Less BS, More Facts, Some Opinions
As data management platform (DMP) Lotame gears up for compliance with the upcoming General Data Protection Regulation (GDPR), some of the far-reaching changes are coming into focus.
First, there’s the matter of tracking consent by users across what General Counsel and VP of Global Privacy Tiffany Morris calls “the chain of custody.” This reaches from the time the user’s data is generated or collected at, say, a publisher’s website, through the various ways in which the data is use
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The number of American deaths at work from unintentional drug and alcohol overdoses jumped more than 30% in 2016, new government data shows, showing that the U.S. struggle with a deadly opioid epidemic is migrating to the workplace.
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Pinterest released its latest diversity report on Tuesday.
Slowly but surely, Pinterest is getting more diverse.
The company released its annual workforce diversity report on Tuesday, and claims that underrepresented minorities now make up 9 percent of its workforce, up from just 7 percent in 2016. Pinterest is also hiring more female employees: Women account for 45 percent of Pinterest’s workforce, up from 44 percent last year, according to this latest report.
The data represents advances compared to 2016 government data published earlier this year. And while the changes from year to year may seem small, the company is chipping away at those diversity proportions.
Here’s how Pinterest’s workforce has changed since 2014:
Women make up a larger percentage of Pinterest’s workforce than they did three years ago, and they also claim more technical jobs inside the company, roles that have traditionally been dominated by men. Women still account for 19 percent of Pinterest’s leadership positions, the same percentage the company had in 2014, but up slightly over the past two years.
Underrepresented minorities — people who are black, LatinX or Native American — also make up a larger percentage of Pinterest’s overall workforce. Minority employees make up a larger percentage of Pinterest’s technical and leadership groups than they did three years ago.
Here’s how Pinterest’s diversity report compares to similar reports from other tech companies. Silicon Valley has been making a push over the past few years to diversify the tech industry for a number of reasons, one of which is to bring in employees with a more diverse range of experiences and ideas. As you can see, Pinterest has a higher percentage of female employees than most other Silicon Valley giants.
Candice Morgan, Pinterest’s head of Inclusion & Diversity, says the company has instituted a number of programs in order to increase diversity, including Pinterest’s own version of the NFL’s Rooney Rule, which requires teams to interview at least one minority candidate for top jobs like head coach. Pinterest’s version of the rule requires the company to interview at least one qualified female and underrepresented minority for each senior-level opening.
Pinterest also has an apprenticeship program to encourage candidates from nontraditional tech backgrounds to apply, and requires employees to complete an unconscious-bias training course in their first week on the job.
So Stitch Fix is giving it to them.
Online personal styling service Stitch Fix stepped up its advertising spending by 84 percent in the first quarter of its 2018 fiscal year, with TV campaigns playing a big role in trying to attract new customers.
But the new customers attracted by the mass-market commercials had one common piece of feedback: Stitch Fix needs to offer a bigger selection of less-expensive clothing. CEO Katrina Lake told Recode in an interview following today’s release of Q1 results — its first earnings report as a public company — that these consumers want more options in the $20 to $50 price range.
So Stitch Fix plans to give these new customers more of what they want.
“In the last year, lower price point product has grown to represent a double-digit percentage of our total unit sales,” the company said in a letter to shareholders announcing the financial results. “Given the success of this offering, we plan to increase lower price point sales as a percentage of overall sales over the course of this fiscal year.”
In its first few years of existence, Stitch Fix’s selection of clothing items skewed mid-tier — higher than the range mentioned above, but lower than those of premium brands. But in the past year, the company has started to sell name-brands at premium price points, in addition to beefing up the selection in the $20 to $50 range.
On the company’s earnings call with analysts, Lake was asked what the lower-price push would mean for profit margins. She did not offer specifics on the profitability makeup of the different price points, but said Stitch Fix “can serve very profitably” these value shoppers.
Average order values, on the other hand, would be lower for these customers, but would be largely offset by new sales of high-price premium brands, she said.
