no matter what the court thinks of the Commission’s sharply contested claims of authority under the Telecommunications Act.

The FCC won last year before the same court when Verizon challenged its order mandating that carriers provide data roaming services to their competitors’ customers. But Judge Tatel, who wrote the Cellco decision is likely to write the court’s opinion overturning the Net neutrality rules — just as he wrote the court’s 2010 Comcast v. FCC opinion, thwarting the FCC’s first attempt at informal net neutrality regulation.

Over an extraordinary two-hour session, Judges Tatel and Silberman asked a barrage of questions that suggest they’ll apply the same test used to uphold the data roaming rule to strike down at least the non-discrimination rule at the heart of the Open Internet Order — and probably, the entire Order.

Common Carrier Analysis

The Communications Act explicitly prohibits treating services that are not regulated under Title II as common carriers. Title II regulates “telecommunications services,” such as landline telephone service, but broadband is an “information service” regulated under Title I of the Act, while wireless is regulated under Title III of the Act (as a “radio transmission”).

In Cellco, the court ruled that the FCC’s data roaming rule did not impermissibly classify mobile providers as common carriers even though it compelled wireless carriers to let other companies’ subscribers roam on their networks. Here, the Open Internet Order effectively forces ISPs to carry traffic of all “edge” providers in an equal, non-discriminatory manner. While these might seem similar, the two mandates differ significantly, and Tatel’s analysis in the data roaming case may lead to precisely the opposite result here.

Tatel’s data roaming opinion rested on a test, derived from decades of case law, for determining what level of regulation constitutes an impermissible imposition of common carrier status:

  1. “If a carrier is forced to offer service indiscriminately and on general terms, then that carrier is being relegated to common carrier status”;

  2. “[T]he Commission has significant latitude to determine the bounds of common carriage in particular cases”;

  3. “[C]ommon carriage is not all or nothing—there is a gray area [between common carrier status and private carrier status] in which although a given regulation might be applied to common carriers, the obligations imposed are not common carriage per se” because they permit carriers to retain sufficient decisionmaking authority over their networks (by retaining programming control and/or the authority to negotiate terms, for example); and

  4. In this gray area, “[the FCC’s] determination that a regulation does or does not confer common carrier status warrants deference” under the Supreme Court’s Chevron decision.

In Cellco, the court determined that the data roaming rule fell into the gray area, and thus deferred to the FCC’s determination that the regulation did not impose common carrier status. The essential distinction, according to the court, was that carriers remained free to “negotiate the terms of their roaming arrangements on an individualized basis,” provided their terms were “commercially reasonable.” Rather than impose a “presumption of reasonableness,” the Commission offered “considerable flexibility for providers to respond to the competitive forces at play in the mobile-data market.” Thus, the court held, the data roaming rule “leaves substantial room for individualized bargaining and discrimination in terms,” and thus “does not amount to a duty to hold out facilities indifferently for public use.”

The Open Internet rules, by contrast, impose a much harsher restriction on what ISPs may do with their broadband networks, barring them from blocking any legal content and prohibiting “unreasonable” discrimination. Judges Tatel and Silberman repeatedly asked questions that suggested that the Order’s reasonable discrimination rule removed the kind of “flexibility” that justified upholding the data roaming rule. By requiring carriers to “offer service indiscriminately and on general terms” and to “hold out facilities indifferently for public use” (to quote the D.C. Circuit’s test), the rule would go beyond the “gray area” in which the FCC gets deference, and fall into the D.C. Circuit’s definition of common carriage. If that’s indeed ultimately where the two judges wind up, it’s game over for the FCC.

The Open Internet Order requires broadband ISPs to make their networks available, and to do so on equal terms that remove pricing flexibility, to any edge provider that wishes to have its content available on an ISP’s network. This seems to be Judge Tatel’s interpretation of ¶ 76 of the Order, which goes on at length about the reasons why “pay for priority” arrangements would “raise significant cause for concern” and then concludes: “In light of each of these concerns, as a general matter, it’s unlikely that pay for priority would satisfy the ‘no unreasonable discrimination’ standard.” So… legal in principle, but effectively banned in practice — a per se rule dressed up as a rule of reason.

If that isn’t, in effect, a requirement that ISPs hold out their networks “indifferently for public use,” it’s hard to imagine what is — as Tatel certainly seemed to think today. Tatel’s use of the term “indiscriminately” in Cellco almost hints that the test was written with the FCC’s “no discrimination” rule in mind.

