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Technology

Coalition Warns Against Broadband Proposals

The Consumer Choice Center joined a coalition of consumer and tax advocacy organizations flagging concerning developments in the infrastructure bill negotiations. Price controls and rate regulation; dramatic expansion of executive brand and agency authority; and government-controlled internet should never be on the table.

You can read the letter below or click HERE for a full version:

July 23, 2021

RE: Broadband Infrastructure Spending

Dear Senators:

We write to you today over some concerning developments in the bipartisan infrastructure negotiations on broadband. We are guided by the principles of limited government and believe that the flaws in the infrastructure framework go well beyond the issues discussed here. Nonetheless, our present aim is to advocate specifically against proposals that would enact price controls, dramatically expand agency authority, and prioritize government-controlled internet. 

The infrastructure plan should not include rate regulation of broadband services. Congress should not authorize any federal or governmental body to set the price of any broadband offering. Even steps that open the door to rate regulation of broadband services will prove harmful in the long run.  

Nor should Congress continue to abdicate its oversight responsibilities to executive branch agencies like the National Telecommunications and Information Administration. Giving NTIA unchecked authority to modify or waive requirements, renders all guardrails placed by Congress meaningless. There must be oversight of the programs to ensure that taxpayer dollars go toward connecting more Americans to broadband as opposed to wasteful pet projects. 

Historically, attempts by NTIA to close the digital divide through discretionary grants have failed, leading to wasteful overbuilds, corruption, and improper expenditures. The American Recovery and Reinvestment Act of 2009 created the $4 billion Broadband Technology Opportunities Program (BTOP) grant program administered by NTIA. From 2009, when BTOP was instituted, to 2017, at least one-third of all the reports made by the Inspector General for the Department of Commerce were related to the BTOP program, and census data showed that the BTOP program had no positive effect on broadband adoption. And this was with only $4 billion in taxpayer dollars. We cannot afford to make the same mistake with much greater sums.

Legislation must be clear and not create ambiguities that are left to the whims of regulators. While “digital redlining” is unacceptable, the FCC should not be allowed to define the term however it sees fit and promulgate any regulations it thinks will solve problems—real or imagined. Doing so would give the agency carte blanche to regulate and micromanage broadband in any way it desires. This would be an egregious expansion of FCC authority. Moreover, definitions and regulations could change whenever party control of the agency changes, leading to a back-and-forth that creates uncertainty for consumers and businesses. 

Legitimate desire to ensure that low-income Americans have access to broadband infrastructure should not be used as a smokescreen to codify aspects of the recent Executive Order on Competition, which should not be included in any bipartisan infrastructure agreement. Republicans fought hard to support the FCC’s Restoring Internet Freedom Order. Any legislating on the functions and deployment of Internet technologies must move as a standalone bill through regular order with committee review. These questions are far too important to shoehorn into a massive bill without rigorous debate.   

Any funding for broadband buildout must target locations without any broadband connection first, and this should be determined by the Congressionally mandated FCC broadband maps. Congress has oversight over the FCC and the FCC has already conducted several reverse auctions. Reverse auctions get the most out of each taxpayer dollar towards closing the digital divide. Areas where there is already a commitment from a carrier to build out a network, should not be considered for grants, and the NTIA should not be able to override the FCC’s map to redefine “unserved” and subsidize duplicative builds.  

Government-controlled Internet should not be prioritized in any grant program. With few exceptions, government-owned networks (GONs) have been abject failures. For example, KentuckyWired is a 3,000-mile GON that was sold to taxpayers as a $350 million project that would be complete by spring of 2016. Those projections could not have been more wrong.   More than five years past the supposed completion date, fiber construction for KentuckyWired is still “in progress” in some parts of the state and a report from the state auditor has concluded that taxpayers will end up wasting a whopping $1.5 billion on this redundant “government owned network” over its 30-year life. NTIA should certainly not encourage these failures to be replicated.

We appreciate your work to help close the digital divide and agree that access to reliable internet is a priority, however we should not use this need to serve as a cover for unnecessary government expansion. Please feel free to reach out to any of the undersigned organizations or individuals should you have questions or comments. 