For the quarter, Stitch Fix reported revenue earnings and profits that were generally in line with analyst estimates. First-quarter revenue grew 25 percent to $296 million year over year, while the company netted $13.5 million in net income.
But Stitch Fix’s stock was trading down as much as 12 percent in the after-hours market, perhaps over concerns that the company did not provide a forecast for net income.
Proving the effectiveness of branded content has been an industry fixation in 2017, BBC StoryWorks, the branded-content arm of the broadcaster’s commercial division BBC Global News, is offering clients facial-coding and eye-tracking tools to show its branded content works, the fruits of two years of research.
Chinese phone maker Huawei is the first client to use these tools for its four-part video campaign “The Explorers.” One of the two-minute videos features an interview with former NASA astronaut Ron Garan. The content is viewed by a sample of the BBC’s global panel of 12,000 members — for Huawei, the sample was 400 — with facial-recognition and eye-tracking software activated through their desktop webcams. Facial movements are recorded on a second-by-second basis and then divided into six possible emotions: sadness, puzzlement, happiness, fear, rejection and surprise. Eye-tracking software indicates which part of the content, which could also be text-based, triggers the emotion.
After the campaign, StoryWorks offers analysis on how the content delivered against brand metrics. Compared to a control group, those who saw the Huawei campaign recorded a 216 percent increase in brand awareness, a 23 percent uptick in brand association and a 19 percent increase in purchase intent, according to the BBC insights team, which couldn’t share exact numbers.
“We want to use science to ascertain the emotional impact of content,” said Richard Pattinson, svp of BBC StoryWorks. “We see a clear correlation between audience engagement and brand impact; we want to use this when we commission with our partners. My focus in 2018 is to understand engagement better. We’re long past engagement [for content] being dwell times and pageviews.”
BBC Global News’ insights team has been researching how emotion relates to brand metrics for the last two years. Its “Science of Engagement” study, in partnership with facial-coding company CrowdEmotion, has won awards.
“We see a strong correlation between serious emotions like fear and positive uplifts in brand awareness,” said Pattinson. “Eliciting more challenging emotions is legitimate. It demonstrates empathy and understanding as a brand.”
Understanding which part of content elicits an emotional response can play into a brand’s distribution strategy. For instance, audiences might feel puzzled during a certain section of a two-minute video, which could then be cut and distributed on social media with the idea that more people will share it.
As with most data-related decisions, these tools are more likely to reinforce hunches rather than break new ground. Pattinson notes that they are not used to create ideas but achieve better cut-through in a crowded content market. “This is the science that helps the art show its full potential,” he said. “It demonstrates why it has been effective for the brand.”
Pattinson also said the tools could help brands understand what content relates to which part of the purchase funnel, which could inform distribution cycles, depending on the campaign objectives. For Huawei, the campaign objectives were more about driving awareness than driving purchase. Four other brands are using StoryWorks’ tools to help demonstrate brand outcomes as a result of emotional engagement, although StoryWorks couldn’t disclose their names. With this added research, the hope is clients are more likely to renew contracts with StoryWorks. Media companies like Vice and The Telegraph are increasingly beefing up the information they can give to clients to prove the effectiveness of their ads.
Since April, StoryWorks has closed over a hundred branded-content deals globally. In early 2016, Pattinson said revenue from branded content was roughly 30 percent of overall ad sales; now, he said it’s closer to 45 percent. StoryWorks has offices in London, New York, Singapore and Sydney with roughly 36 employees, including strategists, project managers, writers, developers and social media managers, among others.
As StoryWorks offers the tools to more clients as planned, it will need to hire more staffers, particularly because post-campaign analysis is bespoke, depending on campaign objectives. “This can only be valuable with the right degree of attention,” said Pattinson, “but bits of it are very scalable.”
Image courtesy of BBC StoryWorks
Publishers are bending to the will of advertisers to make their ads more viewable, but some publishers are finding the payoff isn’t as great as they anticipated.
