When all you have is a hammer, everything looks like a nail

In advance of tonight's Online Copyright Infringement Forum I thought I would indulge myself with one more, slightly differently argued, point about online copyright.

But let me start by noting how predictable submissions on the discussion paper have been. Rights holders uniformly back the proposals, ISPs and others suggest the "problem" is the lack of availability of legal content and the need to "follow the money" to close down advertising supported sites.

What is only slightly less predictable is the commonality of global positions, with, for example, a submission from Assotelecomunicazioni-Asstel which is the business association of Italian telecom operators.

But the title of the blog post reflects the fact that the proposed solutions in the discussion paper are to amend copyright law to change the definition of authorisation, and then change the safe harbour provisions. This is a dangerous way to proceed for three reasons:

• Any change to the law that failed in the High Court just brings us back to the beginning of a series of requests being complied with or not and potentially leading to further litigation;
• Relying on the tightening the authorisation and broadening the safe harbour protection involves a lot more than the ISPs, especially groups like Universities who make no direct revenue from the infringing behaviour, and
• It continues to place the focus on the "innocent" party - the ISP - rather than the infringing party - the end-user.

The issue should be dealt with less as a matter of trying to extend one definition of offence and then limiting its application and more as a matter of straight-forward law enforcement.

I regularly refer to the rules that apply to pawn brokers and dealers in second hand goods. Each state has its own legislation similar to that for NSW, which requires dealers to be licensed. A condition of the licence is to do certain things to assist law enforcement. This includes production of records to authorised officers without warrants (s17).

Telecommunications service providers already have obligations under (s313(1) to "do the carrier's best or the provider's best to prevent telecommunications networks and facilities from being used in, or in relation to, the commission of offences against the laws of the Commonwealth or of the States and Territories." 

This obligation is typically included in the provider's contract with its customers - for example, clause 3.7 of Telstra's general consumer terms states "You must not use a service to commit an offence or allow anybody else to do so." 

As is now well known s313(3) requires service providers to "give officers and authorities of the Commonwealth and of the States and Territories such help as is reasonably necessary " for (amongst other things) "enforcing the criminal law and laws imposing pecuniary penalties." 

In my understanding ordinary copyright infringements do not incur "pecuniary penalties", only damages. However, under s132AC of the Copyright Act 1968 the infringement on a commercial scale potentially incurs pecuniary penalties and imprisonment.  

Hence, on that reading the legislative powers necessary to require telecommunications providers to assist in prevention of copyright infringement already exist.

This is particularly clear in the case of blocking the commercial websites. While both Google and Communications Alliance have raised the spectre of the misapplication of s313(3) by ASIC, the reality is that in the other two cases where it has been used (one by ASIO as reported in The Australian in July 2011 and the blocking of the INTERPOL 'worst of' list) have been proportionate. 

No one has questioned the validity of ASIC in seeking to block access to the website it was targeting. The issue was that ASIC was stupid enough to block the IP address of the hosting provider rather than the domain name, and that it took three days to identify where the blocking request came from.

These issues can be simply rectified by amending s313 to include a provision that the Minister can make regulations about the way that assistance is to be provided. One regulation should address website blocking and introduce three requirements - that only a domain name can be blocked (not a page within a domain nor an IP address), that the block must redirect to a landing page explaining the site has been blocked, and that both the agency requesting and the recipient must keep a record of the request and notify their relevant regulator (ACMA for provider, AGD for agency).

While it might seem extreme to create a subordinate regulatory power to the Minister in this way, the regulation would only restrict the requests that can already be made, the instrument would be transparent, and the instrument would be disallowable.

In brief, there is no need for any law to be changed to implement a website block for sites that are infringing copyright on a commercial scale. 

In the case of individual users there is a case for creating a new enforcement agency (or task for an existing agency) for copyright infringement. The extent to which said agency should be required to provide assistance should be contingent upon the extent to which the rights holder has acted to protect themselves - in particular by making legal means to obtain the material at a fair price available to Australians.

