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Republicans Disagree Over Whether to Break Up Big Tech

Some Republicans — like senators Marsha Blackburn (R-Tenn.), Josh Hawley (R-Mo.) and Ted Cruz (R-Texas) — are outspoken over problems they see with Big Tech, but others aren’t so sure using antitrust enforcement against Facebook and Google is a good idea.

“Google is bigger now than Standard Oil was when it was broken up,” Cruz said at a Senate Judiciary Committee hearing Tuesday.

Senators Lindsey Graham (R-S.C.) and Mike Lee (R-Utah), meanwhile, pushed back on proposals to break up Silicon Valley heavyweights.

In response to multiple witnesses describing Big Tech’s anticompetitive practices, Graham said, “Well my job is to make sure we have a viable industry after all this is over.”

Witness Brian O’Kelley, founder and former CEO of AppNexus (an advertising platform bought by AT&T), told Graham and the committee members that Big Tech companies have gotten really good at fooling consumers into thinking they have a choice to opt out of sharing their personal information when using an online service.

“Everyone has become pretty used to clicking ‘yes’ [to Terms and Conditions], and I worry that’s the illusion of choice, but not real choice,” he said.

But Graham didn’t buy O’Kelley’s argument.

“You agree that no choice is bad?” he asked.

“If you gave me the choice of being robbed when I walk out of here today, I’m going to say no,” O’Kelley explained. “Why don’t we make robbery illegal?”

To which Graham replied: “Whatever.”

Lee suggested maybe privacy advocates exaggerate privacy concerns and abuses by arguing that private companies misusing data isn’t as bad as governments misusing data. He also pointed out that companies like Google and Facebook created products that consumers want — so why should regulators break them up?

“In the absence of anticompetitive conduct, is there anything about that that amounts to an antitrust violation?” he asked.

One witness, Freshfields Bruckhaus Deringer LLP Counsel Jan Rybnicek, thinks Big Tech isn’t harming consumers — and that breaking up Big Tech will harm them.

“Not only is this proposal putting the cart before the horse as no clear market failure has yet been identified, but the solution itself is unworkable,” he said. “The proposal may sound simple in theory but it is anything but that in practice. For one, it is not clear exactly what these companies would be broken up into and how they would operate afterwards. …In recent years there have been calls to dramatically reshape the antitrust laws to address what critics perceive to be an under-enforcement problem, including with respect to digital platforms and digital advertising.”

But Yale University’s Professor of Economics Fiona Scott Morton said there is an overwhelming amount of economic research and evidence that build a strong antitrust case against Big Tech companies like Amazon, Google and Facebook.

The problem isn’t how big the tech companies are, she said, but how they’ve suppressed and snuffed out competition in the advertising market to establish dominance and limit consumer choice.

“If there were more competition in the marketplace, we wouldn’t be so concerned about this problem,” she said.

O’Kelley told the committee that over the past 20 years, the biggest tech companies (like Google and Facebook) have used anticompetitive practices and manipulated regulatory policies to widen profit margins.

O’Kelley and Morton both reminded the committee that consumer harms, like privacy abuses, are just a symptom of anticompetitive behavior. Antitrust isn’t about “bigness,” and it isn’t about breaking up companies just because they’ve harmed consumers.

“The biggest loophole right now is advertising-supported companies seem to be free to consumers, so if we only look at the consumer price, you can do any advertising-based merger [or acquisition],” O’Kelley said, “and if you’re Facebook and Google, you can acquire hundreds of companies and see no antitrust enforcement.”

Hawley said it seems more online startups put money towards advertising dollars to work with Google’s and Facebook’s algorithms rather than toward the products they’re developing, which suggests Google and Facebook control the ad market.

According to O’Kelley, Google’s prioritization of its own in-house products and the ad market forced him to sell AppNexus to AT&T.

“They had so many different pieces to compete, that we could not compete,” he said. “Waiting for regulators to catch up, I had to sell my company. We have to figure out how to keep different businesses separate, Google can’t share data across them. YouTube should be open to any advertising platform. There search data should be available to any platform or no platform. I think that’s a very clear way to break them up or force them to act fairly.”

Despite Graham’s and Lee’s skepticism towards antitrust, enough Republicans are on board with antitrust that they might help push an update to antitrust law — like the one introduced by Sen. Amy Klobuchar (D-Minn.).

Sen. Richard Blumenthal (D-Conn.) said he thinks regulators and lawmakers should deal with Big Tech in two ways: first through antitrust enforcement to address the underlying anti-competitive behaviors, and secondly through a federal privacy law to deal with some of the effects of those anticompetitive behaviors.

“It’s not against the law to be big, it’s against the law to use that power in a predatory way, which is what they have done, by buying out innovators, suffocating competition, by controlling the ecosystem,” he said at Tuesday’s hearing. “We need both antitrust enforcement and new privacy protection. We need them both. I think antitrust enforcement has an enormously important effect, I saw it myself in Microsoft litigation that I was instrumental in bringing. I think the same is true here.”

