“Net Neutrality is a foundational principle in the digital age. But for too long its future has been uncertain due to changes in leadership and politics. That is why it’s important for Congress to do what only it can do through a bipartisan process: write into law the principles of Net Neutrality. Congressional action will provide innovators with a level playing field and industry with the certainty to make technology and investment decisions to continually upgrade our networks. If Net Neutrality is as important as we all say it is, it should be the law of the land, not a political hot potato resting on the third rail of American tech policy for another decade.” – Mike Montgomery, Executive Director
Big Music Blames Streaming For Its ‘Woes’ But Industry Is Doing Just Fine
By Mike Montgomery
The annual Grammys award show is full of glamour and fantastic entertainment featuring incredibly talented artists and musicians. Grammys On The Hill, on the other hand, is the event’s corporate, big music, obnoxious cousin. Every year at this time, big music executives and a pocketful of artists descend upon Washington not to delight and amaze, but to cry poverty in the hopes of changing the laws around music licensing.
Today, the big multinational and multibillion dollar music labels will share their sob stories with members of Congress. They’ll attempt to convince policymakers that a lack of royalties for radio play hurts musicians, that songwriters deserve to make more and that streaming is harmful to music’s health.
Over the last decade, how we listen to music has transformed, giving consumers the power to choose what, when and how we listen to music — whether it’s on the radio, satellite or via streaming platforms. Innovation has changed the game. As I’ve said so often before that I’m now becoming a broken record, there’s no putting the technology genie back in the bottle.
But for the labels to be lamenting to Congress about their faded fortunes in this environment is a pretty ridiculous line of argument. Three music labels, Universal (owned by Vivendi), Sony, and Warner Music, account for 70 percent of all music revenues — meaning they still hold the purse strings.
And despite what they say, there’s more money going into that purse than at any time in recent history. The music industry reported last week that it had its best year in two decades. According to the Record Industry Association of America (RIAA), total U.S. retail sales from recorded music rose 11.4 percent last year, to $7.7 billion.
That’s great news that the labels should be celebrating. But that’s not the way the Big Three operate. They smell blood in the water and, like a pack of hungry sharks, they’re attempting to squeeze the rest of the industry in order to grab more for themselves.
They tell artists that the streaming platforms and the radio stations are to blame. They put up a united front before Congress, saying that we’re all in this together and that together we can fix the music industry.
Sadly, artists won’t realize the full benefit of growing record revenues because the music labels have done everything possible to preserve their pro-label, anti-innovation business models instead of embracing new technologies and the operational, market and marketing efficiencies they offer.
Like taxis fighting the consumer-friendly advent of companies like Uber and Lyft, record labels refuse to change. They still work “breakage” feesinto their artist deals, which was money that was originally meant to cover the cost of records or discs broken in transport. In the streaming world, that’s no longer an issue and it is but one tangible example of money that’s being funneled away from artists not by the streaming companies, but by the labels.
To find the voice of reason on all of this Grammys On The Hill have only to look to this year’s honoree: country music star Keith Urban. The Australian-born singer is one of the biggest acts in America and he’s beloved by music fans of all ages so it’s no surprise that big music would want him,not the corporate titans behind the curtain, as the face of their lobbying rodeo.
But he recently commented to Politico that he doesn’t share the same distaste for streaming platforms as his label overlords, stating that, “Owning music feels like a very foreign concept to me. Buying someone’s album feels odd to me. … But streaming to me seems to be a very obvious, fluid, quick, logical way for music to be heard in this day and age.”
And when asked about one of the main complaints of the Grammys On The Hill crowd, that they should be getting paid for radio spins, Urban very candidly said he still finds AM/FM radio to be a useful promotional tool that helps him reach fans. “A huge amount of my audience still listens to radio,” he told Politico. That’s where they get a lot of my music.”