This requires the conversation to be conducted by the Communications Minister exclusively, not the Attorney-General. With the simple amendment to s313 the Minister could create a system of assistance to be afforded rights holders. This approach has the added benefit of recognising that the Act at s314 already provides that the terms of providing assistance are agreed between the person assisting and the agency seeking assistance, and that in doing so the person neither profits nor bears the cost of providing the assistance.

I will be otherwise engaged tonight, but I'm prepared to bet the conversation will go absolutely nowhere productive, but I do intend to endure the recording. Both industries are experts in arguing from positions rather than principles. 

 

Should assistance to rights holders be limited

Ed Husic in the Federation Chamber today made the point that if we are going to look at mechanisms to aid the enforcement of copyright then we should also look at the issue of price.


In doing so he was picking up on one aspect of a common argument mounted by copyright infringers - that they only do it because it is so hard/impossible to get the content legally. This criticism has some validity, but it is by no means a "slam dunk."


The Husic argument is the flip-side of the rights holders' argument that the Australian Government has an obligation to assist in enforcing copyright law, for which the response should be that this obligation only exists to the extent that rights holders aren't ripping off Australian consumers.


Before people get too carried away by the rights holders' arguments just remember two things. The first is that for each individual firm the "piracy is killing us" line is a great diversion for CEO's to spin to shareholders - nothing quite like an external factor beyond your control to blame for any under-performance. The second is that the industry associations that make the point so forcefully are just doing their job, they aren't representing a "cause."

The fundamental current issue is what role should ISP's play in helping enforce copyright.

According to the AG's discussion paper:


Australia is obliged under its free trade agreements with the United States, Singapore and Korea (not yet ratified) to provide a legal incentive to ISPs to cooperate with rights holders to prevent infringement on their systems and networks.

That is a very wide description. It is an obligation to provide an incentive, and it is only to co-operate. It doesn't seem that this construction actually runs to an obligation on ISPs to take reasonable steps to prevent infringement. This was where iiNet parted company with everyone else. They were happy to assist rights holders get details of infringing parties so that rights holders could take action, they just drew the line at taking action themselves based only on an assertion. The other question is at what cost are the steps "reasonable."

There are two parallels. The first is the example of traders in second hand goods that I frequently mention. Such people are required to get and record identification information from sellers. This works as an effective mechanism to restrict them from being used as a "fence." There seems to be nothing wrong with the requirement that an ISP be required to identify and record which account was used when a specific infringing activity took place. There is equally no reason why the said ISP should not notify the account holder that the allegation of infringement has been made. But there is no basis on which the ISP should be required to take any action whatsoever to degrade or cancel a service on the basis of the mere assertion of another party, nor that the onus of resorting to a court to determine the facts of the matter should rest with the account holder (who might claim their service was unjustly restricted) rather than the rights holder.

But the Husic point is whether such assistance should be afforded to a rights holder who is merely trying to enforce a pricing regime that charges Australians more, rather than a globally equitable pricing regime and all that is sought is protection of copyright.

A similar issue arose with respect to protectionism in the earliest days of Federation. To ensure that the benefits of protectionism were enjoyed by workers, and not just pocketed by the owners of capital, an excise tariff was imposed on manufacturers that would be waived if workers were paid "fair and reasonable wages." The determination of what was fair and reasonable was actually what the Harvester judgement was about - it wasn't a "basic wage" case as we know them today.

This is our second parallel - but in reverse. Should we provide assistance to all rights holders, or only to rights holders who make their content available on fair and reasonable terms? The determination of fair and reasonable terms might take some doing - but it is a worthwhile endeavour.

There is, hopefully, a lot of constructive dialogue yet to be had about these copyright proposals. Hopefully this can be added to the mix.

Very quickly on orthodoxy

Tonight I'm rocking along to the Centre for Independent Studies Grit in the Oyster seminar.