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Congress Pitches New Cybersec Rules, Consumer Protections for ‘Data Brokers’ Like Equifax

Senate Democrats pitched new legislation this week to lay strict cybersecurity requirements on companies handling sensitive consumer data like Equifax, and new rules to hold them accountable when they’re negligent.

Lawmakers want to tackle damaging hacks of consumer information like the recent Equifax breach with the Data Broker Accountability and Transparency Act. The law targets “data brokers” like Equifax collecting and selling sensitive consumer data and would give consumers the power to stop companies from using, sharing, or selling their information for marketing purposes.

The law puts new privacy and security standards in place for data brokers and requires notifying consumers in the event of a breach like the one at Equifax (the company took six weeks before announcing the Social Security numbers, birth dates, and home addresses for 143 million Americans, along with driver’s license numbers, 209,000 credit card numbers, and 182,000 credit dispute documents were taken).

If adopted the bill would let consumers access and correct their information to ensure accuracy, and it would empower the Federal Trade Commission — the federal privacy and consumer protection agency currently investigating the hack — to enforce the act and create new rules for data brokers within a year and create “a centralized website for consumers to view a list of covered data brokers and information regarding consumer rights.”

Democratic Sens. Ed Markey of Massachusetts, Richard Blumenthal of Connecticut, Sheldon Whitehouse of Rhode Island, and Al Franken of Minnesota introduced the bill Thursday.

“As we have recently witnessed with the Equifax breach, data brokers can play fast and loose with Americans’ most sensitive personal information,” Markey said. “The era of data keepers has given way to an era of data reapers.”

Markey said it was time to “shed light on this ‘shadow’ industry of surreptitious data collection that has amassed covert dossiers on hundreds of millions of Americans.”

Blumenthal described Equifax and others’ “profiting off the sale of personal consumer information” a “shameless violation of the privacy and security of millions of Americans.” Franken said consumers should decide “whether information about their personal lives should be available for sale to the highest bidder.”

The bill has already secured endorsements from tech privacy and consumer advocacy groups like the Center for Digital Democracy. The group’s executive director, Jeff Chester said companies like Equifax, “a stealth data broker that mines our information 24/7 . . . will now be held more accountable for what they do.”

Markey’s bill is one among a growing number of legislative solutions proposed and re-introduced since the July hack was revealed last week, some targeting cybersecurity while others aim to reform the entire credit reporting sector. Most all have been pitched by Democrats.

Another from Democratic Sen. Ron Wyden of Oregon introduced Thursday bans credit reporting agencies from charging fees to freeze consumers’ credit.

“Companies like Equifax that have stockpiled massive, insecure databases of Americans’ most sensitive personal data must make security the top priority at every single stage,” Wyden, the ranking Democrat on the Senate Finance Committee, said in a statement.

The Free Credit Freeze Act would give all consumers the option to use PIN numbers to freeze and unfreeze their credit without incurring service fees from credit firms, an option aimed at stopping fraudsters from opening unauthorized lines of credit.

“Given the frequency of these mega breaches, it is simply unacceptable for the credit agencies to continue to charge hardworking Americans who want to protect their credit and their identity from fraudsters,” Wyden said.

Equifax took heat last week for trying to force victims of the hack to give up their right to sue the firm in exchange for a year of free credit monitoring. The company has since altered the terms of service.

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FCC Chief Reveals Net Neutrality Rollback

Federal Communications Commission chief Ajit Pai revealed his plan Wednesday for a net neutrality rollback, aimed at replacing FCC rules passed under the Obama administration with a framework that repeals the agency’s reclassification of broadband as a service subject to anti-monopoly regulations.

During a speech at the Newseum in Washington Wednesday President Donald Trump’s pick to lead the FCC confirmed rumors he’ll seek to reverse the FCC’s reclassification of internet service providers (ISPs) as common carrier public utilities under Title II of the Communications Act — authority originally used to regulate telephone monopolies in the 1930s.

“Nothing about the internet was broken in 2015,” Pai said. “Nothing about the law had changed. And there wasn’t a rash of internet service providers blocking customers from accessing the content, applications, or services of their choice.”

Pai made declining investment in broadband infrastructure his driving concern for repeal, saying broadband investment decreased 5.6 percent, or $3.6 billion, between 2014 and 2016.

“Now, when you talk about less infrastructure investment, many people’s eyes glaze over,” he told attendees. “But it’s important to explain in plain terms what the consequences are. Reduced investment means fewer Americans will have high-speed internet access. It means fewer American will have jobs. And it means less competition for consumers.”

