A History Lesson For Those Advocating Network Neutrality Laws

from the unintended-consequences dept

Over at News.com, Declan McCullagh writes that Barack Obama's election as the next president of the United States has bolstered the hopes of those hoping to impose network neutrality regulations on the Internet. While Obama's key advisors have been cagey about precisely what the new administration's stance on the issue will be, it's a safe bet that we'll be hearing a lot about the issue in the coming months. This seems like a good time for a long-overdue conclusion to my ongoing series on network neutrality regulation.

One of the things that has been missing from the network neutrality debate has been a sense of how it fits into the broader history of government regulations of network industries. It's easy to imagine that the Internet is so new and different that historical comparisons just aren't relevant. But as we've seen with copyright and patent debates, we can learn a lot from historical experiences that may not seem immediately relevant.

I think this is equally true in the network neutrality debate. While the specifics of network neutrality are unlike anything that has come before, the general principles involved—non-discrimination, competition, monopoly power, and so forth—have actually been with us for more than a century. Indeed, today's network neutrality debate bears a striking resemblance to the debate that led to the very first American regulatory agency: the Interstate Commerce Commission, which was created to regulate the railroad industry.

The railroad industry was the high-tech industry of its day, and it had many of the same kinds of transformative effects on the 19th Century American economy that the Internet is having today. As with today's Internet, some parts of the railroad market were highly competitive, while other markets were served by only one or two firms. And people had concerns about the behavior of the largest railroad firms that echoed those that people have about large Internet providers today: that they restrict competition, discriminate among customers.

In 1887, Congress passed legislation (you can read an abridged version here) that is strikingly similar to the proposed network neutrality legislation that we're debating today. The Interstate Commerce Act declared it illegal to charge different prices to different customers for "the transportation of a like kind of traffic under substantially similar circumstances and conditions." It also said that railroads may not "make or give any undue or unreasonable preference or advantage to any particular person, company, firm, corporation, or locality, or any particular description of traffic." Compare that to the leading network neutrality proposal during the last Congress, which would have required network providers to deliver content on a "reasonable and nondiscriminatory" basis without imposing "a charge on the basis of the type of content, applications, or services made available."

Unfortunately, the story of the Interstate Commerce Commission does not have a happy ending. Grover Cleveland appointed a railroad ally named Thomas M Cooley as the first chairman of the ICC. The ICC was widely regarded as toothless for its first couple of decades, largely rubber-stamping railroad industry decisions. Things got even worse after the turn of the century, when the ICC began actively discouraging competition in the railroad industry. The ICC had the power to decide when new firms were allowed to enter the railroad industry, and by the 1920s, the FCC was actively working to discourage competition and push up railroad rates. In the 1930s, the ICC gained authority over the infant trucking industry, and used its authority to slow the growth of the trucking industry to protect the railroads from competition. By 1970, things had gotten so bad that a Ralph Nader report described the ICC as "predominantly a forum at which transportation interests divide up the national transportation market."

What went wrong? The story is too long and complicated to fully describe in a blog post, but I think there are two key lessons. First, the authors of the ICA dramatically underestimated the complexity of the railroad industry and the difficulty of government oversight. One of the reasons the ICC was relatively toothless in its early years is that it was completely overwhelmed with paperwork, as dozens of railroads sent it information about thousands of routes. The railroad industry was simply too complex and dynamic for a few Washington bureaucrats to even understand, to say nothing of regulating them effectively.

Second, the ICC's failure is a classic example of what economists call "regulatory capture": the ability of special interests to gain control of the regulatory process and use it to their advantage. Because the railroads cared more about railroad regulation than anyone else, they were adept at getting their allies appointed to key positions at the commission. Over time, the ICC not only ceased to be an effective watchdog of consumer interests, but actually began actively defending the interests of the railroads at consumers' expense. For about six decades—from about 1920 to 1980—the ICC pursued policies that reduced competition and raised prices in the railroad industry. And when trucking emerged as a potentially disruptive innovation, the ICC helped to limit its growth and slow the corresponding decline of the railroad industry.