The blurb for the seminar reads:

In the scientific, political, academic or corporate spheres the spirit of this age rewards conformity.
Dissenting views are silenced, often illiberally. To depart from the consensus is regarded as dangerous in many intellectual circles. Academics who plough an eccentric course are seen as deniers of truth rather than its interrogators.
Yet as John Stuart Mill explained in On Liberty, the freedom to state an opinion that runs against the consensus is a pre-requisite of human progress.
The cycle of changing paradigms that philosopher Thomas Kuhn says assists our quest towards scientific knowledge rely on a scientific method that aims to disprove assumptions rather than reinforce them. Intolerance of eccentricity reinforces groupthink in public and private institutions. The potential for costly mistakes is magnified.
How can contrarians be restored to their proper place in the debate? How can business and political leaders break out of the loop of positive feedback and garner counter intuitive advice?
Just as an oyster needs an irritant to develop a pearl, so irritation in civic debate leads a stronger, more resilient civilization.

Of course the orthodoxy I object to most is neoclassical economics.

In the SMH today Ross Gittins pointed out one of the case studies of the weakness of the orthodoxy - the way that markets never actually reach equilibrium. It is also a great example of how ordinary business decisions are motivated by the herd not rationality - of business leaders not being able to "break out of the loop of positive feedback and garner counter intuitive advice?"

More compelling and complete, of course, is the column by Steve Keen in Business Spectator that notes how the University of Manchester closed down a course in heterodox or pluralist economics. In more detail Keen explains why a neoclassical world view based on atomistic rational agents operating at equilibrium fails. He makes the case for the work of Hyman Minsky saying:

The alternative vision of capitalism -- as fundamentally unstable and monetary -- is as discordant with the Neoclassical vision of equilibrium in a barter economy as Copernicus’s Heliocentric vision was to Ptolemy’s Earth-centric model.

Question - will the CIS contrarians want to talk about neoclassical economics - or just climate science?

The Power of Open Data

I heard at a function to launch Wayne Swan's book A Good Fight last night about a report on open data  prepared by Lateral Economics with assistance from Equity Economics.

Lateral Economics CEO Nicholas Gruen was the Chair of the Gov 2.0 Taskforce, which (remarkably) resulted in a significant implementation of a Gov 2.0 agenda. Open data is a part of that.

Equity Economics is an economics advisory firm that specialises in the study of equity (i.e. the reduction of inequality) not equities (shares). People like Wayne Swan who are proud to call themselves social democrats (unlike Chris Bowen who wants to drop the title) understand that there is no value to growth if it doesn't reduce inequality. As I recently wrote in an AFR Technology opinion piece we need to note that increasing inequality has a negative effect on growth.

Their report Open for Business: How Open Data Can Help Achieve the G20 Growth Target was commissioned by Omidyar Network which is inherently a investment vehicle for social good created by the founder of eBay. Omidyar Network "invests in entrepreneurs who share our commitment to advancing social good at the pace and scale the world needs today. We are focused on five key areas we believe are building blocks for prosperous, stable, and open societies: Consumer Internet and Mobile, Education, Financial Inclusion, Government Transparency, and Property Rights."

The report identifies a wider role for Government than merely releasing existing data, though that is a good start, saying:

With the increasing ease with which data can be stored, used and distributed, the marginal benefit of all such activities increases. Governments can enrich current data collections, collect additional data for release, and modify regulations pertaining to information (e.g. standards) so as to facilitate greater use of open data and review regulation in specific industries.

Governments may also create value by modifying the environment under which open data are being used. For example, governments may review the regulatory environment if it obstructs open data, and facilitate the emergence of information standards, which enhance the value of private data – for instance, by facilitating comparisons. This will be more effective when harmonised across jurisdictions, giving international forums such as the G20 particular relevance in fully realising the open data opportunity.

The potential returns the report identifies are impressive, saying:

This report estimates returns to investment in the creation/collection of data and the impacts of increased data accessibility and (conservatively) focusing on government- and publicly-funded research data only, we provide a likely lower bound estimate of the potential value of open data.

Exploring the additional returns that might arise from doubling data accessibility and use, we find that returns to investment in Australian government and research data might rise by around a present value of AUD 240 billion over 20 years, the mid-point of a range from an increase of AUD 120 billion to AUD 360 billion.