Regards,

Grover G. Norquist
President
Americans for Tax Reform

Jennifer Huddleston*
Director of Technology & Innovation Policy
American Action Forum

Phil Kerpen
President
American Commitment

Krisztina Pusok, Ph. D.
Director
American Consumer Institute
Center for Citizen Research

Brent Wm. Gardner
Chief Government Affairs Officer
Americans for Prosperity

Jeffrey Mazzella
President
Center for Individual Freedom

Andrew F. Quinlan
President
Center for Freedom and Prosperity

Jessica Melugin
Director Center for Technology and Innovation
Competitive Enterprise Institute

Matthew Kandrach
President
Consumer Action for a Strong Economy

Yaël Ossowski
Deputy Director
Consumer Choice Center

Roslyn Layton, PhD
Founder
China Tech Threat

Ashley Baker
Director of Public Policy
The Committee for Justice

Tom Schatz
President
Council for Citizens Against Government Waste

Katie McAuliffe
Executive Director
Digital Liberty

Annette Thompson Meeks
CEO
Freedom Foundation of Minnesota

Adam Brandon
President
FreedomWorks

George Landrith
President
Frontiers of Freedom

Garrett Bess
Vice President
Heritage Action for America

Carrie Lukas
President
Independent Women’s Forum

Heather Higgins
CEO
Independent Women’s Voice

Tom Giovanetti
President
Institute for Policy Innovation

Ted Bolema
Executive Director
Institute for the Study of Economic Growth

Seton Motley
President
Less Government

Zach Graves
Head of Policy
Lincoln Network

Matthew Gagnon
Chief Executive Officer
Maine Policy Institute

Matthew Nicaud
Tech Policy Specialist
Mississippi Center for Public Policy

Brandon Arnold
Executive Vice President
National Taxpayers Union

Tom Hebert
Executive Director
Open Competition Center

Ellen Weaver
President & CEO
Palmetto Promise Institute

Eric Peterson
Director
Pelican Center for Technology and Innovation

Lorenzo Montanari
Executive Director
Property Rights Alliance

Jeffrey Westling
Resident Fellow, Technology & Innovation Policy
R Street Institute

James L. Martin
Founder/Chairman
60 Plus Association

Saulius “Saul” Anuzis
President
60 Plus Association

David Williams
President
Taxpayers Protection Alliance

Dann Mead Smith
President
Washington Policy enter

Mark Harmsworth
Small Business Director
Washington Policy Center

5G lobbying through fake news

Keeping everyone safe is good… but preventing progress based on false information is bad for everyone.

Every technology generates some degree of scepticism. Whether it’s the discovery of electricity, the invention of the train, or the arrival of microwaves in our kitchen equipment, critical voices are asking important questions about safety. The 5G network is no exception. However, at some point, we have to accept the scientific results. Type “5G” and “health” into search engines. You will find several articles that cannot give you exact answers about the health implications of the network, but they do suggest several fatalistic scenarios.

The type of radiation involved in wireless communications is in the radio wave range, and these waves carry much less energy than ionising radiation, such as X-rays and cosmic rays, which can break chemical bonds in DNA and lead to cancer. In the US, the Federal Communications Commission (FCC) regulates the number of waves that can be emitted. The only known biological effect of radio frequencies is heating: your body temperature can rise under these conditions.

However, the existing limits are such that they avoid the risk of overheating. If the limits set by the current regulations are respected, there are no biological consequences. It should also be added that 5G frequencies are different from what is assumed in the media. Opponents of 5G technology claim that the technology’s high frequencies will make new phones and cell towers extraordinarily dangerous.

The truth is exactly the opposite, as scientists explain. The higher the radio frequency, the less it penetrates the human skin, reducing exposure to the body’s internal organs, including the brain.

So what is the point of the myths against 5G?

On the one hand, we have the general and regular scepticism of anti-progress environmentalists and anti-corporate conspiracists. Such opposition can never be refuted with scientific evidence. On the other hand, we are witnessing scepticism from the general population, organised through different mediums, including the Russia Today (RT) website. In the US, the New York Times explains that RT America is flooding social networks with anti-5G messages. The idea is to stop the US from making progress to the benefit of Russia.

Much more simply, misinformation is often to the benefit of certain competing companies. We saw this in the discussion on car connectivity – 5G versus wi-fi: manufacturers were lobbying Brussels to convince the EU to support one or the other. In July 2019, the German government published its position on these future technologies. It is preparing to support the use of wi-fi technology to link connected cars, arguing that 5G technology is not yet mature enough to deliver results. The document published by the German government states that “the industry should focus on technology that uses short-range, wi-fi-based signals”.