The story of the ICC is not an isolated case. Similar stories can be told of the Civil Aeronautics board, which limited competition in the airline industry until the 1970s. And, of course, there's the example of that the FCC actively promoted AT&T's monopoly in the telecommunications market until it was broken up in 1984.

We can certainly hope that Congress has learned from the experiences of the 20th century and will avoid the most egregious mistakes it made in the 20th century. But it's worth remembering that many of the conditions that led to the ICC's problems are still with us. Today's FCC, like the ICC of the 20th Century, has a revolving door between the commission and the firms they regulate. And the Internet, like the railroad industry of the 19th century, is extraordinarily dynamic and complex. As a result, there's a real danger that if Congress gives the FCC the power to regulate the Internet, it will make things worse, either because it cannot keep up with the Internet's rapid evolution, or because industry incumbents will succeed in getting their own allies in key positions within the commission. Either way, the results could be very different from what network neutrality proponents are hoping for.

Filed Under: history, net neutrality, regulations, regulatory capture, trains, unintended consequences

The Ridiculous History Of The Job And Dollar Loss Numbers Cited By IP Proponents

from the pulled-out-of-nowhere dept

Earlier this week, we talked about how the US Chamber of Commerce was citing the totally bogus stat that 750,000 jobs are lost in the US due to intellectual property violations. The original article tried to track down the source of the number and found a tangled web of government agencies all pointing at each other. Julian Sanchez has apparently been hot on the trail of the real source of that number, along with the equally bogus claim of $250 billion lost to IP infringement in the US. While it took plenty of digging, he seems to have found the origin of each number -- and they're both basically completely made up.

The 750,000 job number actually dates back to 1986, when then-Commerce Secretary Malcom Baldridge, in promoting a stronger copyright bill from the Reagan era, mentioned to a newspaper reporter that infringement cost anywhere from 125,000 to 750,000 jobs. That quickly morphed into "up to 750,000 jobs" and eventually just became "750,000 jobs" with no actual backing data. It's almost surprising that the industry hasn't tried to expand that number since, surely, infringement has become a bigger issue in the intervening 22 years. Of course, doing that might require actual proof, of which there is none, so that might present a problem.

As for the $250 billion, well, that's even weaker. It's gone through a number of versions of the game "telephone," and while it's often attributed to the FBI, they don't do studies like that. Instead, Sanchez eventually tracked it down to a brief aside in a 1993 Forbes article, where it wasn't even talking about losses in the US. Hell, it wasn't even talking about losses. It was talking about the size of the counterfeit market (which, as you know, does not equal losses) in the world. But, the number has been passed around over and over again -- and has been included in various government publications, so the industry (and politicians) take it as fact.

Filed Under: bogus stats, copyright, history, stats

No, This Guy Didn't Invent The iPod 30 Years Ago

from the try-again dept

Two and a half years ago, we wrote about the claims of Kane Kramer, a guy who claimed to have invented the iPod thirty years ago, and was talking to lawyers to see if he had a case against Apple. As we explained at the time, Kramer did not invent the iPod at all. He created a very early digital music player, that had much less functionality that couldn't store more than a few minutes of music, which never got anywhere in the marketplace, and for which all of his patents had long expired. To say that he had invented the iPod would be like saying that the first guy who threw a block of ice in a box "invented" the air conditioner.

Yet, here we go again, as the DailyMail in the UK is claiming that Apple has admitted that this guy did, in fact, invent the iPod. However, again, that's not true at all. What happened was that Apple had him provide some evidence in its dispute with Burst.com (which was eventually settled). Basically, what Apple was doing wasn't admitting that Kramer "invented the iPod" but was showing that there was plenty of prior art (including Kramers) that predated Burst's highly questionable patents.

That doesn't mean that Kramer invented the iPod. It just means that his work predated Burst's claim of a monopoly on some specific technology that it claimed Apple infringed. That's a long way from "inventing the iPod." Besides, there were plenty of digital music players prior to the iPod. In fact, the real revolution around the iPod wasn't the fact that it was a digital player, but that it was the first digital player that had significant storage and could carry large collections of music at once -- something that Kramer's player never could do. So, please, can we stop repeating this myth that he somehow invented the iPod. He didn't.