It is important to note the inclusion here of research data - though in this case limited to government funded research. An issue that has become more critical in academe - and written about by me on another blog - is the issue of whether the data used in a study academic papers should be made available on line to allow verification of results.

This feeds into a wider question about what the relationship should be between government funded research and the intellectual property arising from it. The "corporate" model of the University and R&D seeks to maximise IP protection to create a future revenue stream, while the stream that picks up on Newton's dictum that he saw further than others by standing on the shoulders of giants would promote open access to government funded IP.

This discussion in turn relates to a real question in economic growth theory. Given that knowledge accumulation is a factor in growth the question is whether the private incentive to invest in R&D (the property right in IP) is more or less important than creating an eco-system of knowledge creation and accumulation.

It should be noted that in sciences like physics and economics where the proportion of potentially valuable discoveries are low the academic publishing model now includes plenty of advanced publication of working papers - especially in theoretical physics. This has a two fold effect. The first is it helps establish primacy for receipt of the academic credit. But secondly it fosters a collaborative research program.

This becomes critical to the "innovation" discussion because things like the Global Innovation Index really measure more the ability to create property rights in IP than in the creation of knowledge itself.

If the issue of the eco-system is more important then promoting it is important. As I've also blogged previously elsewhere - Government could play a useful role in breaking the current publisher focussed model of academic publishing and create an open community. Why should the opinion of three referees be the determinants rather than the rating of anyone who wants to read - with a TripAdvisor or Amazon like star system and all the data available.

Ultimately it comes down to understanding growth. Which I will use to return to the book launch. Wayne Swan reminded people of the importance of maintaining confidence during the crisis, not just the quality of your institutions. By "institutions" he meant the formal institutions of regulators and firms (in this case banks). But the original American institutionalists would have identified "confidence" as an institution - in this case a rule of thumb or heuristic that consumers use in making purchasing decisions other than just straight rational analysis. Mitchell - one of these people - was also famous as the economist who first really started gathering large amounts of data. (In brief an individual's demand profile, and the aggregate demand curve, are not only determined by current income but the consumer confidence that the income will be retained).

It is good that Malcolm Turnbull has taken an active interest in open data - speaking at the National Archives and an AIIA function recently, and launching theNational Map Open Data initiative. But the analysis needs to go to another level on how much data should be made available.


(As a finishing note Joshua Gans has also blogged about the ways economic data may be opened and shared more easily.)

Inequality and Growth

My opinion piece in the AFR this week addressed the so-called 'productivity paradox' of IT. This is that all the investment in IT doesn't show up in the productivity stats.

I made three points. Firstly that there is a productivity measurement problem, secondly that other factors pulling down economic growth mask the impact of IT, and third that the economy wide productivity argument is different to the firm level IT investment decision.

The second point is the relation between inequality and growth, and the conclusion of Stiglitz and others that increasing inequality slows economic growth.

I was horrified to note that the AFR editorial on the same day was headed "Growth will take care of inequality" - so I penned a short letter to the editor.

Unfortunately the published letter only covers the elements where I question the use of top 1% income data rather than a Gini coefficient, and the fact that an earlier article had confused measures based on wealth and income distribution.

Also unfortunately I no longer have the original letter contributed, but I did in that also make the point that the theme of the editorial was simply ignoring the economic result that because extra income by the wealthy is less likely to be spent than extra income to the less wealthy, increasing inequality will lead to lower growth.

In short the causal relationship is that inequality slows growth, and that the benefits of growth per se can be distributed either equally or unequally. Therefore a pro-growth policy needs to start by being grounded in favouring reducing inequality.

The never ending story...

Any review - be it a managerial review of strategy or a policy review -needs to be completed both thoroughly and promptly, as each intervening day is an opportunity lost.

The NBN as a project and NBN Co as a company between them have been subject to six comprehensive reviews under the Coalition Government (the Strategic Review, Fixed Wireless and Satellite Review, CBA and Regulatory Review-Vertigan, the Policy Review-Scales, the Governance Review, and the Broadband Availability).