Over the past year and a half, advertisers have continually pounded their fists, demanding that they’ll only buy ads that are guaranteed to be seen by a user. The push for viewability gave the impression that advertisers would spend branding campaign dollars with publishers that had highly viewable ads, said Erik Requidan, vp of programmatic strategy at Intermarkets, which helps publishers including Drudge Report and The Political Insider market their ad inventory to buyers.
Instead, the sites Requidan works with continue to be relegated to getting performance-based ads, he said. Those sites might see a few dollars increase in their CPMs if they boost their viewability, but big-brand dollars haven’t materialized.
“If something is 90 percent viewable, shouldn’t that unlock a whole lot more money or a bigger price point?” he asked.
When listicle publisher Ranker tweaked its site layout last year, page-load time went down 60 percent and average viewability rates doubled from 35 percent to 70 percent. Those factors helped Ranker increase its average CPMs by about 75 percent, but the prices of its least and most viewable ads don’t differ much.
Ranker’s ad viewability ranges from 62 to 82 percent. But there’s only a 13 percent difference in the CPMs for these ad units, said Ranker CEO Clark Benson. Given how much advertisers and their tech vendors emphasize that campaigns perform better when ads are 80 percent viewable, Benson expected Ranker’s most viewable ad units to command a higher price.
“So far, the promise of viewability quickly filtering out bad actors and improving yields for the good ones seems to be only a half-kept one,” he said.
It’s a similar story elsewhere. Stephanie Layser, vp of ad tech and operations at News Corp, said there’s no significant difference in price between the publisher’s least and most viewable ads. Remedy Health Media, the publisher of health sites like HealthCentral and TheBody.com, has seen little lift in its ad rates since increasing its viewability, said Aryeh Lebeau, evp of client operations there.
Some publishers said they’re satisfied with the pricing lift they’re getting for highly viewable ads, which is a function of their expectations of their advertisers.
Lebeau wasn’t bothered by the lack of lift in ad rates because advertisers never promised Remedy higher rates in exchange for higher viewability.
A programmatic specialist at a comScore 200 entertainment publisher, requesting anonymity because he wasn’t authorized to share financial details, said a 30 percentage-point lift in viewability at his company’s websites tends to increase CPMs by about 20 percent. This person emphasized that it’s difficult to isolate viewability’s impact on ad rates, so these figures are rough estimates. The source still felt his company was being compensated fairly for its highly viewable ad placements.
Another source, Danny Khatib, CEO of 100 percent programmatic publisher Granite Media, said high viewability rates can boost Granite’s CPMs by a few dollars, which he saw as significant.
“We never expected new branding budgets to come online solely because of viewability improvements,” he said. “That seems like wishful thinking.”
In an Integral Ad Science survey of more than 1,000 advertisers, 68 percent of respondents said they transact on viewability and another 25 percent said they wanted to do so. Although buyers are regularly transacting on viewable metrics, viewability is less likely to influence ad rates if it isn’t a primary KPI.
The reason rates haven’t risen right along with viewability has to do with how programmatic buying works. David Lee, programmatic lead at media-buying agency The Richards Group, said that even in a private marketplace setup, most buyers don’t place bids on individual publishers but place bids across hundreds, if not thousands, of sites at a time.
So if viewability is being used as a secondary KPI, then buyers’ bids will be restricted to the publishers that meet a certain viewability threshold. But since buyers aren’t bidding on individual publishers, they’re not intentionally setting out to pay specific publishers more based on their viewability gains. And since viewability rates are rising across the industry, publisher improvements in viewability are less likely to increase publishers’ CPMs than they were a year ago.
Another issue with rising viewability is that in an effort to appease advertisers, many publishers are doing whatever they can to make sure their ads are viewed just long enough to be counted as viewable. Most viewable ads are in view for just one second, according to IAS data. That amount of time happens to be the standard the Media Rating Council uses to define viewability.