It’s not Comcast, AT&T, or Verizon that can’t weather Title II but the nation’s smallest providers, Pai said, adding more than 20 told the FCC this week they’ve had trouble obtaining financing to expand their networks since the rules were passed.

“Our nation’s smallest providers simply do not have the means or the margins to withstand the Title II regulatory onslaught,” he added.

The FCC will vote on Pai’s notice of proposed rulemaking (NPRM) during its May 18 open meeting, beginning the process of hearing feedback on his proposal. The last net neutrality proceeding received more than four million public comments.

The chairman explicitly stated he’ll seek to return broadband to a Title I information service, previously regulated by the Federal Trade Commission (which will also return privacy regulation to the FTC) and repeal the 2015 Open Internet Order’s general conduct standard, used by his predecessor Tom Wheeler to go after zero-rating offers by AT&T and Verizon.

“Title I classification was expressly upheld by the Supreme Court in 2005, and it’s more consistent with the facts and the law,” Pai said. “Do we want the government to control the internet? Or do we want to embrace the light-touch approach established by President Clinton and a Republican Congress in 1996 and repeatedly reaffirmed by Democratic and Republican FCCs alike?”

The NPRM will seek comment on how to approach the three bright-line rules barring ISPs from blocking, throttling, or prioritizing content. Fellow FCC Republican Commissioner Michael O’Rielly followed Pai’s brief remarks supporting the case for paid prioritization, suggesting the FCC may take a hands-off approach to that rule.

Previous reports suggested Pai will leave it up to ISPs to pledge against blocking and throttling content in their user service agreements, inclusions that could subject them to legal action if caught violating such agreements.

Contrary to the previous net neutrality order and in keeping with his pledge to make the agency more transparent, Pai said the entire NPRM will be available to read by Thursday afternoon.

“This time will be different,” he said. “You may agree or disagree with the proposal, but you’ll be able to see exactly what it is.”

During a press call with Senate Democrats earlier in the day, Massachusetts Sen. Ed Markey slammed Pai for stating “he wants to take a weed wacker to the Open Internet Order.” Undoing the reclassification of ISPs as public utilities while keeping some net neutrality principles in place, he argued, is “like saying you value democracy, but you don’t see a need for a constitution.”

Markey said almost half of all venture capital invested in the U.S. last year — $25 billion — went to internet and software-based businesses, while broadband and telecommunications providers invested more than $87 billion in their networks in 2015, the most in the last ten years. Proof, the Massachusetts Democrat said, that net neutrality is working and not, as Pai and other Republican opponents assert, hurting investment and growth.

To withstand legal scrutiny, Pai will have to show something significant has changed in the market since the rules were passed in 2015, backed up by a fact-based docket. The previous FCC’s rules, Democrats added, have already been upheld in federal court.

“Any effort to roll back in draconian fashion this kind of rule would be potentially against the law,” Connecticut Sen. Richard Blumenthal added. “They’re going to have to present evidence, and that’s going to be quite a hurdle because the evidence all points in the opposite direction.”

Craig Aaron, president of Free Press, a pro-net neutrality and First Amendment group, described the Trump FCC’s portrait of a broadband market threatened by regulation as “alternative facts.” Evan Greer of Fight for the Future, an open internet non-profit, warned Pai’s net neutrality rollback was the first step toward Trump asking ISPs to slow web traffic going to media outlets like the New York Times, which he frequently describes as part of the “fake media.”

“Hell hath no fury like the internet scorned,” Greer said, suggesting Trump may have misjudged his voters “who already pay too much money” to their ISPs “to decide what they can see and do online.”

During a separate call backers of Pai’s plan from the voice over IP (VoIP) industry (which competes with ISPs in the voice market) asserted the bustling internet ecosystem of today only occurred because of a lack of regulation, specifically because Congress decided in the 1990s VoIP wouldn’t be regulated like traditional telephone networks.

“It cost three dollars a minute to have scratchy voice to China, now you can have free Skype,” Tom Evslin, founder of VoIP provider ITXC, said. “That wouldn’t have happened…this kind of regulation kills innovation.”

Toby Farrand, vice president of engineering and operation for VoIP provider Ooma, explained it isn’t big ISPs that slow down Ooma traffic but other popular edge providers like Netflix, who act as “free riders” by hogging bandwidth during peak hours (as much as 30 percent according to Farrand).

“The idea that somehow Netflix requires protection is kind of backwards relative to a company like Ooma,” Farrand said. “A couple years ago when they released ‘House of Cards’ season 2 or 3, it created problems for our customers. We traced it. We know exactly where the routers were that were causing the problems.”

The group argued net neutrality lobbyists have been co-opted by the commercial interests of edge providers like Netflix and Google as a means of using regulation to benefit their side of the market, a term known as “rent seeking.”

On Tuesday FCC Commissioner Mignon Clyburn, the FCC’s lone Democrat and only commissioner left to have voted for the rules, said she was “uncomfortable” with the idea of ISPs simply promising to be good actors.