For years, the labels have been clamoring for royalties for radio play. They claim it’s unfair that radio stations can spin hit songs and pay songwriters but not artists for the right. But if traditional radio play is so important to a huge star like Urban, the only reason the labels are seeking to alter the landscape is to further enrich themselves. This isn’t a rising tide argument. This is a testament to the self-aggrandizing nature of the record labels and their unending quest for greed.
We need to take a new look at how the big music is organized, subsidized and supported by Washington. And that should start with one simple word: transparency. Congress should ask the labels to detail how much of the $7.7 billion in revenues it took in last year went to the artists they purport to represent. Get granular. Details are our friends.
Despite the whining from big music, what the RIAA revealed last week is that business is booming — for them. It’s time to stop catering to the record labels and create a system that is fair to everyone, rather than allowing the labels to continue telling their dirty little lies about the nature of music licensing laws.
This piece was originally published in The Hill.
Innovators Need Closure On The Apple v. Samsung Case
By Tim Sparapani
The dispute between Samsung and Apple over allegations that Samsung stole Apple’s mobile phone design is like a piece of gum that you’ve been chewing for way too long. It’s time to spit it out.
There’s an enormous amount at stake for innovators in this fight over mobile phone sales, and as I’ve written many times before, this case truly matters. How, or if, damages are ever calculated for Samsung’s infringement of Apple’s rounded-corner phone design will set precedent that will influence Silicon Valley for years to come.
There’s also a real risk that if the outcome establishes the wrong formulation for calculating patent design damages, it will create a new type of design patent troll —essentially law firms that will sue companies to attempt to extort settlements from them based on allegations that they have infringing product designs.
As a reminder, here’s how we got to the point where a federal court has been told to determine anew potential damages for alleged design patent infringement. Last year, the U.S. Supreme Court decisively reset the rules of design patent cases to prevent them from spinning out of control. The court rejected Apple’s position that it was entitled to the full cost of each iPhone that wasn’t purchased because a consumer had instead opted for the infringing Samsung phone.
If the court had ruled in favor of Apple’s position, Samsung would potentially have been on the hook for an estimated $1 billion. But the court decided (to Silicon Valley’s delight) that this “total profits” damages theory was erroneous because software-powered hardware is routinely filled with hundreds if not thousands of other patented inventions that give those products their value.
While the Supreme Court wisely struck down this total profits standard, it left the job half done by tossing the case back to a lower federal court to determine the appropriate damages. That’s why the upcoming decision from the Federal District Court for the Northern District of California will establish precedent around what portion of a product is attributable to its design as opposed to its functionality.
Drawing that line is easy with something like a shovel, which is a relatively simple tool. It’s much harder to do with a complicated piece of technology like a drone, an autonomous vehicle or a smartphone. The court will need to craft a smart rule that divvies up the pie so future judges and juries can determine damages when these cases invariably come up again.
Full disclosure here: As I’ve written before, I’m an unequivocal Apple fan boy. Since the U.S. Supreme Court’s ruling, my family has bought two more iPhones, and I’m writing this piece on my new Mac. I love the design, durability and functionality of Apple’s products. Simply put, though, the risk to innovators is too high if Apple is allowed to recoup the lion’s share of its alleged losses because a lower court elevates the concept of design over product functionality.
The court’s determination will go beyond the question of how much Samsung has to pay Apple. It will lay the groundwork for rules about how we properly compensate the designers who produce iconic, paradigm-shifting product designs, particularly when those designs are only a portion of the usefulness of the product they are part of. The decision will tell us a lot about where the value lies in any new piece of technology. That’s going to be an important factor in ensuring all innovators in Silicon Valley, including coders and designers, prosper.
The longer this case drags on, the more these questions go unanswered and the more difficult it is for people who might be working on ground-breaking products to move forward.
This piece was originally published in Forbes.
