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  • Regulate Google, Facebook, and Twitter as Public Utilities? Bad Idea.

    Free markets can be hard. They might not produce outcomes you personally like. This is why we have such extensive literature on economic inequalitypublic goods, or merit goods, among other alleged market failings.

    Government provision or regulation is usually the proposed solution to these market failings. But advocates for free markets will point out that this cure is, in many cases, worse than the disease. Economics undergraduates will hear much in their classes about “market failure,” but the problem of “government failure” is at least as widespread.

    However, even for free-market advocates, it can be a tough principle to cling to when the market isn’t doing what they would like. For some, it is too tough. When faced with a market outcome they disapprove of, some embrace the very government intervention they usually oppose.

    A case in point is the Internet, specifically websites such as Twitter, Google, and Facebook. Many conservatives believe these companies are politically biased and are “censoring” conservative content in various ways or promoting their opponents. They propose increased government regulation of these companies. They are said to be “public utilities” that require the hand of government a little heavier on their shoulder than other businesses.

    Personally, I can readily believe these websites are biased and do discriminate against certain political views. But what should the government do about that? Should it do anything?

    Underlying this argument is the notion that public utilities are a class of producer apart from most others we leave to the discipline of the market. What sets public utility producers apart?

    Nothing. My old (1992) edition of the Penguin Dictionary of Economicsdefines a public utility as follows:

    An industry supplying basic public services to the market and possibly enjoying monopoly power. Usually, electricity, gas, telephones, postal services, water supply, and rail and often other forms of transport are regarded as public utilities. These services all require specialized capital equipment and elaborate organization.

    Capital is heterogeneous; it is all, to some degree, specialized. Is the capital required to produce automobiles more specialized than that required to produce postal services? Is the organization of a bus company really so much more elaborate than that of Amazon that it belongs in a different, more tightly regulated class of business? More useful is my old (1965) Everyman’s Dictionary of Economics definition:

    Public Utilities, groups of industries in a monopoly position supplying “essential” goods and services, subject to public regulation designed to ensure that they operate “in the public interest.” It is difficult to say which industries fall within this definition since what constitutes “the public interest” or “essential goods” is a matter of personal and political opinion.

    In an age where we can choose between countless different handsets and competing networks, where I can watch live English football on my phone while traveling through rural Minnesota, it might seem bizarre that telephones were once considered something that should be provided by the same people who brought us the Veterans Administration. At one time, even such a staunch advocate of free markets as Milton Friedman thought this. In the 1975 edition of his book An Economist’s Protest, he wrote that “there are some cases, of which telephone is probably one, where technical considerations enforce monopoly.”

    Why has our attitude toward telephones changed?

    Technological progress is part of the answer. This has changed the “technical considerations” Friedman cited back in 1975. There is no longer any technical argument that all telephone users need to be on one network that government is required to regulate.

    But the proximate cause is a change in regulation itself. In the 1920s and 1930s, government became concerned that “competition resulted in duplication of investment.” It stepped in to restrain such duplication by granting monopolies. In an attempt to safeguard the consumer from the effects of this intervention, government intervened again. The Communications Act of 1934 authorized the Federal Communications Commission “to impose service requirements priced at regulated rates. Any deviations in product or service required government approval, a laborious process then as now,” explained Diane S. Katz in a 2004 paper published by the Mackinac Center for Public Policy.

    This is how “AT&T secured its dominance over telephone service for decades to come, controlling more than 80 percent of all telephone lines and assuming family status as ‘Ma Bell.’” There was nothing “natural” about the monopoly—it was created by government regulation in the first place.

    And, when regulation changed, the monopoly it had created collapsed. As LiveMint has pointed out:

    The company’s monopoly was broken up in 1984, with the parent retaining long-distance telephony and the seven regional “Baby Bells” becoming de facto local monopolies providing local services. Long-distance services became heated with competition, with the entry of MCI and Sprint. Due to AT&T’s break-up, the charges that long-distance carriers had to pay regional Bells became transparent. Until 1984, these charges were opaque, and mother AT&T actually used to subsidize local calls. In fact, after the break-up, the local calls became more expensive, rising faster than the rate of inflation. This was also the period of the entry of VOIP (voice over Internet protocol) into telephony.

    As we look back at the saga of the AT&T break-up, it looks strange and archaic. That’s because the emergence of the Internet, the mobile phone and cable plus satellite television was mostly post 1984…

    Just as the monopoly in telephony was a consequence of government regulation, so, also, was the technical progress that makes such a mockery of the notion that telephony is a monopoly a consequence of deregulation.