In response, some car manufacturers have come out in favour of the German government’s position, while others have argued that Berlin should support 5G technology instead.

The lobbying battle is being waged through traditional communication channels. At this level, a basis of verifiable facts must first be established in order to discuss on an equal basis of knowledge.

In the case of 5G, this debate will be crucial for Europe’s technological future.

Originally published here.

The Consumer Choice Center stands opposed to antitrust actions on innovative tech firms

Today, the Consumer Choice Center sent a letter to the members of the House Judiciary Committee to explain our opposition to a series of bills soon to be introduced on the House floors related to antitrust actions.

The full letter is below, and available in PDF form to share.

READ THE LETTER IN PDF FORM

Dear Member of the House Judiciary Committee,

As a consumer group, we write to you to raise your attention about a series of bills that will soon be introduced on the floor of the House and make their way to the House Judiciary Committee.

These bills, soon to be introduced by Democrats and co-sponsored by some Republicans, relate to antitrust actions to be taken against tech firms based in the United States.

These include the Merger Filing Fee Modernization Act, End Platform Monopolies Act, Platform Anti-Monopoly Act, Platform Competition and Opportunity Act, and Augmenting Compatibility and Competition by Enabling Service Switching Act.

In our view, these bills are not about concern for the consumer, the consumer welfare standard as traditionally understood in antitrust law, or even because companies like Amazon, Facebook, Twitter, and Microsoft are “too big.” 

Rather, these actions are a zealous takedown of American innovators that will harm consumers and punish innovation. This is a dangerous precedent.

Many of the tech companies in the crosshairs offer free or inexpensive services to consumers in a competitive marketplace that boasts hundreds of social apps for messaging, photo sharing, social networking, and online marketplaces that offer quick delivery, stellar service, and unbeatable prices.

As consumers of these services, we understand that there are often decisions made by these companies that raise concerns. For political conservatives, the issue hinges on whether there is bias in the moderation of accounts, comments, and products. For liberals, it is about whether these companies are too powerful or too big to be reined in by government, and questions about how they pay their taxes or whether various tech companies played a part in getting Donald Trump elected in 2016.

These are all valid concerns, and we have been active in calling them out where necessary.

However, using the power of the federal government to break up innovative American companies subject to domestic law, especially in the face of mounting competition from countries that are not liberal democracies, such as China, is wrong and will lead to even more unintended consequences.

The American people benefit from a competitive and free market for all goods, services, and networks we use online. Weaponizing our federal agencies to break up companies, especially when there is no demonstrated case of consumer harm, will chill innovation and stall our competitive edge as a country.

If there are breaches of data or if consumer privacy is compromised, the Federal Trade Commission should absolutely issue fines and other penalties. We agree with this. If there are egregious violations of law, they should be dealt with immediately and appropriately.

Let us be clear: The internet is the ultimate playground for consumer choice. Government attempts to intervene and regulate based on political considerations will only restrict consumer choice and deprive us of what we’ve thus far enjoyed.

The overwhelming majority of users are happy with online marketplaces and with their profiles on social platforms. They’re able to connect with friends and family around the world, and share images and posts that spark conversations. Millions of small businesses, artists, and even news websites are dependent on these platforms to make their living. This is an especially important point.

Using the force of government to break apart businesses because of particular stances or actions they’ve taken, all legal under current law, is highly vindictive and will restrict the ability for ordinary people like myself or millions of other consumers to enjoy the platforms for which we voluntarily signed up. 

We should hold these platforms accountable when they make mistakes, but not invite the federal government to determine which sites or platforms we can click on. The government’s role is not to pick winners and losers. It’s to ensure our rights to life, liberty, and pursuit of happiness, as the Declaration of Independence states. 

As such, when these bills come before you as legislators, we urge you, as a consumer advocacy group speaking for millions of people just like you around the country, to reject them. 

Sincerely Yours,

Yaël Ossowski

Deputy Director, Consumer Choice Center

yael@consumerchoicecenter.org

Biden’s broadband plan may hurt providers, consumers

It is no secret that access to reliable, high-speed internet is more important now than ever before, especially given how we spent this past year. We now rely heavily on virtual connections for school, work and perhaps a few never-ending Netflix marathons in an attempt to stay sane throughout lockdowns.