If Congress Is Serious About Job Growth, It Needs To Reject The New Health Care Plan
By Mike Montgomery
(AP Photo/Susan Walsh)
For many years, company-sponsored health care was a boon to workers who paid reasonable rates and didn’t have to worry about not being able to see a doctor. But this system had a hidden drawback — it discouraged people from leaving their jobs to set up their own businesses. Even with insurance, a serious medical problem can easily bankrupt a family. For many, the risk of going without it was just too great.
The Affordable Care Act changed all that. It gave budding entrepreneurs a way to leave their jobs, start new businesses and create new jobs. According to figures from the Treasury Department, in 2014 one in five consumers who bought health care on the open market was a small business owner or was self-employed.
It’s no small thing that the ACA unleashed that kind of latent entrepreneurial spirit in many Americans. While it wasn’t the main objective of the ACA, it was a crucial side benefit and one that the government should be doing all it can to maintain.
Instead, there is a bill in Congress proposing to replace the ACA that would, according to the Office of Management and Budget, kick 24 million people off of health insurance by 2026. The new plan would make health insurance more expensive for many people, and without the expanded Medicaid option, budding entrepreneurs who might have left their jobs to start new businesses might instead decide to play it safe. For those gig economy workers already out on their own, this proposed legislation puts them in the precarious position of potentially not having any coverage at all.
This would be disastrous, especially for the gig economy. A recent report from The McKinsey Global Institute found that 20 to 30 percent of the working-age population engage in some kind of independent work. With the continued growth of the gig economy, that number should continue to increase. Companies like Uber and Thumbtack are giving people the freedom to leave dead-end jobs and work for themselves on their own schedules. That means they can work on business plans, write novels or even just spend more time with their families.
The wave of innovation that inspired these new companies is indelibly tied to the ACA. Many young people who work in the gig economy can’t conceive of a world where they don’t have health insurance because they’ve graduated into this economy.
If people lose their health insurance through the ACA, it’s not only going to damage the current gig economy, but also the ability of future innovators to create the next generation of great companies. Whether or not the new health care bill acknowledges it, the future of work is not secure, high-paying factory jobs with good benefits. It’s digital. And whatever that eventually looks like, it’s going to be helped along by legislation that understands the evolving realities of work and by providing the flexible, 21st century safety net people need.
Members of Congress who care about unleashing America’s job growth potential must realize that the current bill is the wrong plan for our times and it risks taking us backwards. America’s entrepreneurs are counting on Congress to get this right.
This piece was originally published in Forbes.
No One Should Have To Choose Between Health Care And A Smartphone
By Mike Montgomery
Rep. Jason Chaffetz (R-Utah) made a serious blunder that should concern the entire entrepreneurial community when he said on CNN Tuesday that “rather than getting that new iPhone that [people] just love … maybe they should invest in their own health care.”
He was on TV to defend the Republicans’ newly rolled out alternative to the Affordable Care Act. Instead he put his foot in his mouth and in doing so posited a gross misconception that owning a smartphone in today’s digital economy is, somehow, a luxury.
Although Chaffetz later walked back the statement, it’s still worth discussing. Let’s put aside the fact that the average annual cost of health care last year was $10,345 per person and that most people can get new smartphones for less than $50 per month by signing a contract with a carrier. There’s clearly no cost comparison here.
But on a deeper level, Chaffetz’s comment shows a severe lack of understanding of modern technology, entrepreneurship and the trajectory of the economy. A smartphone is not only a necessity for people who work on-call shifts or who work remotely or in the gig economy. Smartphones are potentially the greatest invention of our modern age not just because they enable us to text, make calls and surf Facebook, but also because of the way they can help us stay healthy. Rather than face a binary choice between health insurance and an iPhone, as Chaffetz proposed, perhaps insurance plans should provide beneficiaries with a smartphone that could easily be considered a required piece of health care hardware for the 21st century.
Every day new apps are emerging that are related to health. There are apps that can track your exercise and food intake. There are apps that remind people to take their medications, drink more water and even meditate to manage stress. These small innovations can go a long way toward helping people stay healthier and out of the doctor’s office.