“You’ve heard me say this dozens of times, about the internet and broadband being one of the greatest equalizers of our time, and what it enables,” she said according to Axios. “And something that important, for a handful of entities saying this is how it’s going to be done, I’m a little bit uncomfortable [with] that. I haven’t seen anything, but just the promise of that makes me feel a little uncomfortable.”

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Democrats: Pai Will ‘Do the Bidding’ of Big Internet on Net Neutrality

net neutrality

Democrats targeted the new Republican chairman of the Federal Communications Commission Tuesday, describing Ajit Pai as a tool of the internet industry ready to “do their bidding” by repealing net neutrality — a move they say threatens free speech already endangered by President Trump.

Massachusetts Democrat Sen. Ed Markey gathered influential Democrats and pro-net neutrality groups on Capitol Hill to draw a line in the sand, saying they’ll resist any effort to repeal or not enforce the rules passed under the previous administration.

“The big broadband barons and their Republican allies want to turn back the clock and make big cable and big cellphone companies the gatekeepers for internet access,” Markey told reporters. The Massachusetts Democrat sits on the Senate committee charged with overseeing the FCC and frequently weighs in on agency issues.

“And they have a new FCC chairman in Ajit Pai who will do their bidding,” he added.

Pai voted against the rules prohibiting internet providers from blocking, throttling or favoring content passed by Democrats in 2015. The same rules were previously struck down in federal court, prompting the FCC to go a step further and reclassify broadband providers as public utilities. The designation subjects them to potentially tougher regulations like price caps.

Reclassification was the core of Pai and other Republicans’ dissent. Shortly after Trump’s election victory returning majority power to Republican commissioners, Pai said he would “revisit” the rules “as soon as possible.” So far he’s rolled back provisions to make smaller providers disclose billing practices and closed an investigation into free data programs Democrats say could hurt competition.

“I’ve called net neutrality the free speech issue of our time because the basic principles of our democracy are at stake,” Minnesota Sen. Al Franken said. “That’s why I’m concerned about the new FCC head Ajit Pai. He has repeatedly sided with corporations over consumers and his number one target appears to be taking down net neutrality.”

Vermont Sen. Patrick Leahy made a similar argument, adding that “we’ve had enough attacks on our freedom of speech in this country and freedom of religion,” referring to President’s Trump’s immigration ban and frequent bouts with the press.

Senator Ron Wyden of Oregon poked fun at Republicans for referring to the internet as “a series of tubes” when Democrats tried to pass net neutrality protections in 2006, and reminded supporters of the millions they mobilized to block the Stop Online Piracy Act over similar free speech concerns.

“We have shown again we can beat those odds,” he added.

Connecticut Sen. Richard Blumenthal said he hopes Democrats’ “fears are unfounded, but certainly the implications are we’re in for a fight.”

The group argued the rules are already on the books and have been upheld in federal court. Should Republicans undo them, they warned, they’re likely to hear from the more than four million who submitted comments to the agency in 2014.

Joining them were pro-net neutrality groups including Public Knowledge, Free Press, Fight for the Future and others along with the CEO of Vimeo subsidiary VHX, Jamie Wilkinson.

“We only exist because of net neutrality, which we take for granted,” Wilkinson said.

During the FCC’s first open meeting under Pai last month, the new chairman wouldn’t comment on whether his office will enforce the rules.

Republicans have long preferred a legislative solution over the FCC’s bureaucratic claim of authority over the rules. Senate Commerce Committee Chairman John Thune said at a conference last month he’s “committed to the cause” of net neutrality, and he encouraged Democrats to come to the table for congressional compromise.

“Who knows, the reality of a Republican FCC may help inspire some of my Democrat colleagues to embrace the idea that a bipartisan, legislative solution is the best possible outcome,” Thune said.

Thune’s Democratic counterpart on the Commerce Committee, Sen. Bill Nelson of Florida, has said he is open to a deal.

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Lawmakers Question AT&T/Time Warner About Zero-Rating, Privacy and CNN in Merger

Senators questioned the heads of AT&T and Time Warner on a range of topics related to their proposed merger Wednesday. The companies’ CEOs went on defense about the future of competition, privacy, news coverage and net neutrality if regulators approve the deal.

Utah Republican Sen. Mike Lee kicked off the hearing with a concern raised by another federal agency — the Federal Communications Commission, which last week said AT&T’s plan to exempt its DirecTV-owned content from subscriber data caps, a policy known as zero-rating, hurts competing video services and likely violates net neutrality.

“On its face, zero-rating appears to be customer friendly,” Lee, chairman of the Judiciary antitrust subcommittee, said. “However critics argue that zero-rating transforms internet service providers or wireless carriers from ‘relatively neutral conduits into gatekeepers.'”