With a more online life, it’s not surprising that broadband usage increased 40% over the last year. Many suspect this level of demand for broadband will continue, but there are millions of individuals across the country who do not yet have access, including 368,000 rural Michigan households.

It’s estimated that there is over $2.5 billion in potential economic benefit that is lost among Michigan residents disconnected from the internet, making it clear that we need to find a solution to end this digital divide.

President Joe Biden recently proposed $100 billion to expand broadband through the American Jobs Plan. While this may seem like a worthy infrastructural investment to some, the fine print of the plan proposes lackluster solutions that create a stormy future for Michigan consumers.

A glaring issue is the prioritization of government-run broadband networks with “less pressure to turn profits and with a commitment to serving entire communities.” It’s well documented that these networks are ineffective 𑁋 a Phoenix Center study found that prices in markets with a municipal provider are higher than those in markets without one.

Michigan allows municipal broadband networks only in unserved or underserved areas and if their benefits outweigh the costs. However, local governments have been giving municipal networks advantages over private providers by providing subsidies and privileged regulatory treatment to showcase the illusion of compliance.

This happened recently in Marshall, and the results were dreadful. According to a report released by the Taxpayers Protection Alliance highlighting failed government-run broadband networks, Marshall’s fiber broadband network, called FiberNet, cost $3.1 million and serves only a fraction of its population. It’s worth noting that private broadband services are also available in Marshall.

Another key issue with Biden’s plan is that it exclusively prioritizes building out fiber broadband. While fiber may be a great option for some, it’s not always practical for rural communities due to the high costs and installation process required. Rural households can be located miles apart, and with fiber installation costing as high as $27,000/per mile, the estimated demand from rural communities often does not offset the costs of building fiber networks in those areas.

Innovative solutions like Elon Musk’s Starlink project, which aims to provide low-cost satellite broadband internet access across the globe, should be encouraged. By the end of this year, there will be over 1,000 satellites providing internet to more than 10,000 customers worldwide through Starlink. This is an exciting development because satellite networks are often cheaper, more efficient and can provide faster speeds to rural households than fiber.

The final major issue with Biden’s plan is that it vows to get America to 100% broadband coverage, but this doesn’t take into account all consumer preferences. According to Pew Research, 15% of Americans rely on smartphones and don’t have broadband services. Although it’s not certain as to why, one potential reason is the frequency of free Wi-Fi available in many public spaces which may result in some households opting out of paying for broadband.

To help Michigan live up to its full economic potential, it’s crucial that we get the 368,000 rural households access to high speed internet quickly. The state should embrace private internet service providers, practice technology neutrality by not favoring one broadband type over another and encourage more innovations that benefit consumers.

Originally published here.

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Biden’s $100 Billion Push for Broadband Equity Is No Panacea

In our pandemic age, high-speed internet has become a necessity. Whether paying utility bills, logging in for school, or sending job applications, the transition from paper and pen to browsers and email has been swift.

It makes sense that President Joe Biden and the Democratic majority in Congress want major investments in internet development.

“A chicken in every pot, a broadband connection in every home,” to use an FDR-ism.

As part of the American Jobs Plan, the Biden administration wants $100 billion to bring “affordable, reliable, high-speed broadband to every American.” A similar bill introduced by Rep. Frank Pallone (D-N.J.) seeks $109 billion for more rural connections, municipal internet service providers, and technology training for seniors.

It is true that a “digital divide” exists in our country; many populated areas of the country have a rich competition of internet providers and higher speeds while rural and tribal lands are lacking in options.

And while there is a noble push for broadband “equity”, the reality is billions in spending and centralization of policy don’t address the real problems and won’t deliver as promised.

There are thousands of different rules between municipalities and states overseeing internet infrastructure that serve as a barrier to getting more Americans connected.

A 2018 study by the Federal Communications Commission on state and local regulatory burdens found over 700 individual examples of laws and statutes that hamstring internet providers before they even connect one home.

These include ambiguity on application processes, high permit fees for networks, slow approval, burdensome rules, and more.

With a complex regulatory environment and uncertainty on whether projects will even be approved, it is easy to see why hurdles exist.

In a congressional subcommittee hearing in Washington earlier this month, witnesses argued federal funds to deploy broadband, or even empowering municipalities to start their own internet companies, would be most impactful.

