The AT&T Ruling Shows That U.S. Regulators Don’t Understand Media’s Present — or Future

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This week’s decision by U.S. District Judge Richard Leon to allow AT&T and Time Warner to complete their merger will bring to a close a deal that has been pending for almost two years.

In his blistering, 172-page decision, Judge Leon did much more than simply reject the government’s claim that combining two companies that do not compete with each other would harm consumers. He also made clear, as a matter of federal law, that the U.S. Justice Department’s view of a static media landscape is dead and buried.

“If there ever were an antitrust case where the parties had a dramatically different assessment of the current state of the relevant market and a fundamentally different vision of its future development,” Judge Leon began his decision, “this is the one.”

The judge was faced from the outset with a stark choice: Was the relevant

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GDPR and the End of the Internet’s Grand Bargain

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In May the European Union’s General Data Protection Regulation goes into effect, two years after passage by the European Parliament. This radical new privacy law, which covers any business that processes information about EU residents, will dramatically affect the way data is collected, stored, and used, including for U.S. companies doing business abroad.

In the U.S., lawmakers are now circling waters bloodied by revelations regarding potential abuse of Facebook’s social media data, with CEO Mark Zuckerberg scheduled to testify on Capitol Hill this week about the “use and protection of user data.” Facebook’s woes, following continued reports of major data breaches at other leading companies, have amplified calls for GDPR-like legislation in the U.S.

A Refresher on GDPR

For now, GDPR, which replaces previous EU mandates on data collection and use, differs significantly from U.S. law, pushing the two regions further

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How More Regulation for U.S. Tech Could Backfire

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If 2017 was the year that tech became a lightning rod for dissatisfaction over everything from the last U.S. presidential election to the possibility of a smartphone-driven dystopia, 2018 already looks to be that much worse.

Innovation and its discontents are nothing new, of course, going back at least to the 18th century, when Luddites physically attacked industrial looms. Hostility to the internet appeared the moment the Web became a commercial technology, threatening from the outset to upend traditional businesses and maybe even our deeply-embedded beliefs about family, society, and government. George Mason University’s Adam Thierer, reviewing a resurgence of books about the “existential threat” of disruptive innovation, has detailed what he calls a “techno-panic template” in how we react to disruptive innovations that don’t fit into familiar categories.

But with the proliferation of new products and their reach ever-deeper into our

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Why Mergers Like the AT&T-Time Warner Deal Should Go Through

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Recent leaked reports suggest trouble for the proposed merger of AT&T and Time Warner, an $85 billion deal first announced over a year ago. Last Wednesday, government sources claimed the Department of Justice’s antitrust division was demanding that AT&T sell Turner Broadcasting channels, including CNN, as a condition for approving the deal — and that AT&T had refused, setting up a possible court challenge.

Later stories reported it was AT&T that had offered to sell CNN. But CEO Randall Stephenson immediately denied both versions, and reiterated that the company will not let go of either CNN or the deal itself, pledging to fight the government if necessary.

Whatever the government actually plans to do about the merger, it will need to do it fast. Last Monday, AT&T exercised its right to complete the deal, giving the government less than a month to sue.

But if the government does

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The U.S. Supreme Court Is Reining in Patent Trolls, Which Is a Win for Innovation

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In the last week, the U.S. Supreme Court issued two important rulings limiting patent rights. The decisions, which were both unanimous, significantly scaled back the ability of patent holders to slow innovation by competitors, tipping scales that many legal scholars believe have become badly imbalanced. Taken together, the two cases will improve the innovation environment for companies in fast-changing industries. Consumers will get easier access to new products and fewer limits on those they already own. Why? In the last few decades, courts have both broadened the kinds of inventions for which patents can be granted and relaxed their oversight of what constitutes genuinely novel innovation. As a result, companies of all sizes are increasingly hindered in efforts to bring new products and services to market by patent holders claiming infringement of even trivial features. Startups, with limited resources and experience, are often at a significant disadvantage when it
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The Tangled Web of Net Neutrality and Regulation

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Net neutrality is a basic, but notoriously squishy, principle. It means that a broadband internet provider should not block, slow, or otherwise unfairly discriminate against any websites or online services. Despite being a simple idea, net neutrality has proven difficult to translate into U.S. policy. It sits uncomfortably at the intersection of highly technical internet architecture and equally complex principles of administrative law. Even the term “net neutrality” was coined not by an engineer but by a legal academic, in 2003.

Since Donald Trump’s election, the rhetoric surrounding net neutrality’s imminent demise has been frenzied. Every move by newly appointed Federal Communications Commission (FCC) chair Ajit Pai generates a chorus of consumer advocates bemoaning the death of neutrality and the “end of the internet as we know it.” Businesses and consumers are being warned that Republican lawmakers are united in their determination to not just modify the FCC’s

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The Right and Wrong Ways to Regulate Self-Driving Cars