    In contrast to the blunt instrument of government regulation, producers in free markets are regulated by competition and consumer tastes.

    Facebook, Google, and Twitter may look like monopolists requiring tighter government regulation now, but so did MySpace back in 2007.

    In February 2007, The Guardian asked: “Will MySpace ever lose its monopoly?” In April 2008, Facebook overtook MySpace in the Alexa rankings, and in 2009 Myspace lost half of its user base. As the example of telephony after 1984 demonstrates, if individuals and businesses are allowed to innovate in a free market, they will. For all the talk about “network effects,” “economies of scale,” or whatever else, MySpace’s vaunted “monopoly” was destroyed in a year by such innovation. In contrast, government regulation granted AT&T a monopoly and protected it.

    Facebook, Google, and Twitter may look like unbeatable monopolists requiring tighter government regulation now, but so did MySpace back in 2007. If Facebook’s potential competitors are allowed to innovate in a free market, they will. And, one day, perhaps Mark Zuckerberg will simply be an affectionate memory, like Tom of MySpace fame.

    Source: Regulate Google, Facebook, and Twitter as Public Utilities? Bad Idea. – Foundation for Economic Education

  • Border Security Overreach Continues: DHS Wants Social Media Login Information

    Now more than ever, it is apparent that U.S. Customs and Border Protection (CBP) and its parent agency, the Department of Homeland Security (DHS), are embarking on a broad campaign to invade the digital lives of innocent individuals.

    The new DHS secretary, John Kelly, told a congressional committee this week that the department may soon demand login information (usernames and passwords) for social media accounts from foreign visa applicants—at least those subject to the controversial executive order on terrorism and immigration—and those who don’t comply will be denied entry into the United States. This effort to access both public and private communications and associations is the latest move by a department that is overreaching its border security authority.

    In December 2016, DHS began asking another subset of foreign visitors, those from Visa Waiver Countries, for their social media handles. DHS defended itself by stating that not only would compliance be voluntary, the government only wanted to access publicly viewable social media posts: “If an applicant chooses to answer this question, DHS will have timely visibility of the publicly available information on those platforms, consistent with the privacy settings the applicant has set on the platforms.”

    As we wrote last fall in comments to DHS, even seeking the ability to view the public social media posts of international travelers implicates the universal human rights of free speech and privacy, and—importantly—the comparable constitutional rights of their American associates. Our objections are still salient given that DHS may soon mandate access to both public and private social media content and contacts of another group of foreigners visitors.

    Moreover, as a practical matter, such vetting is unlikely to weed out terrorists as they would surely scrub their social media accounts prior to seeking entry into the U.S.

    Such border security overreach doesn’t stop there.

    There have been several reports recently of CBP agents demanding access to social media information and digital devices of both American citizens and legal permanent residents. Most disturbing are the invasive searches of Americans’ cell phones, where CBP has been accessing social media apps that may reveal private posts and relationships, as well as emails, texts messages, browsing history, contact lists, photos—whatever is accessible via the phone.

    Such border searches of Americans’ digital devices and cloud content are unconstitutional absent individualized suspicion, specifically, a probable cause warrant. In light of the DHS secretary’s statements this week, we fear that DHS may soon take the next step down this invasive path and demand the login information for American travelers’ online accounts so that the government can peruse private, highly personal information without relying on access to a mobile device.

    Source: Border Security Overreach Continues: DHS Wants Social Media Login Information | Electronic Frontier Foundation

  • Fear Materialized: Border Agents Demand Social Media Data from Americans

    The Council on American-Islamic Relations (CAIR) recently filed complaints against U.S Customs and Border Protection (CBP) for, in part, demanding social media information from Muslim American citizens returning home from traveling abroad. According to CAIR, CBP accessed public posts by demanding social media handles, and potentially accessed private posts by demanding cell phone passcodes and perusing social media apps. And border agents allegedly physically abused one man who refused to hand over his unlocked phone.

    CBP recently began asking foreign visitors to the U.S. from Visa Waiver Countries for their social media identifiers. Last fall we filed our own comments opposing the policy, and joined two sets of coalition comments, one by the Center for Democracy & Technology and the other by the Brennan Center for Justice. Notably, CBP explained that it was only seeking publicly available social media data, “consistent with the privacy settings the applicant has set on the platforms.”

    We raised concerns that the policy would be extended to cover Americans and private data. It appears our fears have come true far faster than we expected. Specifically, we wrote:

    It would be a series of small steps for CBP to require all those seeking to enter the U.S.—both foreign visitors and U.S. citizens and residents returning home—to disclose their social media handles to investigate whether they might have become a threat to homeland security while abroad. Or CBP could subject both foreign visitors and U.S. persons to invasive device searches at ports of entry with the intent of easily accessing any and all cloud data; CBP could then access both public and private online data—not just social media content and contacts that may or may not be public (e.g., by perusing a smartphone’s Facebook app), but also other private communications and sensitive information such as health or financial status.

