What To Do About Facebook — First Thoughts

If a billion-user, private, hugely profitable company were truly this powerful, what should be done about it?

by Gaius Publius

The revelations about Facebook and Cambridge Analytica have come and gone quickly, like a fiery auto crash into a ten-foot wall, the remains of which nevertheless disappear overnight — in this case replaced by the next Trump scandal to hit the news. Pedestrians walking past the crash site today can only smell the fumes of earlier fevered concerns.

Yet the Facebook problem remains, if barely considered now. As we wrote earlier, what Facebook did in that case was no more than it was designed to do. Not only that, but what Cambridge Analytica did was follow a path others had tread before, except that this time the "Trump! Russia!" taint had made its own deeds unacceptable.

But ask yourself, if either political party had done what CA did, would this be news? A scandal? Or just "how things are done around here"? And given the power of this kind of private company over the public, is its very existence in the public interest at all?

The questions surrounding Facebook are many and serious. Facebook is first a monopoly; next, a mass manipulator capable of swinging elections and other social decisions in an order-of-magnitude-greater way than simple common advertising, no matter how targeted; third, a source of enormous wealth to a powerful few; and finally, it performs an almost utility-like, ubiquitous social function in today's Internet age. (Consider the telephone network as a utility that connects masses of people and enables communication. Now consider Facebook as a kind of modern-day telephone network. The communication is what we're interested in. The monetizable data and metadata of our communication is what its owners are interested in. The data collection is not necessary to the communication function.)

Each of these aspects of its nature adds implications to the "What to do about Facebook?" question. As a monopoly, should it be broken up? If so how? As a mass manipulator, should its activities be curtailed? As a source of great wealth to very powerful people, it presents all of the obstacles to altering its activity as does, for example, the problem of addressing the harms done by Wall Street. And as a utility, should it be allowed to continue as a private operation, or be nationalized and run in the public interest only?

"Nine Steps to Restructure Facebook"

These are heady questions. This piece represents a first attempt to grapple with some of them, and I may well return to the full topic later. But let's start here, with a look at an article in the Guardian by Barry Lynn and Matt Stoller, both of the Open Markets Institute, a think tank that studies monopolies.

The article's title: "Facebook must be restructured. The FTC should take these nine steps now". I recommend reading it in full, but I want to present today just the authors' suggestions for "fixing" Facebook. These are their recommended nine steps:

1) Impose strict privacy rules on Facebook, perhaps using Europe’s new General Data Protection Regulation as a guide.

2) Spin off Facebook’s ad network. This will eliminate, in one swoop, most of the incentive that Facebook now has to amass data and to interfere and discriminate in the provision of information and news.

3) Reverse the approvals for Facebook purchases of WhatsApp and Instagram, and re-establish these as competing social networks.

4) Prohibit all future acquisitions by Facebook for at least five years.

5) Establish a system to ensure the transparency of all political communications on Facebook, similar to other major communication networks in the United States.

6) Require Facebook to adopt open and transparent standards, similar to conditions the FTC imposed on AOL Messenger in the AOL-Time Warner merger settlement in 2001.

7) Establish whether Facebook violated the 2011 consent decree and, if so, seek court sanctions.

8) Threaten to bring further legal action against Facebook unless top executives immediately agree to work with the FTC to restructure their corporation to ensure the safety and stability of our government and economy.

9) Establish whether top executives enabled, encouraged, or oversaw violations of the 2011 consent decree and, if so, pursue personal fines against them.

Some of these suggestions touch on the behavior of the company relative to its users and data — numbers 1, 5, 6, and all of those relating to the 2011 FTC consent decree, which "required that users be notified and that they explicitly give their permission before data about them is shared beyond the privacy settings they have established. The developer of the [Cambridge Analytica] app sought permission from those who downloaded it but not their Facebook friends."

Some of these suggestions touch on Facebook as a monopoly — numbers 2, 3, and 4. Some of them would indirectly but materially affect the wealth of the Facebook owners (but not the political power their wealth purchases).

None of these suggestions, however, directly addresses whether Facebook should (a) be allowed to exist at all; or (b) be nationalized and regulated like a utility, meaning operated in the public interest and not for the acquisition of private wealth and power.