But that stands against the evidence on municipal networks and changing trends in the telecom space.

A 2017 study from the University of Pennsylvania found local government internet utilities are entirely too expensive to maintain and that some will take decades to recover their initial costs. In many cases, municipal fiber projects led to municipal defaults and the need to raise taxes and bonds to offset costs.

The Taxpayers Protection Alliance maintains an active list of every failed municipal broadband network in the country, and it grows by the month.

The main assumption of these billion-dollar broadband plans is that we should use our resources to focus exclusively on broadband fiber connections while avoiding investment in mobile and satellite networks that are vastly cheaper, more efficient, and provide fast speeds.

Elon Musk’s SpaceX recently launched an additional 60 satellites for his Starlink project, which aims to provide low-cost satellite broadband internet across the world. By the end of 2021, there will be 1,000 satellites providing internet to over 10,000 customers worldwide, accessing download speeds of up to 300 megabits per second, above and beyond the FCC minimum of 25 megabits per second.

Rather than put all our resources in wired broadband connections, the government should practice technology neutrality – not favoring one technology over any other. That is the smartest way to provide coverage to every American.

For instance, 15 percent of Americans rely on smartphones for their internet and do not have broadband at home, according to Pew Research. That is equally split between urban and rural regions of the country. Whether that is because no broadband options exist, or because consumers prefer mobile internet, however, is not clear.

But what is clear is that as mobile networks expand and speeds improve, as they have done for the last decade, and we continue to expand fiber and satellite options, more Americans will be connected to faster and better internet. However, in order to do that, we need the power of private investment, clear regulatory rules, and the removal of red tape.

If our goal is broadband equity, we need every solution available, not just those cooked up in Washington.

Originally published here.

INTERVIEW: Jennifer Huddleston on the Way Forward on Consumer Privacy

INTERVIEW: Jennifer Huddleston (@jrhuddles) on Consumer Choice Radio

-Do we need a federal privacy law?

-There are innovative practices used by private companies. We should celebrate them.

-Why GDPR is so problematic

-The “Techlash” and the bad policy ideas from both left and right

-Data silos and how to maintain consumer privacy and innovation

-Errors of state-level privacy laws

Jennifer Huddleston is the Director of Technology and Innovation Policy at the American Action Forum. 

Is this North Carolina Congressman hawking Bitcoin?

Sometime last week, Neeraj K. Agrawal, the communications director for the DC-based cryptocurrency think tank Coin Center, tweeted a link to an empty website: whitehouse.gov/bitcoin.pdf.

The idea he was trying to convey, in Internet speak, is that hopefully, one day we can look forward to the day when the Bitcoin whitepaper would be hosted on the White House’s website.

That would signal that the executive branch has endorsed elements of the cryptocurrency, and hosted the fundamental founding document to build confidence in the government using Bitcoin as a unit of currency.

That’s futuristic, crypto-fueled optimism that was nothing but a cheeky tweet in that moment.

Taking that to the next level, tech investor and entrepreneur Balaji Srinivasan put forward a challenge: which forward-thinking country or US state would host the Bitcoin white paper on their main domain?

Enter North Carolina Congressman Patrick McHenry.

U.S. Rep. Patrick McHenry (R-NC)

Hailing from Gastonia, a town I once worked in as a newspaper reporter, McHenry represents the 10th district in the northwestern part of the state, home to NASCAR drivers, the mighty Catawba River, and stretching to the stunning Blue Ridge Mountains.

He once represented part of Gaston County in the State House and was later elected to Congress as one of the youngest congressmen in 2004.

As the ranking member on the Financial Services Committee, McHenry has often been involved in regulatory debates and discussions on cryptocurrencies and financial projects, including Facebook’s Libra project.

At least in previous statements and letters, McHenry usually joined hands with his Democratic colleagues to oppose any competition to the US dollar, as we’ve noted in past press releases.

However, it seems McHenry is changing his tune on the future of innovation in the cryptocurrency space.

On Wednesday, he took on the challenge originally posted by Agrawal and followed by Srinivasan: he posted the Bitcoin whitepaper to his own website.

Not only that, but he stated that “policymakers should be on the side of innovation and ingenuity, which are vital to American competitiveness,” and urged his colleagues to join him.