But for people who do become sick, smartphones can be a lifeline. People who live in rural areas can communicate with specialists hundreds of miles away. Smartphones have the potential to eliminate the expensive paperwork that can add costs and time to people getting the care they need. Smartphones offer a future where consumers could one day shop for the best prices on procedures like knee replacements and MRIs. The possibilities are endless.
Chaffetz’s comment shows that there is still a dangerous divide between reality and Washington, D.C. If politicians really care about making health care cheaper and more widely available, they should work with entrepreneurs to come up with modern solutions to this age-old problem. Equating smartphones with wasteful spending is not the way forward.
This article was originally published in Forbes.
Why the FTC must regain its power as the top cop in online privacy
By Tim Sparapani
There are a few things that are constant in this world: death, taxes, and the fact that every new administration rethinks regulations.
That can be a big problem, especially when it comes to consumer privacy rights. The rules that govern how companies collect, use and share consumers’ data shouldn’t ebb and flow like the tides. They should be cemented in place to give companies and consumers desperately needed assurance that the landscape won’t keep changing.
For years, privacy advocates like me have pushed for protections on consumer data collected on and offline. We urged that the U.S. Federal Trade Commission (FTC) be given additional resources to focus specifically on the misuse of consumer data collected offline and merged with online data.
Unfortunately, the FTC’s wings were clipped when another federal agency, the Federal Communications Commission, expanded its previously narrow privacy authority. While that might sound like something privacy advocates would applaud, it’s a move that’s only muddied the waters and, arguably, reduced protections for consumers’ online privacy.
The U.S. Federal Communications Commission’s (FCC) self-approved expansion of authority actually displaced the FTC entirely. FTC staff had consistently policed online privacy with an impressive level of authority and competency.
That not only left consumers’ privacy in limbo, it pushed innovators and startups into a chaotic, unpredictable regulatory landscape for all online products and services that make use of consumer data.
The confusion that resulted from this was compounded by the election. Before the FCC could even hire privacy experts or prepare policy pronouncements, a new commission was ready to walk through the door. That’s why it is long past time for Congress to impose some order on the privacy landscape. One easy thing Congress can do is return the FTC to its place as the top privacy cop on the internet beat.
This piece was originally published in The Hill
Statement By Executive Director Mike Montgomery On The FCC Stay On Privacy Regulations
In These Chaotic Times, Democrats Need to Rethink Priorities
By Mike Montgomery
It was crunch time. With less than two hours to go before the U.S. Senate narrowly confirmed the controversial Betsy DeVos as the next secretary of education, a group of prominent Democratic senators huddled on Capitol Hill for a press conference about … something else.
What could have been more important? The so-called travel ban? President Donald Trump’s foreign policy agenda or the onslaught against federal environmental regulations?
No, they gathered to talk about the future of net neutrality and the concern that at some point in the future, the FCC might decide to alter its approach to governing the internet.
Don’t get me wrong: I fully support a free and open internet, but more fundamental issues must take precedence in these trying times, especially when a torrent of constituent feedback can permanently turn the tide on matters of national importance — where focusing on net neutrality today may mean a constituent decides not to weigh in on opposing Steve Bannon’s spot on the National Security Council.
As a parent and a progressive Democrat, I am disappointed to see vital energy and focus diverted from the DeVos vote. On Tuesday, the Senate confirmed the unqualified DeVos to run the department that serves 50 million students across more than 100,000 schools. Why was discussing something like net neutrality, on that day specifically, more important than discussing a contrasting progressive vision for the future of our public school system or supporting actual education voices?
That’s not to say that net neutrality isn’t important. It is and will remain so. But progressives who are also net neutrality proponents should be disappointed that any attention was deflected on an historic and consequential day to discuss what the FCC might do in the future regarding net neutrality.
DeVos was confirmed by the narrowest of margins – and perhaps if senators were focused on that issue and not net neutrality, perhaps there could have been at least one more last-gasp attempt to convince one additional Republican to vote against DeVos. Instead, they were preparing for a press conference that did not need to be held that day.