The FCC tried, but failed, to address such concerns in the Open Internet Order, by arguing that broadband providers remained free to “make individualized decisions” with the only customers that matter: their subscribers. Today, the agency again insisted that restricting, however heavily, a broadband provider’s ability to negotiate with an edge provider (or the backbone providers in between) is irrelevant to the analysis of whether the FCC has illegally imposed common carriage. But if that argument worked, the D.C. Circuit would not have had to analyze whether the data roaming rule afforded sufficient flexibility to carriers in contracting with other carriers to provide data roaming services to their customers.

Similarly, the FCC failed today, and in its briefs, to effectively distinguish this case from Midwest Video II, which was critical to the Cellco decision. here, the Supreme Court court struck down public-access rules imposed on cable companies as impermissible common carrier regulation because they “prohibited [cable operators] from determining or influencing the content of access programming,” and “delimit[ed] what [they could] charge for access and use of equipment.” In other words, the FCC’s rule left no flexibility for negotiations between companies — the same problem as in the Open Internet Order. The FCC attempted to distinguish the two cases by arguing that the FCC was restricting an existing wholesale market for channel carriage, while no such market exists today for prioritized Internet services. But this misses the key point made, emphatically, by Judge Silberman: it is the FCC’s relentless attempt to regulate Net Neutrality that has prevented the development of this market. Nothing better reveals the stasis mentality behind the FCC’s Order

Perhaps the most damning moment of today’s arguments occurred when Verizon’s lawyer responded to questions about what room for negotiation was left under the unreasonable discrimination rule — by pointing to what the FCC itself said in Footnote 240 of the Order. There the FCC quotes, approvingly, comments filed by Sprint: “The unreasonable discrimination standard contained in Section 202(a) of the Act contains the very flexibility the Commission needs to distinguish desirable from improper discrimination.” In other words, the only room for “commercially reasonable negotiation” recognized by the FCC under the nondiscrimination rule is found in the limited discretion traditionally available to common carriers under Section 202(a). Oops. This #LawyerFail will doubtless feature prominently in the court’s discussion of this issue, as the FCC’s perhaps accidental concession that, whatever the agency claims, it’s really imposing common carrier status — analogous to Title II, no less!

Judges Tatel and Silberman seemed to disagree only as to whether the no-blocking rule would also fail under Cellco’s reasoning. Tatel suggested that if the non-discrimination rule didn’t exist, the blocking rule, standing alone, would “leave substantial room for individualized bargaining and discrimination in terms” just as the data roaming rule did. Tatel spent perhaps fifteen minutes trying to draw clear answers from all counsel on this point, but seemed convinced that, at most, the no-blocking rule simply imposed a duty on the broadband provider to allow an edge provider to reach its customers, while still allowing the broadband provider to negotiate for faster carriage on “commercially reasonable terms.” Silberman disagreed, insisting that the blocking rule still imposed a common carrier duty to carry traffic at a zero price.

Severability

Ultimately the distinction between these two rules under Cellco’s common carriage test may not matter. If the court decides that the order is not severable, striking down the nondiscrimination rule as common carriage would cause the entire Order to fall.

The judges got into an interesting, though relatively short, discussion of this point. Verizon’s counsel repeatedly noted that the FCC had never stated any intention that the order should be read as severable either in the Order, in its briefs or even at oral argument. Unlike in MD/DC/DE Broadaster’s Assoc. v. FCC, the Commission did not state in the adopting regulation that it intended to treat the regulation as severable. And, as the DC Circuit has stated, “[s]everance and affirmance of a portion of an administrative regulation is improper if there is ‘substantial doubt’ that the agency would have adopted the severed portion on its own.”

The question, as the Supreme Court held in K Mart Corp. v. Cartier, Inc., is whether the remainder of the regulation could function sensibly without the stricken provision. This isn’t clear. While Judge Tatel seems to suggest that the rule against blocking could function without the nondiscrimination rule, Judge Silberman seems convinced that the two were intended as necessary complements by the FCC. The determination of the no-blocking rule’s severability may come down to Judge Rogers, who didn’t telegraph her view.

So what’s next?

The prediction made by Fred Campbell shortly after the Cellco decision seems like the most likely outcome: Tatel, joined by at least Silberman, could strike down the entire Order as imposing common carriage — while offering the FCC a roadmap to try its hand at Net Neutrality yet again by rewriting the discrimination rule to allow for prioritized or accelerated carriage on commercially reasonable terms.