Filed Under: history, invention, ipod, kane kramer
Companies: apple

Turns Out Disney Might Not Own The Copyright On Early Mickey Mouse Cartoons

from the oops dept

Remember the recent story we had where some researchers noted that, despite the conventional wisdom (and claims from Time Warner), it appeared that Time Warner probably did not own the copyright on Happy Birthday? Of course, the company still collects millions for it, because people assume they do, but the historical evidence suggests that this is really incorrect. Now it turns out that the same thing may be true for Disney's copyright on Mickey Mouse. This is rather noteworthy considering both the history of Mickey Mouse, as well as how much effort Disney has always put towards copyright extension just as the supposed copyright on Mickey Mouse was about to expire.

Now, to be clear, Disney can continue to hold the trademark on Mickey Mouse for as long as it continues to use the mark in commerce, but the copyright should go into the public domain eventually -- meaning others can make use of the early works, as long as it's clear that they're not doing so as Disney. So what if all of these copyright extensions were for naught, and the copyright had already expired?

There seems to be rather compelling evidence that this is the case, and many legal scholars agree. Basically, Disney was a bit disorganized early on and appears to have screwed up the original copyright claims on some early Mickey Mouse shorts, which based on the law at the time would nullify the copyright altogether. Now, this would only count for those early clips, which had a slightly different version of Mickey.

Not surprisingly, Disney isn't particularly open to this argument. Not only does it dismiss the concept out of hand as "frivolous," it has also legally threatened a legal scholar who first published an analysis saying that the copyright was invalid. In a letter to the researcher, Disney warned him that publishing his research could be seen as "slander of title" suggesting that he was inviting a lawsuit. He still published and Disney did not sue, but it shows the level of hardball the company is willing to play.

Of course, the story can be different when Disney is on the other side of the coin. When it was discovered that someone else (other than Disney) probably held the copyright for Bambi, Disney went ballistic, throwing out arcane legal concept after arcane legal concept to come up with anything that would get the copyright out of the hands of this other potential owner. Disney basically threw every potential legal argument against the wall -- including claiming both that Bambi was in the public domain and that Disney owned the copyright to it.

Unfortunately, none of this is likely to amount to much. It's unlikely anyone will actually challenge Disney on the copyright of early Mickey Mouse (or that anyone will challenge Happy Birthday's copyright either). However, once again, we find that the supposed "ownership" of certain things isn't quite as clear cut as some would like you to believe.

Filed Under: copyright, history, mickey mouse, ownership
Companies: disney

History Locked Up... Thanks To Copyright

from the too-bad dept

And here's yet another story of important content that could be put to use, unfortunately being totally locked up thanks to copyright. A few readers sent in the story of the Brooklyn Historical Society refusing to let someone putting together a book of photographs of the Canarsie section of Brooklyn use some old, historically relevant, photographs, because of fears over copyright. The photos in question were from well over 100 years ago, and no one has any idea who owns the copyright -- but rather than risk getting sued for infringement, the Historical Society has said no to using the photos in the book. This is the sort of situation that could be solved with orphan works legislation, but there's a vocal contingent of photographers who loudly are attempting to block that legislation, often falsely stating what the orphan works bill would actually allow, claiming that companies will "steal" their photos. So, instead, we sit around, unable to see important historic photos. I'm sure that's what the framers of the Constitution had in mind.

Filed Under: brooklyn, copyright, history, orphan works, photographs

The First Fifty Years Of The Internet

from the as-written-by-the-winners dept

Paul Kedrosky points us to an article in the latest issue of Vanity Fair recounting the first fifty years of the internet's history by assembling a bunch of the people who were involved in different stages from conception right up until today, and getting them to talk about it. As Kedrosky notes, there are a few small problems with it (most notably, it's very much history as written by the "winners" leaving out quite a bit and perhaps "enhancing" some stories a bit), but overall it's a fantastic and fun read full of great quotes.