None of the reviews have been delivered within the timescales announced at their commencement, and certainly none have been delivered within the expected timescales in the Coalition's policy.

Today's AFR has a report from David Ramli that the Vertigan Panel is set to miss its 'July deadline'. However, July is only the deadline that has been applied since the statutory component of the report was tabled in the House of Representatives last week.

The policy said the review would be completed in six months. But it took the Minister three months to get around to establishing it, and when he did so on 12 December last year he announced the panel would report within six months. So 12 June was the reporting date, not July. This was confirmed by Dr Verigan at the Senate Select Committee on the NBN on 5 May when he said "The panel has been asked to provide a report to the minister within six months, so our timetable is to hand a report to the minister in mid-June."

If Ramlii's report is accurate - and I have every confidence it is - the panel hasn't even provided the report to the Minister yet, it isn't just a delay in public release.

As I wrote in an opinion piece for the AFR recently a cost benefit analysis was not an issue for Labor because it was not confronted with an alternative. For the Coalition it is critical because they have consciously decided to seek a renegotiation of agreements to access copper - a renegotiation that was not possible until after the original Definitive Agreements were concluded.

A key element in the CBA will be the demand estimates being developed and the consequences on project finances under different technology scenarios. A weakness of the CBA will be that - despite the Coalition policy statement that the CBA would not rely on any work done by NBN Co - the review is using the Strategic Review costs. These costs continue to be assumptions and one can infer from the delays in reaching agreement with Telstra that there may be a gap between the costs assumed by NBN Co and the costs being offered by Telstra.

But these are not reasons for delay - especially since as late as that May hearing of the Senate Select Committee on the NBN Dr Vertigan indicated he was working to the 12 June date.

There are three possible reasons for the delay. The first is that the task is bigger than originally estimated by the Minister, the Department, the Panel of Experts and the professional consultants. The second is that the Minister's Office is unhappy with the initial indications of the conclusions of the analysis and is asking for the tweaking of parameters to get the answer he seeks.The third is that the Minister has realised that having failed to abolish the Senate Select Committee any CBA released in July will be subject to the same level of scrutiny that found the Strategic Review was a contrived and unreliable analysis.

The first of this is the most benign, but nonetheless concerning. After all Mr Ergas did tell the previous Senate Select Committee that given the information provided to the Implementation Study a Cost Benefit Analysis could be completed in a "matter of days." It raises serious doubts about the judgement of one of the Panel of Experts.

The second alternative would be concerning, but not critical so long as there is sufficient information available to interrogate the analysis and independently assess the sensitivity of various assumptions.

That the third possible reason can be contemplated is even more reason why proposals to replace the SSC NBN with a Committee with a Government majority and the CBA outside of scope should be resisted by Senators, as I previously outlined in another place.

It is incumbent on Minister Turnbull to explain this latest delay in his NBN plans and provide clarity on when the CBA and Review of regulation will be released.
 

Syria and the NBN

Today's AFR has a column by Phillip Coorey which starts:

Sooner or later, leaders are tested by tragedy, and the cynical nature of ­politics is that they are rated on how well – or otherwise – they handle it.

Later he notes:

Tony Abbott’s handling of the MH17 atrocity is being universally admired...There is nothing confected about the combination of anger, grief and frustration that has emanated from the Prime Minister since Friday morning. It reflects the national mood.

Another story by Coorey and John Kerin is headed World backs Tony Abbott fury over MF17. 

What the AFR is saying - and it is reflected across the media - is that the Prime Minister's response has tapped the national mood and has reflected the international mood. The statements have been measured but direct, firm but not disproportionate.