Or, if the the court decides the order is severable, it could strike down just the nondiscrimination rule — assuming the court could find either direct or ancillary jurisdiction for both the transparency rule and the non-discrimination rule.

Either way, an FCC loss will mean that negotiated arrangements for priority carriage will be governed under something more like a rule of reason. The FCC could try to create its own rule.  Or the matter could simply be left to the antitrust and consumer protection laws enforced by the Department of Justice, the Federal Trade Commission, the states and private plaintiffs. We think the latter’s definitely the best approach. But whether it is or not, it will be the controlling legal authority on the ground the day the FCC loses — unless and until the FCC issues revised rules (or Congress passes a law) that can survive judicial review.

Ultimately, we suspect the FCC will have a hard time letting go. After 79 years, it’s clearly in denial about its growing obsolescence.

William Buckley once described a conservative as “someone who stands athwart history, yelling Stop.” Ironically, this definition applies to Professor Tim Wu’s stance against the Supreme Court applying the Constitution’s protections to the information age.

Wu admits he is going against the grain by fighting what he describes as leading liberals from the civil rights era, conservatives and economic libertarians bent on deregulation, and corporations practicing “First Amendment opportunism.” Wu wants to reorient our thinking on the First Amendment, limiting its domain to what he believes are its rightful boundaries.

But in his relatively recent piece in The New Republic and journal article in U Penn Law Review, Wu bites off more than he can chew. First, Wu does not recognize that the First Amendment is used “opportunistically” only because the New Deal revolution and subsequent jurisprudence has foreclosed all other Constitutional avenues to challenge economic regulations. Second, his positive formulation for differentiating protected speech from non-speech will lead to results counter to his stated preferences. Third, contra both conservatives like Bork and liberals like Wu, the Constitution’s protections can and should be adapted to new technologies, consistent with the original meaning.

Wu’s Irrational Lochner-Baiting

Wu makes the case that the First Amendment has been interpreted to protect things that aren’t really within the First Amendment’s purview. He starts his New Republic essay with Sorrell v. IMS (cf. TechFreedom’s Amicus Brief), describing the data mining process as something undeserving of any judicial protection. He deems the application of the First Amendment to economic regulation a revival of Lochner, evincing a misunderstanding of the case that appeals to undefended academic prejudice and popular ignorance. This is important because the economic liberty which was long protected by the Constitution, either as matter of federalism or substantive rights, no longer has any protection from government power aside from the First Amendment jurisprudence Wu decries.

Lochner v. New York is a 1905 Supreme Court case that has received more scorn, left and right, than just about any case that isn’t dealing with slavery or segregation. This has led to the phenomenon (my former Constitutional Law) Professor David Bernstein calls “Lochner-baiting,” where a commentator describes any Supreme Court decision with which he or she disagrees as Lochnerism. Wu does this throughout his New Republic piece, somehow seeing parallels between application of the First Amendment to the Internet and a Liberty of Contract case under substantive Due Process.

The idea that economic regulation should receive little judicial scrutiny is not new. In fact, it has been the operating law since at least the famous Carolene Products footnote four. However, the idea that only insular and discrete minorities should receive First Amendment protection is a novel application of law. Wu implicitly argues exactly this when he says “corporations are not the Jehovah’s Witnesses, unpopular outsiders needing a safeguard that legislators and law enforcement could not be moved to provide.” On the contrary, the application of First Amendment protections to Jehovah’s Witnesses and student protesters is part and parcel of the application of the First Amendment to advertising and data that drives the Internet. Just because Wu does not believe businesspersons need the Constitution’s protections does not mean they do not apply.

Finally, while Wu may be correct that the First Amendment should not apply to everything for which it is being asserted today, he does not seem to recognize why there is “First Amendment opportunism.” In theory, those trying to limit the power of government over economic regulation could use any number of provisions in the text of the Constitution: enumerated powers of Congress and the Tenth Amendment, the Ninth Amendment, the Contracts Clause, the Privileges or Immunities Clause of the Fourteenth Amendment, the Due Process Clause of the Fifth and Fourteenth Amendments, the Equal Protection Clause, etc. For much of the Constitution’s history, the combination of these clauses generally restricted the growth of government over economic affairs. Lochner was just one example of courts generally putting the burden on governments to show the restrictions placed upon economic liberty are outweighed by public interest considerations.