As publishers increased their volume of viewable ads by refreshing pages, sticking ads in photo galleries and using interstitials, users got turned off and buyers caught on. IAS found that the average time that a desktop display impression was in view declined from 9.8 seconds in May 2016 to 7.7 seconds in May 2017.
“We’ve seen some publishers game the system in using ad placements that provide a less than optimal consumer experience but have higher rates of viewability,” said Stephani Estes, svp of media strategy at ad agency Cramer-Krasselt. “In those instances, we’re not willing to pay more for higher viewability.”
It’s understandable that publishers get miffed by low returns on highly viewable ads. But in programmatic environments, the highest CPMs come from programmatic direct deals, not the open exchange. And to entice ad buyers to set these deals up, publishers need to have viewability rates above 65 percent, according to three publisher sources.
Viewability isn’t necessarily a way to lift rates, said Mort Greenberg, svp of ad sales at Sightline Media Group, which owns government-focused sites like Federal Times and Military Times. “However,” he added, “high viewability will keep you on a plan.”
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What is net neutrality’s history and why does it matter? These questions and more get answered.
On this episode of Too Embarrassed to Ask, Recode’s Kara Swisher and The Verge’s Lauren Goode welcome Jessica Rosenworcel to the studio to discuss net neutrality. Rosenworcel is a Democrat who has served on the five-person Federal Communications Commission under both Obama and Trump, which means she voted in the 2105 net neutrality rules and against their 2017 repeal. She explains her thinking and takes questions from the audience.
You can read some of the highlights from the discussion here, or listen to it in the audio player above. Below, we’ve posted a lightly edited complete transcript of their conversation.
If you like this, be sure to subscribe to Too Embarrassed to Ask on Apple Podcasts, Spotify, Pocket Casts, Overcast or wherever you listen to podcasts.
Kara Swisher: Hi, I’m Kara Swisher, executive editor of Recode.
Lauren Goode: And I’m Lauren Goode, senior technology editor at The Verge.
KS: And you’re listening to Too Embarrassed To Ask, coming to you from the Vox Media podcast network. This is a show where we answer all of your embarrassing questions about consumer tech.
LG: It could be anything at all, like whether Kara’s ever going to launch her own internet service provider named Swisher Net.
KS: No.
LG: Swisher Cast?
KS: No.
LG: KT&T?
KS: That’s so bad.
LG: Ba-dum bum. Swisher Wireless, so that you will have better internet options.
KS: No, Lauren. I’m not gonna do that.
LG: Oh, come on.
KS: In any case, send us your questions. Find us on the Twitter, or tweet them to us @recode, or to myself, or to Lauren with the hashtag #tooembarrassed.
LG: We also have an email address. It’s tooembarrassed@recode.net. And a friendly reminder, there are two Rs and two Ss in embarrassed.
So Kara, the internet is kind of important to our jobs.
KS: Yeah, it is. You know, I was around when it was born. I wrote some of the early articles when it was commercialized. Al Gore was involved.
LG: That’s right. You were at the Washington Post.
KS: I was. In the early ’90s when it became …
LG: You were covering CB radio.
KS: I was indeed, and I would cover the original stories when it went to commercial.
LG: What was that like when you first got assigned a story? When someone said, “Go talk to this company, AOL”?
KS: Yeah. No, it wasn’t … Before that it was others. There were PSI Net. There were all kinds of internet service providers, but they … You know, it was weird because nobody was using it. Everyone thought it was unusual and strange, and that’s when I met Al Gore way back when, when he in fact did help invent the internet. He did indeed. He certainly was critical to its commercialization, for sure.
Nobody was paying attention to it at all. And I met Vince Cerf and all the others that were involved, the Defense Department efforts and things like that. It was an interesting time. It was hard to know what was gonna happen, but I always felt it was an important moment.
LG: It was indeed, and I don’t think anyone really …
KS: Yes, and critical. Changed our lives.