So these are just first thoughts to answering the question, "What should be done about Facebook?" and only first thoughts. Still, they are important thoughts. If something isn't done about Facebook, it will continue to be used as a mass manipulator (and grow more effective as one) by a great many actors not tainted with the "Trump! Russia!" stink — meaning both American political parties, plus our various special-interest elites, such as the military.

Facebook, Democracy & the Next Sanders-Like Candidate

The implications for our democracy, assuming we have one, are great.

To consider just one, imagine a Bernie Sanders candidacy in 2020 (or a candidacy very like it), with Facebook still on the loose, and conscienceless Establishment operatives, who hate and fear him, willing to "do anything it takes" to protect their insider grip on the political process. No "Trump!" no "Russia!" in this scenario, but an outcome nevertheless as tragic for the nation, as I see it, as the one currently mourned as having already happened.

If 2020 is indeed the last electoral cycle for America to escape the twin tsunamis of, first, chaotic violent revolt against "rule by the rich," and second, the wave of climate chaos that races toward us, it may not matter much who wins in 2020, even if the winning candidate promises nothing more than "let's just get back to normal."

 Imperial Storm Troopers protecting a bank in Portland

In the post-2020 world, getting back to "normal" may not be enough.

GP
 

FCC Chair Wheeler: I Want to Regulate the Internet As a Utility

by Gaius Publius

In a dramatic statement, issued through Wired magazine, FCC Chairman (and former telecom lobbyist) Tom Wheeler has "fully" endorsed reclassifying the Internet as a common carrier under Title II of the Telecommunications Act. In other words, the Internet, all of it, will be regulated as a "utility," the way your phone service is.

Wheeler's piece opens with a fascinating story in which he tells his own (bad) experience as a fledgling Internet provider dealing with the lock-out policies of cable providers — while Steve Case, the founder of what would become AOL, was successfully selling a similar, but much inferior product using common-carrier–protected phone lines. That part is not just interesting; it makes what follows entirely credible.

Then Wheeler writes this:

Originally, I believed that the FCC could assure internet openness through a determination of “commercial reasonableness” under Section 706 of the Telecommunications Act of 1996. While a recent court decision seemed to draw a roadmap for using this approach, I became concerned that this relatively new concept might, down the road, be interpreted to mean what is reasonable for commercial interests, not consumers.

That is why I am proposing that the FCC use its Title II ["common carrier"] authority to implement and enforce open internet protections.

Using this authority, I am submitting to my colleagues the strongest open internet protections ever proposed by the FCC. These enforceable, bright-line rules will ban paid prioritization, and the blocking and throttling of lawful content and services. I propose to fully apply—for the first time ever—those bright-line rules to mobile broadband. My proposal assures the rights of internet users to go where they want, when they want, and the rights of innovators to introduce new products without asking anyone’s permission.

All the right words, finally.

Words and Deeds

Still, so far just words. The deeds will have to match them. Two pieces for you. One, this from one of the main advocacy groups, Popular Resistance (my emphasis throughout):

Today [February 4] is the day that the FCC announced the rules for net neutrality that will be voted upon at their next meeting on February 26. Together, our work over the past year is the reason that we achieved reclassification of the Internet as a common carrier under Title II of the Telecommunications Act. We are on the verge of a tremendous people powered victory over the telecom industry. We expect more analysis of the actual language to come soon. But for now, we can celebrate that people power conquered the cable industry and welcome net neutrality back. (Here is a fact sheet from the FCC on the proposed rule.)

We agree with Chairman Wheeler that the interests of the telecoms is not always consistent with the public interest. [Yes, Wheeler actually said that.] We urge the Chairman to not compromise with telecoms and Internet providers as this is the opportunity to follow the wishes of the American people and put in place rules that ensure the Internet is free of discrimination.

We are also pleased to see that proposals in Congress for fake net neutrality are not moving forward. Both political parties would be wise to side with the American people, small businesses, Silicon Valley and other Internet-based businesses rather than the telecom companies. The public wants real Net Neutrality.