The more recent stuff in the article doesn't add much, but there's a great discussion of the early years, where there are even a few themes that may sound familiar around here -- including the idea that multiple people seem to come up with the same ideas at the same time. For example, the article notes that both Paul Baran and Donald Davies entirely independently came up with the idea of packet-switched networks, and one of Baran's quotes in the article is:

"I get credit for a lot of things I didn't do. I just did a little piece on packet switching and I get blamed for the whole goddamned Internet, you know? Technology reaches a certain ripeness and the pieces are available and the need is there and the economics look good -- it's going to get invented by somebody."

It's Stigler's Law all over again.

Somewhat related to that is the interesting tidbit about how CERN originally wanted to patent the World Wide Web, until Tim Berners-Lee talked them out of it (as recounted by Robert Cailliau):

"At one point CERN was toying with patenting the World Wide Web. I was talking about that with Tim one day, and he looked at me, and I could see that he wasn't enthusiastic. He said, Robert, do you want to be rich? I thought, Well, it helps, no? He apparently didn't care about that. What he cared about was to make sure that the thing would work, that it would just be there for everybody. He convinced me of that, and then I worked for about six months, very hard with the legal service, to make sure that CERN put the whole thing in the public domain."

Imagine how different the world would be if the Web were patented early on? It almost certainly would have massively stunted development.

Also, amusingly, from multiple people early in the piece, AT&T plays the roll of the clueless big company who wants nothing more than to kill the internet and keep its monopoly:

Paul Baran: The one hurdle packet switching faced was AT&T. They fought it tooth and nail at the beginning. They tried all sorts of things to stop it. They pretty much had a monopoly in all communications. And somebody from outside saying that there’s a better way to do it of course doesn’t make sense. They automatically assumed that we didn’t know what we were doing.

Bob Taylor: Working with AT&T would be like working with Cro-Magnon man. I asked them if they wanted to be early members so they could learn technology as we went along. They said no. I said, Well, why not? And they said, Because packet switching won't work. They were adamant. As a result, AT&T missed out on the whole early networking experience.
....
Bob Kahn: Let me put it into perspective. So here we are when there are very few time-sharing systems anywhere in the world. AT&T probably said, Look, maybe we would have 50 or a hundred organizations, maybe a few hundred organizations, that could possibly partake of this in any reasonable time frame. Remember, the personal computer hadn't been invented yet. So, you had to have these big expensive mainframes in order to do anything. They said, There's no business there, and why should we waste our time until we can see that there's a business opportunity?
....
Bob Metcalfe: Imagine a bearded grad student being handed a dozen AT&T executives, all in pin-striped suits and quite a bit older and cooler. And I'm giving them a tour. And when I say a tour, they're standing behind me while I'm typing on one of these terminals. I'm traveling around the Arpanet showing them: Ooh, look. You can do this. And I'm in U.C.L.A. in Los Angeles now. And now I'm in San Francisco. And now I'm in Chicago. And now I'm in Cambridge, Massachusetts -- isn't this cool? And as I'm giving my demo, the damned thing crashed.

And I turned around to look at these 10, 12 AT&T suits, and they were all laughing. And it was in that moment that AT&T became my bete noire, because I realized in that moment that these sons of bitches were rooting against me.

AT&T trying to kill the internet, not seeing the business opportunity and insisting things could never work (when they obviously did)? That all sounds mighty familiar...

Filed Under: bob kahn, bob metcalfe, bob taylor, history, internet, paul baran, tim berners-lee

Another Failed Harvard Social Network Takes 'Legal Action' Against Facebook

from the if-connectu-could-do-it... dept

Even before ConnectU came along claiming that Mark Zuckerberg somehow "stole" the idea and the code for Facebook from them, there was another Harvard alum, Aaron Greenspan, who had been claiming something similar about how Zuckerberg took the idea from a project Greenspan set up called houseSYSTEM. When Greenspan's story (after years of him pushing it) finally got some mainstream press last year, we pointed out how ridiculous the whole story was. Facebook was hardly the first social network out there -- and ConnectU and houseSYSTEM were clearly built off the ideas of those that had come before them as well. It seemed like both cases involved folks who had failed to actually execute and build something that people liked, and were taking it out on Zuckerberg (who did successfully build something that people wanted to use) in hopes of either fame or money or both.