LG: I mean, certain people certainly saw how big it was going to grow, but a lot of people didn’t. That brings us to today, because there’s a big fight going on in Washington right now about how the government will regulate the internet.
KS: Yeah, what’s become of it. What’s interesting is actually one of the big hubs of the internet is right there in Washington. That’s why AOL started there. That’s why a lot of those internet service providers are there. It was called, I think, Mae East. There was Mae West, get it? And Mae East. And that’s one of the reasons it was begun there, really, essentially. So it’s really interesting that the government is now arguing over this very critical medium for all of us.
LG: That’s right. We’re talking about net neutrality, which the FCC is planning to vote on next week. And in full transparency, we are recording this episode on Tuesday, December 5. So what happens in the next few days could always change before you hear this podcast on Friday, but that is what we’re hearing right now.
KS: So we’re delighted to be joined on the show today by one of the members of the Federal Communications Commission, Jessica Rosenworcel. She’s been onstage at our conferences, but not on our podcast, so we’re thrilled to have her here on Too Embarrassed To Ask.
Jessica Rosenworcel: Thank you for having me.
KS: It’s an exciting time for you. Everything’s going on, and this has been going on for years actually, these arguments. So we’re back to the other side essentially. Let’s quickly give our listeners some background information to explain this in the plainest terms possible because there’s no more complicated word than net neutrality, and one that just deadens the space. So why don’t you talk about that for us.
Sure. I think the United States internet economy is the envy of the world, and that’s true because it was built on a foundation of openness. For decades in this country, communications policy was built on this notion that the treatment of traffic should be nondiscriminatory. For the internet that has meant that you can go where you want and do what you want without your broadband provider getting in the way.
But if you take away those policies that preserve openness — and that’s what net neutrality is all about — what you get is broadband providers with the power to block websites, throttle services, and censor and restrict your access to online content.
KS: All right, so this week …
LG: The week of Thanksgiving, the FCC Chairman, Ajit Pai …
KS: The new chairman.
LG: The new chairman revealed a proposal that would very much change that. In a statement, Pai said that under his proposal the federal government would stop micromanaging the internet and instead the FCC would simply require ISPs, these are his words, to be transparent about their practices, so that consumers can buy the service plan that’s best for them, and entrepreneurs know their small businesses can have the technical information that they need to innovate.
But there has been a lot of backlash. Some senators have called on Pai to reschedule the vote that’s coming next week, December 14. It looks like we may forge ahead anyway. I have a question I’m a little embarrassed to ask about your role in the commission, and how you as a commissioner of the FCC sort of work with someone like Ajit Pai, and where you kind of stand on these issues.
Well, that’s a great question. Fundamentally, how does the FCC work? I mean, we are tasked with overseeing so many important aspects of the digital economy, and there are five of us who do so. By statute, by law, three of us can come from the party from the president. I’m one of the two on the other side, so what happens is we make decisions about big policy matters that are before the agency, and sometimes we agree. And sometimes we disagree, like in this case where I’m a fan …
KS: Yeah, I have this idea of the two of you sitting within a couple of feet of each other in the office, like eating your turkey sandwiches silently, while you kind of both steam over your differing opinions on net neutrality.
We both drink a lot of coffee. I’ll give you that. We’ve got something in common.
KS: That’s what you agree on. But before, Obama was president, and there were three on the Democratic side that were sort of making these rules.
That’s correct. That’s right.
KS: So explain the shift that’s happening, exactly what the difference is. Once Trump became president, everything shifted back, and obviously the companies that are providing broadband access moved quickly to take advantage of that.
Well, the chairman in any administration is kind of like the first among equals. We have five votes, but the chairman gets to dictate what the commissioner vote on. And my colleague, Chairman Pai, decided soon into his tenure that he wanted to revisit these issues and roll back the most recent net neutrality rules that were put in place.
KS: Explain those. What were put in place under Obama that are being rolled back? From your perspective.