Is this North Carolina Republican Congressman hawking Bitcoin? It seems the answer is yes.

Looking into it more, he’s grown more bullish on Bitcoin and tech-related financial services in the last two years and even clarified his position on why projects like Libra do not represent a true cryptocurrency.

Appearing on series of podcasts, including one with fellow Republican Congressman Dan Crenshaw, McHenry has been more vocal on why Bitcoin’s technology is like nothing before, and in fact, represents the future of financial and digital services.

And top it off — he posted the Bitcoin whitepaper on the congressional web server!

If McHenry’s statements are true, and if he is using his position as a Financial Services committee member to advance those ideas, I think we may have a consumer champion congressman to follow in the next two years.

As a fellow North Carolinian and advocate for consumer-friendly policies, I have been critical toward McHenry’s various positions in the past, specifically on legitimizing financial services for cannabis-related companies.

I believe the exact tagline I used was “The North Carolina Republican singlehandedly blocking progress on cannabis banking“.

Obviously, McHenry’s ideas and policies are more nuanced and deserve a closer look. I look forward to him expounding on that much more. So while we may not agree on cannabis banking, there still could be much to agree on with the congressman.

If more politicians in DC and various statehouses approached this issue like McHenry, perhaps our governments would be better vehicles for fostering innovation and helping grow consumer choice.

Kudos to you, Rep. McHenry.

Yaël Ossowski is deputy director of the Consumer Choice Center

Consumer Choice Center joins group pushing back on breaking up U.S. tech companies

On January 21, the first full day of President Joe Biden’s administration, the Consumer Choice Center joined a coalition of taxpayer and consumer groups in calling on members of Congress to avoid using antitrust to break up tech firms.

Dear Leader McConnell, Leader McCarthy, and Republican Members of Congress:

On behalf of the undersigned organizations, representing taxpayers, consumers, and free market advocates across the nation, we write in strong opposition to proposals from across the ideological spectrum to change substantive antitrust standards that encourage courts to break up and destroy American technology companies. While we sometimes are concerned with the actions of these companies, as long-time supporters of free markets and free expression, we are troubled to see that some fellow conservatives would try to use the sledgehammer of big government to attack companies they may disagree with on a political or ideological basis.

This is a divisive period in our nation’s history, and with the democratization of news and information many policymakers are asking tough questions about the role technology plays in modern society. Congress may decide to legislate in the near future on matters like online consumer protection, data privacy, content moderation, and more. Regardless of what bills lawmakers introduce in the coming months — or what regulations or lawsuits are introduced by a new administration — our organizations firmly believe that the courts, not Congress, should determine whether America’s most successful companies have violated the antitrust laws. Congress should not change substantive laws to address political or ideological concerns about the companies in question. This is also the wrong message to send to entrepreneurs who are actively working to provide Americans with competitive alternatives to today’s household names.

In the past, conservatives and free market advocates agreed that the powers of the federal government are too great, and the societal and economic benefits of emerging technologies too strong, for true advocates of limited government to support politically-motivated efforts to tear apart successful firms simply because they’re big or for any number of other arbitrary reasons. These companies provide valuable services to hundreds of millions of American and global consumers. That assumption has now been challenged by recent “conservative” calls to “demand the breakup” of major technology companies. As policymakers face a White House and Congress controlled by one party for the next two years, it is imperative to avoid setting a precedent that companies who do not abide by the norms and rules of the governing party find themselves in the crosshairs of vindictive punishment down the road.

Therefore, it is worth reiterating to our allies in Congress and our colleagues throughout civil society: antitrust enforcement should never be used as a political or ideological tool. Instead, antitrust regulators and lawmakers should adhere to the prudent, decades-old consumer welfare standard, which has long been a ‘north star’ for antitrust enforcement and that — when properly applied — allows free-market economies to innovate and thrive.

Thank you for your consideration, and should you like to discuss these matters further we are at your disposal.

Sincerely,

National Taxpayers Union

Taxpayers Protection Alliance

ALEC Action

American Consumer Institute

Americans for Prosperity

Center for Freedom and Prosperity

Competitive Enterprise Institute

Consumer Choice Center

FreedomWorks

Libertas Institute

Lone Star Policy Institute

Market Institute

NetChoice

R Street Institute

Small Business & Entrepreneurship Council

TechFreedom

READ THE LETTER HERE

Twitter Ban shows that the free market works

Big tech’s conservative purge will lead to stricter regulations.

