Opinion: 4 reasons why digital regulation is difficult

The US Supreme Court’s recent ruling against Aereo, an online television broadcaster, showed how much governments continue to struggle with regulating the internet. 

When the US Supreme Court struck a major blow to the business model of Aereo, the over-the-internet television broadcaster that catered to cord-cutting millennials, the tech industry was outraged. Silicon Valley alumni like Professor Eric Goldman are concerned that the decision sets a precedent that will stifle innovation in digital media. Others argue that the decision showed the court’s ignorance of technology and paved the way for the end of Dropbox.

These misgivings over the decision are probably overstated. Other legal scholars contend that the Supreme Court, however ignorant about digital media it may be, wrote a narrowly-focused decision precisely so that it would not set a broad precedent against digital innovators.

Regardless of whether Aereo’s use of thousands of tiny antennae was enough to get around copyright laws, the case brings to light the striking inability of governments to deal with technological innovation. Here are the four big problems for digital governance today:

1. Laws were not written for the digital age

The Supreme Court decision relied heavily on the Copyright Act of 1976, written 13 years before the World Wide Web was created and three years before Nickelodeon, the most popular cable TV station in the US, went on-air. In fact, the entire internet is regulated on the basis that it is not primarily used for communication. That leaves judges and regulators with inadequate tools to handle the influx of new internet businesses.

The most telling part of the Aereo case is not the ultimate decision. It is that, as Justice Scalia wrote in his scathing dissent, the Supreme Court relied on the shaky justification that if it looks like a cable company and sounds like a cable company, it probably is a cable company. Ruling with an analogy to the analog world cannot be a sound strategy since the world has quickly become digital.

2. Neither lawmakers nor judges are equipped to adopt new technologies

US Lawmakers are in no hurry to rework the law for the next generation of business and privacy issues. Even if Congress were ready to take action, the majority of lobbying money and campaign contributions from media companies come from companies whose business model is rattled by tech start-ups like Aereo.

That leaves a group of judges with an average age of about 70 using outdated laws to decide whether technologies invented after they started receiving social security checks should be allowed to continue operating. That is not to say that they do not understand technology, but not being digital natives places them at a distinct disadvantage for understanding the implications of their rulings.

3) Incumbent media companies can spend lots of money to stop threatening innovations

The future is scary for broadcast TV networks and record labels. Millennials are not buying their products, and the industry has been at a loss for fixing its demographic problem. Instead, companies like ABC (the plaintiff in the Aereo case) are trying to stave off their competition through their advantage in the courtroom. The access to tremendous resources allows them to lead long and expensive legal fights that their start-up competition cannot.

Of course this is all on top of the money spent on lobbying Congress and contributing to campaigns. Even if traditional media companies have not yet figured out a way to compete with disruptive technologies, they may be able to outlast them using their experience in the courtroom and connections to Congress.

4) Tech is not bound by legal jurisdictions  

In a sense, the Aereo decision is clear-cut. Aereo operated only in the US, so there was no opportunity for multiple courts to rule differently. Other tech legal battles are not so clear. Apple and Samsung have been fighting over patents the last three years, costing each billions of dollars. Despite several rulings, neither company has decisively won. Just in the US, Apple was found guilty of infringing Samsung’s patents by a federal court, but the US International Trade Commission found  that Samsung infringed Apple’s.

Beyond that, cases in South Korea, Germany, Japan and several other countries turned out in different ways. Technology easily crosses borders in a way that makes current intellectual property laws look trivial.

Tech industry advocates warned that the Aereo case will have a chilling effect on Silicon Valley and consumers will ultimately suffer. But that misses the point. It is the entire way we deal with technology and the law that has a chilling effect.


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Categories: North America, Technology

Author:Alex Christensen

Alex Christensen focuses on the impact policymaking has on the economy. He previously was an economic policy analyst at Minnesota 2020, a non-partisan think tank based in St. Paul, Minnesota. As the Hirsch Undergraduate Fellow at the Center for New Institutional Social Sciences, he analyzed how political institutions impact the development of wind power across the OECD countries. Alex is currently studying for his MSc in Economics at the London School of Economics, where his thesis examines the connection between monetary policy and equity prices. Previously, he graduated magna cum laude from Washington University in St. Louis with a degree in economics and political science.


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