Unfortunately, what’s done is done. There is no reset button for anyone to push. DeVos is the secretary of education, and net neutrality is in place as firmly today as it was earlier this week.
Net neutrality deserves attention and protection — but it needs a thoughtful legislative conversation to codify an open internet, not press conferences and partisanship. For those who want to preserve the basic principles of net neutrality but are fearful that the FCC will abolish the Open Internet order, it’s time to take this fight to Congress. As we’ve said all along — only by cementing net neutrality into law can the government hope to create a stable environment for consumers and existing and future tech companies alike. We need bipartisan legislation that will remain immune to the whims of any particular administration and survive partisan politics.
Many people I know feel displaced and voiceless in today’s political environment. The last few weeks have shown that activists are finding new ways to express their points of view – but the firehose of issues is unrelenting and daunting. Health care, immigration, education, the Supreme Court, the environment – the list goes on. We all need to remind ourselves that there’s a proper time and place for important debates like net neutrality. Tuesday was not that day.
Mike Montgomery is executive director of CALinnovates, a nonpartisan coalition of tech companies, founders, funders and nonprofits determined to make the new economy a reality.
CALinnovates Calls on Congress to Enact Bipartisan Net Neutrality Legislation
February 7, 2016
The following quote can be attributed to CALinnovates Executive Director Mike Montgomery:
“To quote Yogi Berra, ‘It’s déjà vu all over again.’ Well into a decade of debate about Net Neutrality, it simply won’t go away. CALinnovates takes very little satisfaction in saying we saw this coming, but we’ve been calling for a Third Way that could affirmatively cement the tenets of Net Neutrality into law forever. Instead, Net Neutrality is apparently back on the table, perhaps having experienced a slightly longer shelf life than a ripe banana.
“By passing bipartisan Net Neutrality legislation, Congress can enshrine lasting laws into place that will remain immune to the whims of any particular administration and survive partisan politics. A regulatory roller coaster makes consumers and the business community queasy. Let’s settle this issue once and for all. The time is now.”
CALinnovates Welcomes Call For Fresh Look at Online Consumer Privacy Rules
By Tim Sparapani
Innovators and startups welcome the news that policymakers are taking a fresh look at how to protect consumers’ privacy online. While the headlines may try to spin this as just another partisan food fight, in truth it’s an incredibly important opportunity to restore balance and clarity to consumer privacy rules in the online ecosystem.
As we’ve said from the start, the privacy rules adopted late last year by the Wheeler FCC were clearly flawed and the ongoing jurisdictional tussle over privacy needs to be resolved for the benefit of consumers and companies alike. The Wheeler rules created an inconsistent, confusing patchwork, in which consumers’ private information on the internet would be protected differently depending on which servers and routers their data happened to be crossing. Yes, the exact same data would arbitrarily enjoy different levels of protection. 94% of consumers believe that all companies collecting their information online should face the same set of rules – and they’re right. The Wheeler rules break from the bipartisan FTC privacy framework that has seen the internet thrive and grow in other ways, introducing new friction and erecting confusing and unjustified new obstacles to even the most mundane uses of data any consumer would see as non-sensitive. This kind of regulation is bad for consumers, bad for entrepreneurs, and bad for innovation.
In addition, a little known consequence of the Wheeler rules was that they jeopardized the United States’ privacy agreement with the European Union. The Privacy Shield is predicated in part on the United States having a single, lead consumer privacy agency, and the dilution of the FTC’s authority puts this agreement at risk.
We’re glad that policymakers at the FCC and in Congress will have an opportunity to review the rules again and, hopefully, correct these flaws. A return to the FTC’s role as the lead privacy enforcer would allow innovators to do what they do best: innovate. In addition, a consistent set of rules would do well to assuage consumer advocates’ concern that gaps in enforcement would delay critical privacy actions when companies are ignoring or outright abusing their data responsibilities to their customers.