The Lochner court actually protected a small bakery run by immigrants from special interest legislation aimed at putting them out of business on behalf of bigger, established competitors. Shifting this burden away from government and towards the individual is not clearly the good thing Wu assumes. Applying the same Liberty of Contract doctrine, the Supreme Court struck down legislation enforcing housing segregation in Buchanan v. Warley and legislation outlawing the teaching of the German language in Meyer v. Nebraska. After the New Deal revolution, courts chose to apply only rational basis review to economic regulation, and would need to find a new way to protect fundamental rights that were once classified as economic in nature. The burden shifted to individuals to prove an economic regulation is not loosely related to any conceivable legitimate governmental purpose.

Now, the only Constitutional avenue left for a winnable challenge of economic regulation is the First Amendment. Under the rational basis test, the Tenth Circuit in Powers v. Harris actually found that protecting businesses from competition is a legitimate state interest. This is why the cat owner Wu references in his essay and describes in more detail in his law review article brought a First Amendment claim against a regime requiring licensing of his talking cat show: there is basically no other Constitutional protection against burdensome economic regulation.

The More You Edit, the More Your <sic> Protected?

In his law review piece, Machine Speech, Wu explains that the First Amendment has a functionality requirement. He points out that the First Amendment has never been interpreted to mean, and should not mean, that all communication is protected. Wu believes the dividing lines between protected and unprotected speech should be whether the communicator is a person attempting to communicate a specific message in a non-mechanical way to another, and whether the communication at issue is more speech than conduct. The first test excludes carriers and conduits that handle or process information but have an ultimately functional relationship with it–like Federal Express or a telephone company. The second excludes tools, those works that are purely functional like navigational charts, court filings, or contracts.

Of course, Wu admits the actual application of his test online can be difficult. In his law review article he deals with some easy cases, like the obvious application of the First Amendment to blog posts, tweets, and video games, and non-application to Google Maps. Of course, harder cases are the main target of his article: search engines, automated concierges, and other algorithm-based services. At the very end of his law review article, Wu finally states how to differentiate between protected speech and non-speech in such cases:

The rule of thumb is this: the more the concierge merely tells the user about himself, the more like a tool and less like protected speech the program is. The more the programmer puts in place his opinion, and tries to influence the user, the more likely there will be First Amendment coverage. These are the kinds of considerations that ultimately should drive every algorithmic output case that courts could encounter.

Unfortunately for Wu, this test would lead to results counterproductive to his goals.

Applying this rationale to Google, for instance, would lead to the perverse conclusion that the more the allegations against the company about tinkering with its algorithm to disadvantage competitors are true, the more likely Google would receive First Amendment protection. And if Net Neutrality advocates are right that ISPs are restricting consumer access to content, then the analogy to the newspaper in Tornillo becomes a good one–ISPs have a right to exercise editorial discretion and mandating speech would be unconstitutional. The application of Wu’s test to search engines and ISPs effectively puts them in a “use it or lose it” position with their First Amendment rights that courts have rejected. The idea that antitrust and FCC regulations can apply without First Amendment scrutiny only if search engines and ISPs are not doing anything requiring antitrust or FCC scrutiny is counterproductive to sound public policy–and presumably, the regulatory goals Wu holds.

First Amendment Dynamism

The application of the First Amendment to the Internet Age does not involve large leaps of logic from current jurisprudence. As Stuart Minor Benjamin shows in his article in the same issue of the U Penn Law Review, the bigger leap would be to follow Wu’s recommendations. We do not need a 21st Century First Amendment that some on the left have called for—the original one will do just fine.

This is because the Constitution’s protections can be dynamically applied, consistent with original meaning. Wu’s complaint is that he does not like how the First Amendment has evolved. Even his points that have merit, though, seem to indicate a stasis mentality. In her book, The Future and Its Enemies, Virginia Postrel described this mentality as a preference for a “controlled, uniform society that changes only with permission from some central authority.” But the First Amendment’s text is not a grant of power to the central authority to control or permit anything. It actually restricts government from intervening into the open-ended society where creativity and enterprise, operating under predictable rules, generate progress in unpredictable ways.

The application of current First Amendment jurisprudence to search engines, ISPs, and data mining will not necessarily create a world where machines have rights. Wu is right that the line must be drawn somewhere, but his technocratic attempt to empower government officials to control innovation is short-sighted. Ultimately, the First Amendment is as much about protecting the individuals who innovate and create online as those in the offline world. Such protection embraces the future instead of fearing it.