If the pending merger is approved, the wireless carrier plans to make the same offering with Time Warner content, including HBO, while competitors like Netflix, Amazon and Hulu will still count against subscriber data caps. Critics including the FCC and pro-net neutrality groups say that will incentivize users to favor AT&T-owned content.

“Critics say such concerns would only be exacerbated if AT&T were able to bring Time Warner content under its fold,” Lee said.

Time Warner CEO Jeffrey Bewkes and AT&T CEO Randall Stephenson, whose company has yet to respond to the FCC’s latest letter, said AT&T will offer over-the-top video competitors the same rate DirecTV pays AT&T to sponsor its data (a cost the FCC estimates is anticompetitive).

Democrat Sen. Al Franken of Minnesota cited those numbers to Stephenson, pointing out FCC findings that it would cost competitors like Netflix and Hulu more to sponsor data than the $35 AT&T’s new DirecTV Now service charges subscribers, making it “infeasible” for them to compete.

“Explain again how this isn’t anticompetitive, because you’d be taking money out of your right pocket and putting it in your left pocket,” Franken said. “How exactly does DirecTV make payments to AT&T mobility for this service, and do the respective entities record such payments?”

Stephenson said he didn’t know what the payment mechanism was and declined to give specifics, but asserted there was a cost incurred by facilitating the program. He added AT&T will provide that data to the Department of Justice when it reviews the merger.

“We are charging everybody the exact same,” Stephenson said. “The lowest wholesale price per data transport that we have.”

The same net neutrality regulations the FCC is basing its zero-rating investigation of AT&T on will also insulate Time Warner from Federal Trade Commission scrutiny if the merger is allowed to proceed. That’s the result of a case AT&T won over the FTC earlier this year in federal court, where the wireless carrier argued its reclassification as a common carrier under net neutrality removes it from FTC jurisdiction.

Consumer advocates have since warned the 9th Circuit Court of Appeals case potentially leaves companies that also provide internet access free from FTC enforcement on issues like privacy protection and deceptive practices, a concern raised by Lee.

Stephenson dismissed the concern, saying, regardless, the company will still be regulated by the FCC. But a technicality that limits the FCC’s authority to common carrier activities could still leave those companies in the gap free from either agency, according to Gene Kimmelman, president of the pro-net neutrality group Public Knowledge.

“If they purchase Time Warner, and they have content, the FCC can only regulate their common carriage business regardless of how the court wanted to look at it,” Kimmelman said. “There is a gap there that I think is significant.”

Connecticut Democrat Sen. Richard Blumenthal sarcastically noted Congress’ opinion of the merger is irrelevant since President-elect Donald Trump vowed on the campaign trail to block the merger.

“And I take him at his word,” Blumenthal smirked to a cackling chamber.

“Why?” Franken cracked in response.

Blumenthal said while he agrees with Trump that “it’s too much concentration of power in the hands of too few,” he’s disturbed by part of the president-elect’s opposition, which Trump said stemmed from unfavorable coverage by Time Warner-owned CNN.

“For a public official to use the blunt, heavy instrument of law enforcement to try to silence or change coverage by a news department of any company is to me, absolutely abhorrent,” Blumenthal said.

The senator asked the CEOs of both companies to commit they won’t pressure their news organizations to alter coverage of Trump in an attempt to get the president elect’s stamp of approval on the deal. All said they had yet to meet with Trump’s transition team, but agreed.

“In terms of the independence of our journalism,” Time Warner CEO Jeffrey Bewkes said, “We have always vigorously defended that for decades, whether when we had Time Inc. or CNN. And we intend to continue defending and being an independent journalistic voice.”

It’s unclear if the deal will face FCC scrutiny. The trigger for FCC review is whether AT&T decides to acquire any of the broadcast licenses owned by Time Warner as part of the merger. Stephenson told lawmakers the company was still making that determination, but added DOJ is likely to seek input from the FCC regardless.

“There’s a different level you have to meet whether it’s FCC or DOJ, and FCC, their merger review requires that any proposed deal actually benefits consumers,” Franken said. “I would think that the message you’re sending to us and the current and potential AT&T consumers, if you can’t confidently assert that this deal benefits the American public, is not a great message.”

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Hacks Prompt Democrats to Call for Stronger FTC Privacy Rules

Opponents of privacy rules for internet providers the Federal Communications Commission will vote on next week have called for the agency to copy the Federal Trade Commission’s light touch regulatory approach, but recent hacks against the Democratic National Committee, Hillary Clinton’s presidential campaign and Yahoo have some Democrats calling for the opposite.

After the FCC proposed rules earlier this year to mandate internet service providers (ISPs) get subscriber opt-in consent before collecting and monetizing data on their browsing habits, opponents from the tech industry, Congress and regulatory agencies lobbied the regulator to adopt the FTC’s privacy framework, which allows edge providers like Facebook and Google to track all user data, except the most sensitive, unless they opt-out.