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Self-driving, autonomous vehicles — a topic of speculation, if not science fiction, just five years ago — are suddenly going mainstream. Every major car manufacturer is offering prototypes or early models of cars that do most of the driving automatically, including luxury models from Tesla with a built-in “autopilot” feature. Startups and major tech companies, notably Alphabet’s Google X division, are investing heavily in smart car technology, as are network ride-sharing companies such as Uber and Lyft. This means self-driving cars have shifted from a period of wild experimentation directly to market adoption — what Paul Nunes and I describe in our 2013 HBR article as “big bang” disruption. Before long, we’ll stop referring to the underlying technologies involved — including lasers, radar, cameras, embedded sensors, and advanced machine learning software — in terms of what they’re replacing. “Self-driving” or “smart” cars will simply become whatever we call the next generation of transportation technology.
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U.S. Digital Infrastructure Needs More Private Investment

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There’s an urgent need to invest in America’s crumbling infrastructure. Even our politicians agree on that. As anyone who has driven a car, ridden a train, turned on the tap, or lost power during a minor storm can tell you, we’ve fallen desperately behind in maintenance, to say nothing of improvements. The latest “report card” from the American Society of Civil Engineers gives the U.S. an overall grade of D+ for everything from roads and bridges to water systems, ports, public transit, power grids, and schools, estimating that just making critical repairs would cost over $3.5 trillion. Our presidential hopefuls are making their cases on the matter. According to a recent article in the New York Times, Hillary Clinton plans to spend $250 billion to create a national infrastructure bank funded by increased corporate taxes. Donald Trump promises to double that amount, borrowing the necessary funds through government bonds.
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A Brief Review of Hillary Clinton’s Innovation Plan

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Late in June, presidential candidate Hillary Clinton surprised business leaders by issuing a detailed technology and innovation platform. Tech and business leaders should be taking note. The next person to win the White House will inevitably face a slew of important decisions about the future of the tech and startup sectors. Clinton’s plan may have been designed to deflect growing concern here in California (where I work) and other innovation hubs about criticism of the tech economy from the Obama administration and other Democrats on the left. Just a day after the plan was released, for example, Democratic Sen. Elizabeth Warren of Massachusetts attacked leading technology companies, including Apple, Amazon, and Google, hinting that they had grown too large to escape the blunt instrument of antitrust to break them up. But overall the Clinton agenda mixes unlikely promises for significantly increased federal spending in education, basic research, and infrastructure with
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The Downside of the FCC’s New Internet Privacy Rules

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There may soon be a new cop on the privacy beat — the Federal Communications Commission. Last month, the FCC issued a 150-page document proposing sweeping new rules and regulations for broadband Internet Service Providers (ISPs). But in my analysis, this is not good news for those who genuinely care about promoting consumer privacy. To understand why the FCC’s involvement would create more problems than it would solve, it helps to understand a massive shift in web security over the last few years: the overwhelmingly successful campaign to encrypt data flowing to and from consumers over the Internet. Encrypting data traffic ensures that information you send and receive can’t be decoded by anyone — including criminals, government snoops, and even the ISPs who provide your access to the internet. The latter group includes home and mobile broadband providers, and anyone — your cable provider or a coffee shop —
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The Business Implications of the EU-U.S. “Privacy Shield”

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Last week, the U.S. and EU announced a tentative agreement to allow U.S. companies to continue sending and receiving personal information about EU residents across EU borders — everything from an online employee directory for a multinational company to a Facebook profile stored in the cloud. An earlier agreement, known as the Safe Harbor Privacy Principles, which went back 15 years and was relied on by some 4,000 companies, was declared illegal last year based on concerns, highlighted by the Edward Snowden disclosures, that compliance with surveillance requests from U.S. government agencies, notably the NSA, may have put U.S. companies into conflict with the EU’s broadly written privacy directives. It’s entirely unclear, however, if the so-called “EU-U.S. Privacy Shield” will pass muster with EU authorities. Most of the changes add new but largely toothless restrictions, including expedited dispute resolution requirements, solely on private sector organizations. It will
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How to Understand the EU-U.S. Digital Divide

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After two decades of failed efforts to spur innovation and competition in Europe’s lagging communications sector, the European Commission has promised “an ambitious overhaul” next year as part of its far-reaching Digital Single Market initiative. Until now, the EU had hoped to drive down prices for DSL-based Internet services by forcing network providers to open their facilities at discounted prices to new entrants. But that policy came at the cost of badly degraded incentives for providers to invest in new technologies, leaving the EU with minimal cable Internet, fiber-optic networks, or high-speed mobile broadband. At least for voice services, the U.S. took a similar path in 1996, requiring local phone companies to “unbundle” their old networks at rates overseen by the Federal Communications Commission. Congress, however, wisely left the internet out of that experiment, letting fixed and mobile broadband access markets to develop largely on their own. As a
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How Europe Can Create Its Own Silicon Valley

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The EU has spent twenty years trying to create the kind of market conditions needed for explosive growth seen elsewhere in the digital economy. So far, nothing has worked. And Europe has tried most everything, the latest of which is EU President-elect Jean-Claude Juncker’s new framework. Of the 15 largest public Internet companies today, none are European. Eleven are U.S.-based, and the rest are Chinese companies. The problem is frequently reduced to a single question: How can Europe create its own Silicon Valley? Having lived and worked in Northern California since the beginning of the Internet revolution, I’ve been asked that same question regularly, both at home and abroad. My answer may surprise you: pass the right laws. Of course it’s true that certain prominent features of Valley life play a major role in California’s dominance, some by design and others by happy coincidence. First and foremost is the
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