Earlier this month, Twitter banned the personal account of Donald J. Trump (@realdonaldtrump) and at the same time limited the official White House account, leaving the President of the United States unable to directly communicate with the nation and its voters on the platform. 

For many conservatives, the move to ban Trump from Twitter after the Capitol riots on January 7, was an assault on freedom of speech and since then, many leaders around the world have also condemned how Twitter handled the situation. 

German Chancellor Angela Merkel was critical of Twitter for blocking President Donald Trump’s account, considering the ban a threat to free speech. The European commissioner Thierry Breton saw Twitter’s decision as a total break from the past, calling it “the 9/11 moment of social media” in an op-ed published by Politico. Acting Australian Prime Minister Michael McCormack said blocking Trump amounts to censorship. And the French Junior Minister for European Union Affairs Clement Beaune said to Bloomberg that “This should be decided by citizens, not by a CEO.”

Other social media platforms such as Facebook, Instagram, Snapchat, TikTok, and YouTube followed Twitter’s lead and now Trump is banned from virtually every major platform out there, mostly indefinitely. Those who approve of Twitter’s ban of Donald Trump and the purge of thousands of conservative accounts on the platform, like to invoke the mantra that if conservatives think they have been “shut down”, they should also find comfort in the fact that the free market will provide an alternative and competition. However, it’s not that simple.

Social media platforms enjoy a great privilege that not many other companies or sectors do. They make their own rules under their Terms of Service and have total control of their platforms. This extreme power makes it hard for users and companies who feel that they have been unfairly treated to have a diligent due process review of their claims. With nowhere to go to have their voices heard, one last line of defence still stands and stronger than ever: the market.

After the ban of Donald Trump’s accounts, which had over 80 million followers on Twitter, some consumers started to ditch the social media platforms and services that they believe were censoring and targeting conservative speech. Many well known political accounts, such as James Woods reportedly lost over 7 thousand followers in 48 hours and the Heritage Foundation, a conservative think tank, lost 45,000 followers. Even more centrist political accounts as Dave Rubin reported a drop of over 35 thousand followers on Twitter. Republican lawmakers also lost thousands of followers. According to USA Today, about 42% of the accounts – 213 – had fewer followers on Jan. 13 than they did on Jan. 6. The vast majority of those accounts –200 – belonged to Republicans. As a result, the next week, Twitter stocks plummeted more than 10%. Facebook fell 4% to $256.84, Alphabet stock was down 2.2% to $1,766.72, and Amazon stock dropped 2.2%, to $3,114.21.

The market reacted this way because large tech companies are alienating users by directly excluding accounts and because people are simply leaving the platforms all together for alternatives such as Gab and Rumble. Parler was a popular alternative for Twitter but was wiped off the internet last week after both Apple and Google remove the app from their stores and Amazon decided not to host the website on their AWS servers. 

Most of today’s social media platforms are free because they collect data about their users every day, from location to website searches, even fingerprinting all your devices. Those pieces of information are sold to advertisers who cater to your interests.  As we have written, this practice is both innovative and helps support the social media networks we use. However, the business model is not sustainable if tech companies are not able to gather updated information about their users, or worse, if the consumers the advertisers are looking to reach are not on their platforms anymore. 

Twitter CEO Jack Dorsey, whose company’s share plumed the most this week, seems to have realized this the hard way. His strategy may have backlashed as now, millions of conservative consumers are out on the internet, without a home, and desperately looking for a new place to be heard and speak freely. He acknowledged last week that banning Trump from Twitter “sets a precedent I feel is dangerous: the power an individual or corporation has over a part of the global public conversation.”

Tech companies should be aware that even though they enjoy a privileged position now, this might not last for long. The European Commission, for example, has introduced two proposals that would place more restraints on digital giants. The first, is the Digital Markets Act, the centerpiece of Europe’s digital plans aimed at boosting online competition in a world dominated by Silicon Valley. The second is the Digital Services Act aimed to limit the spread of illegal content and goods online, making online platforms responsible for the spread of such content. Other countries might also try to regulate digital services in a way that would be prejudicial to tech companies and most importantly, to consumer choice. Poland, for instance, plans to make censoring of social media accounts illegal: “algorithms or the owners of corporate giants should not decide which views are right and which are not,” wrote the prime minister, Mateusz Morawiecki on Facebook last week.