Since the recent hacks against the DNC, Democratic Congressional Campaign Committee, the email account of Clinton Campaign Chairman John Podesta, and Yahoo, the comparison has had the unintended consequence of prompting influential Democrats in both chambers of Congress to suggest updating the FTC’s rules to the FCC’s heightened standard.

“The optimal solution would be to adopt strong privacy rules for both ISPs and websites,” New Jersey Rep. Frank Pallone wrote for the Huffington Post in October.

The ranking Democrat on the House Energy and Commerce Committee, charged with overseeing both the FCC and FTC, said the latter agency’s process to update its policy “makes it virtually impossible to adopt similar rules,” and that lawmakers should step in.

“Congress should take this opportunity to fully empower the FTC, and give it the tools it needs to protect consumers from the unscrupulous practices of any company that can collect and monetize their data — whether it is a website or a cable company,” the op-ed reads.

Pallone’s comments echo those by Connecticut Democrat Sen. Richard Blumenthal in September after Yahoo disclosed a year-old hack that compromised personal data, including email login information, for more than 500 million users.

“There are serious questions as to whether Yahoo effectively notified consumers as promptly as they should have been told about those security breaches,” Blumenthal, who sits on the equivalent oversight committee in the Senate, told all three FTC commissioners.

Blumenthal said the FTC should set hard rules for privacy up front, instead of relying on its standard enforcement approach of suing violators after they’re caught.

“The FTC has brought numerous enforcement actions over the years against companies for lax data security practices, but this piecemeal, after-the-fact approach might be better served if the commission were able to prescribe rules requiring security practices,” he added.

On Thursday, Massachusetts Democrat Sen. Ed Markey, who sits alongside Blumenthal on the Senate Commerce, Science and Transportation Committee, likened an internet provider’s ability to track subscriber browsing habits to Russia hacking and stealing the communications of several Democratic party organizations, and said it was up to the federal government to ensure neither Russia nor anyone else can compromise the privacy of U.S. citizens.

“We know that every click an American makes online paints a detailed picture of their personal and professional lives, and an ISP has the ability to see that personal, sensitive information,” Markey told reporters. “Today there are no rules in place that prevent ISPs from collecting and sharing consumers’ information.”

The hacked emails eventually leaked by WikiLeaks exposed primary season favoritism that forced former DNC Chairwoman Debbie Wasserman Schultz to step down as party head on the eve of its presidential nominating convention. Also revealed were numerous private emails between Clinton campaign staffers, including transcripts of paid speeches given to Wall Street firms that the former secretary of state declined to publicly release.

The embarrassing and ongoing disclosures are further fuel for privacy hawks to push for stronger legislative reforms, backed by a party that could find itself occupying the majority of Senate seats in January, riding the coattails of likely president-elect Hillary Clinton.

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Economist Says Cable Subscribers Pay Half of What the FCC Claims for Set-Top Boxes

The Federal Communications Commission is relying on faulty data to justify its plan to get rid of set-top box rentals, according to one economist, who says the amount cable and satellite customers pay is “almost half” of what the agency claims.

Later this month the FCC will vote on a plan to make pay-TV providers offer their content on apps instead of forcing consumers to rent set-top boxes — fees the agency claims cost the average U.S. household $231 every year, totaling an almost $20 billion annual profit for the cable and satellite industries.

According to economist George Ford of the Phoenix Center, a non-profit D.C.-based policy think-tank, that amount — calculated by neither an FCC or Obama administration study, but by a year-old congressional informal survey — is “grossly” overstated by as much as 60 percent.

The survey of the 10 leading pay-TV providers, conducted last July by the offices of Democratic Sens. Ed Markey of Massachusetts and Richard Blumenthal of Connecticut “provides no details as to how their figures are calculated” according to Ford, and didn’t take into account different options like DVR, promotions or the range of prices providers offer.

AT&T and DISH provide customers with one free box, for example, with the former charging $8 for the second, down from the survey’s purported $7.43 per box every month to $4.92 for the survey claimed average of 2.6 boxes per home. DISH prices are even less at $4.20 — an overestimation of more than 60 percent. Comcast, the largest cable provider in the U.S. with 22.4 million subscribers, charges $2.20 to 2.50 per box, while Cox — serving 2.9 million — charges $8.50. The average price of the two comes to $5.43, and the subscriber-weighted average between the two, $3.05.

Ford said the 2.6 average itself is problematic, since the survey assumes the number is the same across all providers. Data from providers themselves says otherwise, with Bright House Networks, for example, reporting 3.8 million boxes divided across 2.4 million subscribers, averaging 1.6 boxes per subscriber. By applying the 2.6 figure, Markey and Blumenthal exaggerated the number of boxes Bright House customers rent by 60 percent.