We look forward to reviewing the final rule but if it is consistent with the statement issued today, we will do all we can to ensure that the telecom’s influence in Congress does not undo rules that provide for real Net Neutrality and preserve the dynamism of the Internet as a democratized form of communication and vehicle for innovation.

So, notes of relief, notes of caution. Reasons for concern are two. One, that Wheeler will weasel in a way that matters. From his statement linked above:

All of this can be accomplished while encouraging investment in broadband networks. To preserve incentives for broadband operators to invest in their networks, my proposal will modernize Title II, tailoring it for the 21st century, in order to provide returns necessary to construct competitive networks. For example, there will be no rate regulation, no tariffs, no last-mile unbundling. Over the last 21 years, the wireless industry has invested almost $300 billion under similar rules, proving that modernized Title II regulation can encourage investment and competition.

Like Popular Resistance, we'll have to see what that means. "Returns" means profit. Still, he's firm and clear on many of the rules he's proposing, like no throttling, blocking, or "fast lanes." See page 2 of the FCC's Fact Sheet (pdf) for that. Page 3 talks about "Forbearance," Title II regulations that won't apply, which is where we could get some take-back.

Industry Reaction

The second note of concern is Congress and its (bought-and-paid) attempt to block this move. As you read above in the Popular Resistance statement, industry shills in Congress (is it really just Republicans?) are working to prevent this reclassification. The latest attempt is a set of bills before the House and Senate introduced by Sen. John Thune and Rep. Fred Upton. The analysis is here. In essence, these bills neuter both the public Internet and the FCC's ability to regulate it.

But according to Politico:

[Sen. John] Thune told MT on Tuesday [February 3] that it’s “unlikely” that the Republican draft net neutrality bill will move forward before the FCC votes on Wheeler’s net neutrality proposal later this month. There "probably" won't be a markup of the bill "any time soon," he said, adding that he’s still trying to get Democrats to support the bill.

Plus, Harry Reid is on the side of the angels on this one. So far, so good on that front. By the way, get ready for more of this from the heavy manipulators of the right-wing thought machine:

There’s a debate raging about how the FCC should regulate the Internet. Some advocates are pushing for “Title II.” That’s code for 1930s-style utility regulation. Title II would put the FCC squarely in the middle of the Internet — right beside the NSA. It saddles the Internet with price controls and other heavy-handed rules from a thankfully long-gone era. The debate over Title II isn’t a debate over net neutrality, which is why many net neutrality proponents actually oppose Title II. Instead, it’s a debate between a vocal minority that wants greater government control over broadband companies, and defenders of a bipartisan consensus around a “Hands Off the Internet” approach. ...

Drivel. Focus-tested. Industry-bought. But that's where they're headed. (About that "bipartisan consensus," I know it exists. I'd love to have the names of any elected Democrat who signs onto this pushback.)

The Ruling Will Apply Very Broadly

What's striking (and certain) about this proposal is how sweeping it is. At least in the main, nothing is being finessed. From the FCC Fact Sheet again:

First, the Chairman’s proposal would reclassify “broadband Internet access service”—that’s the retail broadband service Americans buy from cable, phone, and wireless providers—as a telecommunications service under Title II. We believe that this step addresses any limitations that past classification decisions placed on our ability to adopt strong Open Internet rules, as interpreted by the D.C. Circuit in the Verizon case last year. But just in case, we also make clear that if a court finds that it is necessary to classify the service that broadband providers make available to “edge providers,” it too is a Title II telecommunications service. (To be clear, this is not a “hybrid”— both the service to the end user and to the edge provider are classified under Title II.)

Nice. Not much weasel there. The Verge comments on this as well:

The biggest revelation from the proposal is the decision to lump wireless networks in with wired broadband, something the FCC has avoided doing for years thanks to enormous pressure from Verizon and AT&T. "I propose to fully apply — for the first time ever — those bright-line rules to mobile broadband," Wheeler wrote. "My proposal assures the rights of internet users to go where they want, when they want, and the rights of innovators to introduce new products without asking anyone's permission." Including wireless providers in the rules is a hugely important move, since we've seen that the biggest players have been willing and able to abuse internet openness. AT&T once blocked FaceTime for completely arbitrary reasons, and most recently, T-Mobile has disregarded the principles of net neutrality by giving some music companies special exemptions from data caps.