Of course, once Facebook settled the case with ConnectU earlier this month, it was only a matter of time until Greenspan realized that he might be missing out as well. So, as you might expect, Greenspan has decided to "take legal action" against Facebook, though at this point it's merely limited to trying to get Facebook's trademark on the name revoked (claiming that houseSYSTEM used the name, and that it's widely used and generic). He may actually be right that the term is generic, but it seems more than likely that this lawsuit is just trying to drum up some attention and potentially money from Facebook.

It will come as no surprise, of course, that Greenspan is really using this lawsuit to promote his "book" which has a huge section accusing Zuckerberg of getting the idea from Greenspan. Greenspan's been promoting the book for ages, with plenty of excerpts available online. The press release Greenspan put out claims that his "publisher" (which is apparently also owned by Greenspan) was denied the ability to promote the book because it had "Facebook" in the title. Of course, he provides no details about who denied him the right to advertise, and it seems odd that anyone would prevent titles with the name "Facebook" from appearing, as such a book, by itself, probably is not a violation of Facebook's trademark. Does anyone else want to claim that Zuckerberg stole the idea for Facebook? Apparently, it's good for business.

Filed Under: aaron greenspan, books, facebook, history, mark zuckerberg, trademark

Can Someone Give Michael Eisner A History Lesson On Copyright And Patents?

from the not-that-it-would-help dept

Michael Eisner gave an interview at SXSW on Tuesday (with Mark Cuban acting as the interviewer). While he discussed a variety of things, at one point he was asked about copyright issues and he responded with a strongly pro-copyright statement:

"I have a long history, obviously, of believing in copyright. I think basically what separated this country from the rest of the world was patents and copyrights. President Lincoln introduced a lot of this, fought for (the idea that) to pay people for their intellectual work was no different than paying them for their physical work. And nobody would think twice about paying someone for their physical work."

Eisner has been repeating this bizarre and near totally incorrect claim about Lincoln for years. In fact, in 2002 he wrote an editorial for the Financial Times with the bizarre claim that Abraham Lincoln would hate file sharing. Then, last year, in another interview he talked about how important intellectual property was in the US since the time of Lincoln. It certainly would appear that he has Lincoln on the brain when it comes to intellectual property. There are just a few problems with this, with the first one being that Lincoln had almost nothing to do with intellectual property laws in this country. While he is the only president to hold a patent, he didn't do much with that patent, and during his administration there was no major legislative changes to either patent or copyright law. Thus, it's not at all clear why Eisner seems to repeatedly be crediting Lincoln with setting up our modern copyright and patent law.

As we've been discussing, that job fell to two other former Presidents: Thomas Jefferson and James Madison, who clearly understood that copyrights and patents had both positive and negative impacts -- and were worried that the negatives could outweigh the positives. Eisner, on the other hand, has proven beyond a shadow of a doubt that he's an absolutist: copyright should be ever strengthened and lengthened. It was, after all, under Eisner's watch that Walt Disney was the driving force behind the Bono Copyright Extension Act, designed solely to protect the copyright on Mickey Mouse for even longer. Apparently, since Eisner's history lesson on copyright and patents only goes back to Lincoln, he's not aware of the "for a limited time" part that's in the Constitution.

Furthermore, Eisner seems to have a total blind spot to the fact that much of Walt Disney's success was due to its widespread use of stories and concepts from the public domain (the very public domain he doesn't seem to want to exist any more). Even the beloved Mickey Mouse was originally a concept copied from a popular movie (which was still under copyright at the time Disney copied it). Eisner is no longer at Disney, but it's not a stretch to suggest that a big part of Disney's troubles, leading to his own ouster, had to do with his inability to adapt to the changing times and changing marketplace that wasn't so reliant on artificial scarcities.