Neither DISH nor Verizon included the average number of boxes per household, while DirecTV — a rival satellite provider — reported 2.5. The average of Verizon’s terrestrial competitors was 2.2. By using the midpoints of the various price ranges offered by providers like Comcast and Time Warner Cable and plugging in data not offered by providers with numbers from similar competitors, Ford used subscriber-weighted averages to find a wide range of subscriber fees, with Comcast customers paying an average of $76.14 every year for 2.7 boxes on the low end, and Cablevision subscribers paying $237.37 for 2.8 boxes on the high end.

“Most importantly, across all 10 providers in the survey, the average annual fees paid for all boxes in the subscriber’s home is $145,” Ford wrote. “The average monthly cost per box is $5.15. These averages are well below those reported by Blumenthal and Markey ($7.43 per box and $231 per year). Blumenthal and Markey, grossly overstate — by 60 percent — the fees related to set-top boxes.”

Based on Ford’s figures, “the annual expenditures of the U.S. consumer on set-top boxes equals about $12 billion, almost half of the $20 billion claimed by Blumenthal and Markey.”

The number was thrown around repeatedly in the Senate Thursday during an FCC oversight hearing. Republican lawmakers grilled FCC Chairman Tom Wheeler on the latest version of his plan to unlock the box, which includes a provision to give the FCC authority over licensing agreements between pay-TV providers and the third-party devices that will download their apps.

Providers and Republicans in the Senate and on the commission aren’t happy with the provision, and one of Wheeler’s two fellow Democratic commissioners — the two he counts on to pass his proposals when the FCC’s two Republican commissioners are opposed — appears ready to defect.

Commissioner Jessica Rosenworcel, who has had her renomination hearing stalled in the Senate over Wheeler’s partisan voting record and unwillingness to definitively say he’ll leave office with Obama in January — said she isn’t sure the FCC has the authority to oversee copyright.

“I’m going to be very candid with you that I have some problems with licensing and the FCC getting a little bit too involved with the licensing scheme here,” Rosenworcel said. “Because when I look at the Communications Act and Section 629, I just don’t think we have the authority.”

Section 629 instructs the FCC to promote competition in the TV navigation device marketplace, and has been cited by Wheeler as his primary justification for the rules change. Without Rosenworcel, it’s unlikely Wheeler will get the votes needed to pass the proposal during the commission’s open meeting on Sept. 29.

Wheeler said “the door isn’t closed” on the proposal, and said commissioners still have two weeks to compromise.

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FCC Commissioner Calls Agency Plan to Unlock Set-Top Box ‘A Fantasy’

The Federal Communications Commission’s Thursday plan to let cable customers watch TV over free apps instead of set-top boxes “exist[s] within a fantasy world” according to one FCC commissioner, who said a provision to grant the FCC copyright oversight exceeds its authority.

“I will review this proposal carefully over the coming days and weeks, but at the outset it appears to exist within a fantasy world of
unlimited commission authority,” FCC Commissioner Michael O’Rielly, one of the commission’s two Republicans, said after the plan dropped. “The commission is and must remain in the business of licensing spectrum and infrastructure, not content.”

The plan detailed to reporters by senior FCC officials Thursday abandons Chairman Tom Wheeler’s initial pitch to make pay-TV providers like Comcast open up their video streams to third-party devices, and orders providers instead to build free apps subscribers can download on devices like a Roku, Apple TV, smartphone or tablet.

Wheeler’s concession came after cable providers, content programmers, lawmakers, fellow commissioners and the U.S. Copyright Office expressed concern the original plan would make content vulnerable to piracy with DVR functions and manipulation by potential third-party device makers like Google, who could alter channel placement and advertising by building their search functions.

The apps outlined by the FCC will let pay-TV providers control the flow of content from end-to-end and leave channel placement, advertising and licensing deals with programmers intact.

While the app-based approach was the solution offered by the industry in response to Wheeler’s original plan, the FCC tacked on a provision to establish a body within the FCC to review licensing deals between pay-TV providers and third party devices to “serve as a backstop to ensure that nothing in the standard license will harm the marketplace for competitive devices,” according to agency documents published Thursday.

Though FCC officials said the licensing authority the plan seeks to establish is very limited in scope, industry and policy groups opposed to the provision aren’t convinced.

“According to several public sources, the commission will play a much more significant role in the licensing process than simply the ‘backstop’ as it was described today,” the National Cable & Telecommunications Association (NCTA), which counts Comcast among its members, said in a statement. “The work of this licensing body would be subject to intrusive FCC oversight, creating a bureaucratic morass and improperly involving the FCC in private licensing arrangements in a way that will slow the deployment of video apps, ignore copyright protections and infringe on consumer privacy.”