    We believe that the CBP practices against U.S. citizens alleged by CAIR violate the Constitution. Searching through Americans’ social media data and personal devices intrudes upon both First and Fourth Amendment rights.

    CBP’s 2009 policy on border searches of electronic devices is woefully out of date. It does not contemplate how accessing social media posts and other communications—whether public or private—creates chilling effects on freedom of speech, including the First Amendment right to speak anonymously, and the freedom of association.

    Nor does the policy recognize the significant privacy invasions of accessing private social media data and other cloud content that is not publicly viewable. In claiming that its program of screening the social media accounts of Visa Waiver Program visitors does not bypass privacy settings, CBP is paying more heed to the rights of foreigners than American citizens.

    Finally, the CBP policy does not address recent court decisions that limit the border search exception, which permits border agents to conduct “routine” searches without a warrant or individualized suspicion (contrary to the general Fourth Amendment rule requiring a warrant based on probable cause for government searches and seizures). These new legal rulings place greater Fourth Amendment restrictions on border searches of digital devices that contain highly personal information.

    As we recently explained:

    The U.S. Court of Appeals for the Ninth Circuit in U.S. v. Cotterman (2013) held that border agents needed to have reasonable suspicion—somewhere between no suspicion and probable cause—before they could conduct a “forensic” search, aided by sophisticated software, of the defendant’s laptop….

    The Supreme Court held in Riley v. California (2014) that the police may not invoke another exception to the warrant requirement, the search-incident-to-arrest exception, to search a cell phone possessed by an arrestee—instead, the government needs a probable cause warrant. The Court stated, “Our holding, of course, is not that the information on a cell phone is immune from search; it is instead that a warrant is generally required before such a search, even when a cell phone is seized incident to arrest.”

    Although Riley was not a border search case, the Riley rule should apply at the border, too. Thus, CBP agents should be required to obtain a probable cause warrant before searching a cell phone or similar digital device.

    Both Riley and Cotterman recognized that the weighty privacy interests in digital devices are even weightier when law enforcement officials use these devices to search cloud content. A digital device is not an ordinary “effect” akin to a piece of luggage or wallet, but rather is a portal into an individual’s entire life, much of which is online.

    The Ninth Circuit wrote:

    With the ubiquity of cloud computing, the government’s reach into private data becomes even more problematic. In the “cloud,” a user’s data, including the same kind of highly sensitive data one would have in “papers” at home, is held on remote servers rather than on the device itself. The digital device is a conduit to retrieving information from the cloud, akin to the key to a safe deposit box. Notably, although the virtual “safe deposit box” does not itself cross the border, it may appear as a seamless part of the digital device when presented at the border.

    And the Supreme Court wrote:

    To further complicate the scope of the privacy interests at stake, the data a user views on many modern cell phones may not in fact be stored on the device itself. Treating a cell phone as a container whose contents may be searched incident to an arrest is a bit strained as an initial matter…. But the analogy crumbles entirely when a cell phone is used to access data located elsewhere, at the tap of a screen. That is what cell phones, with increasing frequency, are designed to do by taking advantage of “cloud computing.” Cloud computing is the capacity of Internet-connected devices to display data stored on remote servers rather than on the device itself. Cell phone users often may not know whether particular information is stored on the device or in the cloud, and it generally makes little difference.

    The Riley Court went on to state:

    The United States concedes that the search incident to arrest exception may not be stretched to cover a search of files accessed remotely—that is, a search of files stored in the cloud…. Such a search would be like finding a key in a suspect’s pocket and arguing that it allowed law enforcement to unlock and search a house.

    Thus, the border search exception also should not be “stretched to cover” social media or other cloud data, particularly that which is protected by privacy settings and thus not publicly viewable. In other words, a border search of a traveler’s cloud content is not “routine” and thus should not be allowed in the absence of individualized suspicion. Indeed, border agents should heed the final words of the unanimous Riley decision: “get a warrant.”

    We hope CBP will fully and fairly investigate CAIR’s grave allegations and provide a public explanation. We also urge the agency to change its outdated policy on border searches of electronic devices to comport with recent developments in case law. Americans should not fear having their entire digital lives unreasonably exposed to the scrutiny of the federal government simply because they travel abroad.

    Source: Fear Materialized: Border Agents Demand Social Media Data from Americans | Electronic Frontier Foundation