For now, a free market is still the most powerful way in which consumers can have a voice and make their choices clear. This might change in the future, but it’s comforting to know that even when governments fail, consumers and private companies can count on the power of supply and demand. And if you ask me, I wouldn’t change it for anything else.

Follow me on Twitter or LinkedIn

Originally published here.

Facebook Breakup will harm consumers

Breaking up and regulating tech companies will harm consumers, not serve them.

The recent uptick in downloads of privacy-focused messaging apps such as Signal and Telegram is a great testament to the power of consumer choice in the digital sphere. It should deal a heavy blow to the attempts of breaking up or regulating WhatsApp’s parent company Facebook as the market is quite evidently not dominated by one monopoly. Moreover, intrusion into private companies will ultimately result in stifling consumer choice, and thus, should be abstained from.

Today’s consumers and developers have far greater power than ever before. No company is spared from the continuous battle over users as switching to a competitor in the tech world takes a few clicks and an app store. A great number of tools and services are at constant disposal for anyone, who is looking for a better solution to his individual problem.

Given these market dynamics, app creators are incentivised to create solutions for every niche problem to satisfy their target user group, compete in a global market, and scale their solution worldwide. Some apps may access your data to provide a better service by analysing usage patterns. Others may protect your privacy but compromise on another feature. The ability to choose between these options (or to use both for different use cases!) constitutes a consumer choice paradise rather than a monopoly worth regulating.

Furthermore, interfering in markets by breaking up companies or regulating them seldom comes at no cost. Any infringement harms innovation and reduces investment.

Facebook, for instance, purchased Instagram and WhatsApp for $1 billion and $19 billion, respectively. Although both had an existing user base, neither was generating large sums of revenue before being taken over. There is simply no telling if without investments in innovation from their new parent company, those services would have generated any long term profits and delivered the services to their users that they love today.

Retroactively, turning back the clock would set a dangerous precedent for any company that wants to invest in creating superior experiences for their user-base and show that no investment is safe from regulators. The price for innovating to enrich all of our lives would be an uncertain return on investment. The ultimate victim of over-regulating a naturally liberal market: consumers.

Fears of harming innovation as a consequence of overzealous regulators are not purely theoretical. The effort to split Microsoft’s software and operating system from another in the early 2000s did little to liberate markets. Rather, it inhibited the company that developed the most popular operating system from innovating by dragging them into the courtroom for pre-installing the Internet Explorer on Windows machines.

In the end, no regulators were necessary to decide on behalf of consumers. As more browsers naturally emerged, consumers replaced Internet Explorer as the most popular browser regardless of it being delivered out of the box. However, there is no telling how much damage has been done to Microsoft and users alike by the regulatory efforts to destroy a company simply because of its success.

Today’s efforts even go beyond break up fantasies. Another favoured approach by lawmakers across the globe is imposing interoperability, ordering messaging services to communicate with each other to lower barriers of entry. On first sight, the idea makes sense: let users choose their preferred service and allow them to communicate with anyone regardless of their preferred option. Unfortunately however, interoperability will also only harm consumers.

Interoperability necessitates common standards. Emails for example are interoperable as you can communicate with anyone regardless of their provider. The standard may have been the gold standard a few decades ago. But by today’s standards emails are not secure, they are not user friendly, and there have been no significant improvements to the protocols for decades. Similarly, text messages are interoperable, which is hardly a plus as they are simply inferior to messaging apps. 

Absent any regulation, developers can tailor these apps to their users, introduce new features, and innovate to win users. This liberty to innovate is why freely available apps provide the safest way to communicate that has ever existed by superior encryption standards. It also allowed millions of users to switch to an alternative app last week, seeking conditions that are not standardised by law and more applicable to them.

Any governmental effort to define these encryption standards, as would be necessary to allow for interoperability, would also make it easier to break these privacy seals that consumers desperately desire.  Lawmakers need to understand that their actions are not providing value to consumers. Neither breaking up so-called monopolies nor imposing arbitrary regulations is in the interest of their people. Consumers are more than capable of making their own choices. Millions of them have done so in the past week as they did not agree with a new policy imposed on them by WhatsApp.

Kya Shoar is a Digital and Tech Fellow at the Consumer Choice Center.

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