What has all this to do with Syria and the NBN? Simply it relates to a decision made on the campaign trial at the last election on Saturday 24 August 2013. In his book The Rudd Rebellion Bruce Hawker wrote of that day (slightly abbreviated):

Following the frenetic pace we had set yesterday I was looking forward to a quiet Saturday in Sydney. However, I woke up before 7 a.m. and found a message from Fiona to say she was ill and would not be able to attend the press conference. So I got dressed and went out to Kirribilli and went through the issues - including the latest round of terrible polls showing, among other things, that Kevin would lose his own seat...We then went to the NBN Discovery Centre at North Sydney, where we found out that the Syrian crisis was escalating, following the revelation that Syrian authorities had used chemical warfare on their own people. I said that we should make this the story of the day and ensure that Kevin said he would be offering Abbott a briefing. Nothing is more likely to worry the voters than the thought of Tony Abbott being in charge during a Middle Eastern crisis. Imagine Julie Bishop calling the shots while Tony does a triathlon....
The press conference went well.

There is nothing in the book to mention why the Prime Minister was visiting the NBN Discovery Centre on a Saturday. It reveals a lot about the campaign.

Since before the leadership change the PM's office and the Minister's office had been trying to organise an "NBN Day" where the focus of campaigning could be on the NBN and the more important Digital Economy issues. The leadership change derailed the initial plans and nothing else was able to be arranged prior to the election being called.

Once the election was called, campaign HQ continued to plan for an NBN day. As was documented in the official ALP review of the campaign "There were serious difficulties managing the liaison between the Travelling Party and Campaign Headquarters." Planning for an NBN day was one specific case.

The visit to the NBN Discovery Centre was planned and deferred about three times, with the final visit scheduled for the Saturday. In the meantime Campaign HQ worked with the Minister's office to prepare a document making the case for Labor's NBN. I created a longish word document that drew on all the work we'd done before, including many speeches, and on a number of "one page" briefs prepared by my colleagues Andrew Rodger, Adam Sims and Andy Byrne. Jessika Loefstedt, who was formerly from both Albanese's and Gillard's office, worked with the design people at Campaign HQ to prepare an excellent brochure I Want My NBN. 

So everything was set. Hawker even records in his book that on 20 August ALP pollster John Utting had advised the need to do more NBN stories - especially to appeal to male voters. (Don't accuse me of being sexist - I am just reporting how Hawker described the polling data.)

So the visit to the NBN Discovery Centre was arranged. I attended only to be able to answer any NBN specific issues that the PM might have that others in his party couldn't.

The Prime Minister arrived and was surrounded by the press pack as he toured the centre.

After the tour the PM and his entourage disappeared into a meeting room to prepare for the press conference - and were there for an extensive period. Based on Hawker's account above that was presumably when the decision was made to make it Syria day.

When the PM emerged that is what the press conference was about. It is even (by my recollection) what the PM started with...a statement on Syria.

Unfortunately I haven't been able to find a video clip or transcript of the whole press conference (if a reader has a link please letme know). The SBS online story actually mentions that the PM was at the Discovery Centre promoting the NBN, but the story is headed and dominated by the fact that he talked about Syria.

An adviser was thrusting at the PM from the side an iPad with the 'I Want My NBN' brochure and website for promoting the story, and the PM did refer to it. He also very briefly mentioned some small business initiatives.

All of this was lost under the guiding hand of Bruce Hawker and the idea that making Syria the issue would be good for Labor.

The outcome was vastly different. For the next two days the PM was battling accusations of a stunt. He claims he did not say he was "suspending campaigning" because of the situation in Syria. He did cerainly say he was returning to Canberra for a full briefing. But he didn't reveal that he was first returning to Brisbane to film Annabel Crabb's 'Kitchen Cabinet'. This, in turn, led to accusations that the PM delayed the briefing for the puff piece.

And now, ten months later, we actually see the new PM being lauded by his measured approach to an international incident. I don't see the Australian people being worried about Mr Abbott being in charge, nor is Julie Bishop taking control while the Prime Minister is exercising.

But far more significantly for the political judgement of Bruce Hawker - the PM's polling hasn't jumped because of his performance over the issue. In the final analysis, even when there are Australian citizens directly affected, Foreign Affairs is a hygiene factor in Australian politics.

The economy and our social fabric - and the role communications infrastructure could play in it - well that's another story.