Archive for September, 2017

Make Innovation Great Again: My Remarks at the Roosevelt/GWIPP Market Power Rising Event

Good morning. I want to thank Marshall Steinbaum and Eric Bernstein for organizing this important event. And thanks to Sally for that kind introduction. People might not know that, as her night gig, Sally hosts a podcast called Women Killing It, which celebrates women’s accomplishments in business, politics, and the arts, and is quite inspiring. And sticking with the feminist theme, I can’t help but noticing the gender composition of this panel. They all should look this way, right? Marshall called me in panic, saying he needed a token, bald Jewish man on a DC policy panel for diversity reasons.

I want to use my opening to discuss remedies that have been floated to combat the threat to edge innovation posed by dominant platform owners. Some like Sally are calling for beefed-up antitrust enforcement under the current standards. Others like Marshall and Lina Khan are calling for a change in the standards, to accommodate concerns not captured under the consumer-welfare framework. Still others like retired tech columnist Walt Mossberg are calling for new protections that would operate outside of antitrust, such as a tribunal to adjudicate disputes between edge providers and dominant platforms. I affectionately call last this one the “Mossberg Plan.”

These various remedies may be complementary, in which case no one has to prove that her plan is best. But my competitive juices compel me to make the case today for the Mossberg Plan. To do that, I offer three principles that should guide us as we tackle this difficult competition problem: (1) Policy Stability, (2) Speed, and (3) Symmetry.

Policy stability is the notion that regulatory outcomes involving a particular issue are reasonably predictable, so that the relevant actors—here, in the Internet ecosystem—can make long-term plans. Confidence in equitable outcomes is the key to spurring edge innovation by independent content and app providers. The same confidence in predictable results attracts platform owner investment that spurs innovation. Of course, there is no such thing as a perfectly predictable outcome; even antitrust cases aren’t perfectly predictable. But procedural and substantive precedent from the repeated application of well-understood standards will guide the next decision, narrowing the range of outcomes and making prediction easier.

Relative to agency review, adjudication in a court or a tribunal is shielded from political influence—another force working against policy stability. A judge with a lifetime appointment or a sufficiently long tenure is not thinking about how her decision will affect her future income path, as determined by her political constituency.

For the opposite of policy stability, check out the modern FCC, which has become highly politicized. FCC Commissioners have injected politics and thus policy instability, for example, by voting perfectly along party lines when presented with an Administrative Law Judge’s findings of discrimination by a vertically integrated cable operator. Republicans have voted to overturn a finding of discrimination in both cases—an admittedly small sample size, but troubling nonetheless.

Not to pick on Republicans, Tom Wheeler, the Democratic Chairman under President Obama, injected an unhealthy dose of policy instability in his design of a case-by-case regime in the 2015 Open Internet Order. Rather than commit to a well-understood standard such as nondiscrimination, as his predecessor Julius Genachowski did in the FCC’s 2010 Open Internet Order, Chairman Wheeler opted for something more nebulous called the “General Conduct” standard and declined to use an independent factfinder to adjudicate disputes. This gave Wheeler, and future FCC Chairs, maximum flexibility to achieve whatever regulatory result they desired, enshrining an arbitrariness that undermines investment. In January 2017, Wheeler’s Wireless Telecom Bureau found that AT&T’s and Verizon’s zero-rating plans were in violation of the nebulous General Conduct standard—only to be reversed by Chairman Pai a few months later. This is the opposite of policy stability.

In contrast, an independent tribunal tasked with enforcing a well-understood standard such as nondiscrimination, whose decisions have binding influence on future cases and could not be reversed by agency heads, would achieve policy stability.

Let’s move to the second principle for identifying a good remedy here—speed. Speed in this context is the notion that a complainant that prevails on the merits enjoys injunctive and potentially monetary relief in a timely fashion. Proponents of the use of antitrust as a means to police discriminatory conduct on the Internet, such as Josh Wright, are silent when it comes to speed. Based on my 20-year career working on antitrust cases, I can say with some authority that antitrust moves like molasses. It’s as if antitrust procedures were designed by lawyers to ensure job security! The breakup of AT&T occurred ten years after DOJ’s complaint in 1974, and Microsoft also took a decade to resolve. That means Netscape and others operating on the edge of Microsoft’s platform were allowed to twist in the wind for ten years. And this is how edge innovation dies.

In contrast to the five-to-ten year ordeal of antitrust litigation, a specialized tribunal tasked only with determining whether discrimination had occurred and, as a result, the complainant was materially injured, should be able to adjudicate cases in one-to-two years.

And finally, let’s briefly touch on the third principle to guide us in policy design—symmetry. Symmetry is the notion that no set of dominant firms is immunized from the regulation. Just as it made zero sense to subject some Internet firms to opt-in standards for privacy protections and others subject to opt-out, it would make zero sense to design a regime that policed ISPs (and only ISPs) for discriminatory conduct, while permitting Google/Facebook/Amazon to discriminate against independent edge providers with impunity, especially since the tech platforms are a bigger threat to edge innovation. According to two dozen interviews by the Post’s Elizabeth Dwoskin of top tech investors and entrepreneurs, the threat posed by Facebook “is having a profound impact on innovation in Silicon Valley, by creating a strong disincentive for investors and start-ups to put money and effort into creating products Facebook might copy.”

A tribunal that created a forum for edge providers to bring discrimination complaints against both tech platforms and ISPs, evaluated pursuant to the same evidentiary criteria, would satisfy the symmetry principle.

When judged along these dimensions—policy stability, speed, and symmetry—the Mossberg Plan is the best option for policymakers. It would make innovation great again.

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