As near as I can tell, it's all one and all lumped together — phone lines, cable, mobile devices and cell phone towers, string cheese, whatever. If it gives you the Internet, it's a common carrier and regulated under Title II, period. Again, so far, so good.

Bottom Line: February 26 Could Be Internet Freedom Day

The time between now and February 26, when the full FCC votes on the rules, will be hugely important. Telecom companies are formidable beasts, giants, with money to spare and to burn. They will not go quietly. The good news is that Obama appears firmly in the good camp (finally!) and other Democrats appear to be holding fire, however much some of them want that good telecom money for themselves. Thune, as you read, is slow-walking his bill, and Reid has not waffled.

Things to watch: The "forbearances" contained in the final language. The vote of the commissioners themselves. The post-decision reaction of the telecoms.

Nevertheless, we're that close. Finally.

[Update: Corrected typo: Steve Case, not Tom Case.]

GP

Cross-posted with permission from Digby's Hullabaloo.

JPMorgan Executives Caught Stealing Millions From California Electricity Users

If you watched the History Channel series, The Men Who Built America you may recall that JP Morgan backed Thomas Edison and made a bid to control the electric industry in America. The clip above is just an introduction and doesn't go into Morgan's ruthlessness. Today JP Morgan is an even more powerful Wall Street firm than the founder could have ever imagined-- and, once again, ruthless in its quest to make money from electricity. Like Enron before them, the Morgan criminal banksters are manipulating California's electricity markets to enrich themselves while rate payers are fleeced.

In an official notice, the Federal Energy Regulatory Commission alleged that the bank had engaged in "eight manipulative bidding strategies" in California and Midwestern markets.

The strategies led to payments to JPMorgan "of tens of millions of dollars at rates far above market prices," according to the notice. JPMorgan is expected to pay a massive fine related to the allegations.

The strategies allegedly worked like this. In California, for example, the bank would bid to deliver electricity to a utility the next day at a low price of $30 per megawatt hour. When the next day came, JPMorgan would change its offer to a much higher price of $999 per megawatt hour, assuring the power did not get bought, according to the notice.

California ISO, the state's power-grid operator, would then have to compensate the bank for the cost of making the bid, under California's "make whole provision," which requires ratepayers to cover certain costs incurred by energy sellers.

Still too big to jail? Fines-- paid by shareholders-- don't do anything at all to put a stop to the criminal behavior of these Wall Street sociopaths. I know the sensitivities of most of us don't allow for firing squads but... what about some hard prison terms for the top executives? That would put a stop to this kind of behavior-- at least for a while.This is from a press release I got yesterday from Elizabeth Warren and Ed Markey. And this is what Blue America was talking about when we promoted the idea of this incredible team:

Massachusetts Senators Elizabeth Warren and Edward J. Markey today asked the head of the Federal Energy Regulatory Commission how his agency was protecting consumers and prosecuting JPMorgan Chase following the agreement by the company to pay $410 million in penalties and surrendered profits to settle allegations of market manipulation in electricity markets. In a letter sent to FERC Chairman Jon Wellinghoff, the two Massachusetts Democrats ask how FERC determined the financial punishment for JPMorgan, how harm to consumers was evaluated, and whether this incident is part of an increasing trend of energy market manipulation.

“While this fine is large in absolute terms, the total penalties are equal to roughly 1.3 percent of JPMorgan’s 2012 profits,” write the Senators. “We are concerned about whether the settlement includes adequate refunds to defrauded ratepayers and also concerned that the individual executives who sought to impede the Commission’s investigation will not be punished. It is critical that government settlements provide appropriate relief for consumers and deter future law-breaking.”

...According to FERC allegations, a JPMorgan energy-trading unit engaged in 12 deceptive bidding strategies in wholesale energy markets from September 2010 to November 2012 in California and the Midwest, resulting in tens of millions of dollars in overpayments from the grid operators. Of the $410 million JPMorgan will pay, $125 million consists of disgorged profits that will go to ratepayers in California and the Midwest and $285 million civil penalties.