Saturday, September 29, 2007

WIPIP, Panel 2

Frank Pasquale, Seton Hall Law School
From Net Neutrality to Search Neutrality: Frontiers of Equitable Information Policy

Principles of net neutrality: transparency – we want to know if traffic is being slowed down, or if carriers are turning down controversial text messages. Open infrastructure – non strangulation principle that providers shouldn’t deliberately degrade quality of service in order to upsell the better quality, as makers of printers for home use do.

Many skeptics of net neutrality see it as an unnecessary burden. There’s been a “laissez-faire switcheroo”: Google is closer to a monopoly than broadband providers. The reductio ad absurdum is – what’s next, search neutrality? Net neutrality advocates call this a red herring, but Pasquale is interested in it. Pervasive vertical integration is a problem no matter the layer. Verizon cutting a deal with Yahoo! search is a problem, and so is Google cutting a special deal to put a company at the top of organic results all the time. The FTC has warned search engines to separate paid and organic content, but without transparency we just won’t know if that’s happening.

Google will put a notice next to your site if it appears to contain malware. If that gets you to clean your site up, great; but maybe there needs to be some sort of due process. (Later he talks about individuals’ ability to respond to their FICO scores, see election software, etc.)

Transparency: net neutrality advocates want to know whether packets are being blocked, quality of service is degraded, etc. Compare to the NYT/MoveOn controversy – we should know who gets discounts. There are parallel demands in the search engine context. Which groups and governments’ demands are acceded to? E.g., the results for a search of “Jew” on Google produce a link from Google explaining matters.

Laissez-faire claims against net neutrality: property fundamentalism (we own our platform); free speech absolutism (Red Lion is dead); Schumpeterian optimism (Google will build its own internet). And Google makes the exact same claims when people argue for intervention into its search results! Pasquale disagrees with them all. Google isn’t willing to wait for salvation through the market in the carrier context. Net neutrality can help competition.

Tom Bell: References work on the history of mandatory interconnection. Before then, people had two phones on their desks – there was competition, and then after mandatory interconnection Bell wiped everyone else out. So Google’s take on net neutrality might help it consolidate its power.

Pasquale: If you have net neutrality, you have to look at regulating Google too.

Eric Goldman: Google’s trying to have it both ways and should be held accountable. You are trying to develop a law of intermediation – the same arguments can be made against any intermediary.

Christopher Yoo: Failure to interconnect drives competition to connect everyone; someone then wins the race, and that creates a new set of policy problems. Everyone says Bell refused interconnection, but new entrants were no more interested in interconnection. Also, this isn’t Schumpeterian competition, which is vertical competition for the market – a succession of monopolies. Here, there is a drive to add a third player to a duopoly. Different monopolies at different levels can push into each other’s levels – one possible story is that those bumping up against each other are a good idea.

Pasquale: That’s a benefit of having countervailing monopolies at different levels. Maybe that’s the only hope we have – set some corporations against others.

Mark Schultz, Southern Illinois University School of LawThe Music Never Stopped: Technological Progress, Economic Growth, and Copyright

Abstract Paper

An interesting argument: performing arts are subject to the “cost disease” – productivity increases in the overall economy don’t increase productivity in this sector. A 45-minute sonata still takes 45 minutes and the same number of performers in 2007 as in 1907. As a result, performances become more and more economically unsustainable. There have been a number of responses to this argument, including claims that people spend more on art as society gets wealthier. But tour prices continue to go up, and only a few bands can make money from live performances. Copyright is a potential savior by allowing performers to capture some productivity gains from technology in the form of recorded/broadcast media and broader distribution. Basically, neither impeding technological progress nor abandoning copyright is a good idea for artists.

Tom Bell: Do we care about artists except insofar as their works are accessible to consumers? Performing costs are a red herring – we can get music from recordings, so who cares if live performance is more expensive?

A: This is a common response to the cost disease argument. You still need an incentive to produce recordings. Will we get anything if live performance gets more costly & records are no longer worth distributing?

Bell: Garageband shows that plenty of people will publish for free!

Michael Carroll: You’ve set up an all or nothing proposition: get rid of copyright or keep it. Also, the superstar effect creates a lottery effect – people will take the risk because they want to be one of the ten winning bands that makes money on tours.

A: It’s not all or nothing, though people do argue for abandonment of copyright. There is a class of performers who can’t provide music for free and can’t make a living just by touring, but could use copyright-protected business models.

My question, like Mike’s: allocatively, the rewards copyright offers suggest a shift more towards winner-take-all, since one violinist can satisfy more demand. How does that interact with the paper’s analysis? Depending on how people react to tournaments, that could induce more people to pursue artistic careers, or fewer – and either might be good for society, depending on the alternatives!

A: The long tail moderates that – technology allows people to connect with a smaller group of fans.

Q: So is the winner-take-all system more powerful in recorded media or in live performances? Which market is more skewed, and what effects does that have on incentives? We need to know more about the interaction of incentives; the long tail, after all, is profitable for retailers, but it’s not clear that it provides musicians with a living.

Glynn Lunney, Tulane University Law School

Copyright’s Price Discrimination Panacea
Abstract Paper

The paper was an example of work I like but do not remotely do. Lunney models the effects of increased price discrimination in a world where resources invested in creativity have to trade off with other investments, arguing that the most likely alternative is diversion from other creative fields in which price discrimination (or even copyright protection in the first place) is relatively less important. As a result, he shows, increased price discrimination is likely to decrease overall social welfare. I found the model comprehensible even though graphs give me hives.

Terry Fisher, in another paper, says price discrimination is socially cheapest way to achieve any given incentive level compared to uniform pricing. You can decide on the incentive level and then allow price discrimination and give less overall copyright protection in length and scope. But there are two problems: (1) the difficulty of setting the right incentive level, and (2) political economy: you never get the quid for the quo; scope keeps getting bigger.

There may be cases in which price discrimination is a good idea – addressing the costs of uniformity in copyright scope, or achieving a better incentive level – but the assumptions really matter; we need to articulate and defend the reasons why we think price discrimination works.

Q: Aren’t you assuming a lot about the industries copyright would steal from?

A: Look at other creative industries – they don’t have anywhere near the ability to price discriminate as copyright industries.

Q: Price discrimination is not the only way to appropriate extra value.

A: I don’t see copyright industries capturing a smaller fraction of value than the industries nearer to them. But this is the right debate: what are the most plausible assumptions to make about the markets?

There are always more market failures to talk about, which is why second-best analysis is so hard to do – intractable, even.

A paper from another panel:
Eric Claeys, George Mason University School of Law

INS v. AP: Hot News and Natural Property Rights
Abstract Paper

I liked the discussion at the end of the paper of the limits of economic analysis in the presence of substantial empirical uncertainty, and the ways in which economics in fact reduces to intuitions. Exactly what Lunney was talking about!

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