The history of intellectual property is fascinating and long, but Abraham Lincoln barely deserves a footnote in it. If Eisner wants the full story, we're more than willing to educate him -- though, since he's such a believer in the idea that information requires property rights, I'm guessing he'd be appalled if we just gave them away. So, Mr. Eisner, if you'd like to pay for a lesson on the history of intellectual property, we're willing to sell one to you. To entice you, we'll even throw in an explanation for why it's also incorrect to claim that intellectual property laws separated the US from the rest of the world (and will even show examples of how the US actively ignored IP rights for many years in order to build up certain industries, including -- believe it or not -- the entertainment industry).

Filed Under: abraham lincoln, copyright, history, james madison, michael eisner, patents, thomas jefferson
Companies: disney

A Little History Lesson On How The Recording Industry Works

from the an-inside-view dept

Jon writes in to tell us about an opinion piece from The Guardian written by Simon Napier-Bell -- a manager for some big name rock bands, including the Yardbirds and Wham! -- giving his historical analysis of how the recording industry killed itself. He notes that it's somewhat systemic. He goes through example after example that shows that the recording industry never recognized that it was in the business of selling everything having to do with the musician, and always through it was just in the business of distribution. He details, in no uncertain terms, the gangster mentality (and connections) of recording industry execs, that were much more focused on exploiting musicians rather than helping them. He digs somewhat into the economics covered by Courtney Love and others. Much of this has been stated elsewhere, but it's yet another reminder that recording industry execs are lying when they talk about how their main focus is to "help artists." If that were true, there were tons of things that the industry would have and should have done differently over the past decade. He also recognizes that there is a place for record labels, but it's a very different one than in the past, and it needs to be focused on selling the scarce goods related to the music, rather than just trying to sell the music itself.

Filed Under: history, recording industry, riaa, simon napier-bell

Once Again: The Great Inventors Often Were Neither Great, Nor Inventors

from the revisiting-history dept

For many years, we've tried to argue how important it is to understand the difference between innovation and invention. While it may seem like a minor point of semantics, it actually plays quite heavily into the debate over the patent system. Invention is the process of coming up with something new. Innovation is taking that something new and successfully bringing it to market in a way people want. A quote I've heard a few times sums it up thusly: "Invention is turning money into ideas. Innovation is turning ideas into money." If you look at the true history of major breakthroughs, you'll quickly learn that invention is fairly meaningless -- and the important point is the innovation. In fact, if you look at all the "great inventors" championed by American history, you'll quickly realize that most weren't great inventors at all, but rather innovators, who later (often through questionable means) took credit as the inventors they never were. Even though those who actually are familiar with the history of these products know this already, it's still nice to see these false stories of invention getting more exposure.

Last year, there was a book showing how Thomas Edison wasn't the great inventor he claimed to be. Now, there's a new book suggesting not only was Alexander Graham Bell not the great inventor many hold him up to be, but the famous story of him rushing to the patent office to beat Elisha Gray's patent filing by mere hours may hide the fact that Bell actually cheated the system with the help of a corrupt patent examiner, who shared Gray's filing with Bell and then helped make it appear that Bell's filing came first. While this should raise even more questions about why either man was able to get a patent on an idea that was getting plenty of attention from many sources, and thus should have been considered obvious, it also adds to the list of "great inventors" who really did very little inventing.

The reason this is so important is that a patent system really only makes sense if it's the invention part that's important and that invention is basically the pinnacle of advancement in the space. Instead, if it's innovation that's more important, and innovation is an ongoing process that is sped along by competition, then there is little reason to have a patent system at all. Those who hold up Edison, Bell, the Wright Brothers and others as examples of why the patent system should exist are pointing to the wrong role models. The more detailed you look at their records you realize that both men cheated -- and used the patent system not to help protect "inventions," but to get monopolies that kept out real competition, slowed down true innovation and built up unfair monopolies they didn't deserve.

Filed Under: alexander graham bell, elisha gray, history, innovation, inventors, thomas edison