NCTA drafted the app proposal the FCC drew from for its final plan. The trade group threatened to sue the FCC earlier this year if the agency made the technical aspects of Wheeler’s initial proposal law.

“It’s sad, but not surprising, that even Wheeler’s idea of compromise involves declaring himself ‘King of Copyright,’” said Evan Swarztrauber, communications director at the center-right D.C.-based think tank TechFreedom.

South Dakota Republican and Senate Commerce Committee Chairman John Thune, who chairs the committee that oversees the FCC, said the agency legally cannot “police copyright as Chairman Wheeler has proposed.” The plan was praised by Democrats including Sens. Ed Markey of Massachusetts and Richard Blumenthal of Connecticut, who together conducted the survey cited by the FCC that found the average U.S. household pays $231 annually in set-top box rental fees, bringing in almost $20 billion for the industry every year.

John Bergmayer, senior counsel at digital consumer advocacy group Public Knowledge, said in a statement the updated plan “addresses the legitimate concerns raised by these parties while preserving the benefits to the public, and fulfilling the congressional directive that requires the FCC to ensure that viewers do not need to rent set-top boxes from their providers.”

Public Knowledge, which previously criticized the Copyright Office’s critique of the rules, published a study the same day alleging the office’s objectivity has been compromised by “regulatory capture,” a result of hiring former entertainment industry employees who champion policies that benefit copyright holders over consumers.

“The report, however, doesn’t necessarily offer a full profile of these employees,” Politico noted in a Friday newsletter, “highlighting examples of their connections to particular industries, but making little mention of their work in other fields like finance or public service.”

Swarztrauber pointed out on Twitter Friday that Public Knowledge has gone through its share of revolving doors at the FCC, where Gigi Sohn — the organization’s former president and CEO of more than a decade — joined Wheeler’s staff as a counselor in 2013 ahead of its landmark net neutrality rulemaking two years later..

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Senate Advances Net Neutrality Carveout for Small Providers

Congress came one step closer to exempting small broadband providers from the Federal Communications Commission’s net neutrality rules Wednesday, one day after a federal appeals court struck down providers’ attempt to declare them illegal.

The Senate Commerce, Science and Transportation Committee approved the Small Business Broadband Deployment Act during markup Wednesday. The legislation exempts small and rural broadband providers with 250,000 or fewer subscribers from the burden of proving they’re complying with the FCC’s net neutrality regulations passed last year.

Providers meeting the bill’s definition won’t have to disclose information including monthly data charges, promotional rates, data caps and network performance.

During markup, Commerce Committee Chairman John Thune said the bill “takes one component of the difficult and sometimes toxic debate over internet regulations, and tries to strike an honest and reasonable compromise that both protects Internet end users and relieves regulatory burdens that disproportionately affect small Internet providers.”

The House of Representatives passed similar legislation by a unanimous 411 to zero vote in March, sending a strong bipartisan mandate to pass the exemption in the Senate.

FCC commissioners exempted small providers from the requirements for one year after passing the Open Internet Order in 2015, and voted in December to extend the exemption for another year for providers with 100,000 or fewer subscribers.

The House bill, authored by Communications and Technology Subcommittee Chairman Greg Walden, extends the exemption for five years. The Senate version advanced Wednesday included an amendment by Democrats limiting the exemption to three years.

“While I respect the goals of this legislation, the bill, if passed, would mean that approximately three million more consumers – for a total of nine million consumers – will lose access to important information about how their broadband provider operates its network,” Ranking Democrat Sen. Bill Nelson said. “All consumers, irrespective of the size of their broadband providers, deserve information about the fees associated with their service, along with how their monthly broadband usage can affect their rates.”

Nelson added the ruling Tuesday by the U.S. Court of Appeals for the D.C. Circuit, which struck down the broadband industry’s challenge to the rules’ legality, affirms their need.

“I am pleased that the court upheld these important open internet protections,” Nelson said. “It is a significant milestone for consumer protections on the internet and a strong affirmation by the court of the FCC’s authority under the Communications Act.”

Republican Sens. Steve Daines of Montana, Jim Risch of Idaho and Democrat Joe Manchin of West Virginia authored the Senate bill.

“The administration does not oppose this exemption, the Small Business Administration supports this exemption, and most importantly, the small businesses that we represent support this exemption,” Daines continued, “so they can focus on their businesses and their customers rather than burdensome regulatory requirements.”

Before passage of the House bill, the White House indicated President Obama would sign the exemption.

Democrat Sens. Ed Markey of Massachusetts and Richard Blumenthal of Connecticut — the two lawmakers behind research that led to the divisive set-top box proposal pending at the FCC — opposed advancing the bill.

Several small and rural providers testified to the FCC and Congress last year they would be forced to forego plans to expand their networks if forced to comply with the transparency requirements, which they said would mandate they funnel resources away from innovation and deployment toward legal expenses.

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