Well, you know what? Actually, I think I want to take you back just a little bit further and point out that the first net neutrality policies in this country were put in place in 2005-2006. I think it’s important to remember that. I think it’s important to remember that President George W. Bush was in the White House at that point.
In other words, these were not policies that had a Democratic or Republican tint to them. They were just based on this idea that the internet should be open, and you can go where you want and do what you want. So in 2005-2006, the FCC came out with a policy statement on internet openness. It was its first statement on net neutrality.
Then over the course of the next decade or so, the agency kept on revisiting those policies largely because every time it put those policies on paper, a court would overturn them. So over 10 years, the agency worked to try to find a legal home for those policies that would pass court muster. And the agency was finally able to do so with the rules that passed in 2015, which were upheld by courts in 2016.
And those rules say that your broadband provider cannot block websites, can’t throttle content, and it also cannot engage in paid prioritization whereby they set up deals with certain providers of web services to make sure that you have faster access to them.
LG: So there were rules put in place … And people talk a lot about the difference between Title I and Title II classifications. But there are rules put in place that treated the internet more like telecommunication services rather than information services.
Yeah, Title I, Title II, we are getting nerdy now. Okay. I’m gonna try to keep it …
LG: Try to keep it clean.
Keep it clean. I know, I know. You know, Washington’s not good at that, but I’m gonna try it though. Title I is the section of the Communications Act that doesn’t really have a lot of rules. Title II is the section that has a lot of rules, and the FCC’s network neutrality policies bounced back and forth between Title I and eventually found a home in Title II because the courts would not let the agency keep them in Title I. That’s why we have the 2015 rules. Those are the rules that the current chairman wants to wipe off the map. He is only interested in having a transparency policy for network neutrality, which you described before.
KS: Of the ones that were there.
LG: Yeah.
KS: And transparency, what would that require?
Well, we all like transparency, so let’s be clear. I think transparency’s a good thing. Transparency in this case means that your broadband provider tells you about their traffic management practices.
KS: And who do they tell?
They tell you as a consumer. So theoretically, that’s a good thing, right? First, it assumes you read the small print in every contract, and you and I both know that that’s hard. But you put that out there, and you’re told how your traffic is being treated.
The challenge comes, if you don’t like what’s going on, if they’re favoring some websites over others or blocking or censoring content, what do you do? Ideally, in a competitive market, you pick up your service and you go elsewhere. But the great challenge for net neutrality right now is that according to FCC data, more than half the households in this country don’t have a choice of broadband provider.
So transparency only serves you well if your market is fully competitive. And if it’s not, you’re more or less stuck with your current provider, and you’re gonna have to deal with their traffic management policies.
LG: So that means, your ISP is Swisher Net, as I’ve just developed here. I’ve pitched a new internet service by Kara Swisher.
Well, we could use more competition, so that could be a good thing.
LG: Okay, so let’s say you’re using Swisher Net. Swisher Net is the only ISP you have an option for in your neighborhood, and you read the fine print, and there’s transparency because there are all these new rules in place. The transparent fine print says, you know what, Swisher Net has been prioritizing its own Recode videos over all the other videos that are on the internet. By the way, when we need to, we throttle you.
And you say, “Well I don’t like that option.” You really don’t have that many other options. I mean, a lot of people, like you were saying, in America don’t … They have maybe one or two internet service provider options when they go to sign up in their neighborhood.
Yeah, exactly.
LG: So you’re saying the transparency, you agree with that aspect of Pai’s proposal.
I agree that transparency’s important, and I think it’s a good thing to have your broadband provider disclose how they manage your traffic. I think the challenge comes in making sure that we all have recourse. If you don’t like most goods or services in a competitive market, you can move on and find someone else. But that’s not true for the majority of American households, including myself. I live right now in the District of Columbia. I’ve only got one provider that will serve my house at what I feel I need, which is 25 megabytes.
KS: So they could say, “Well here’s the transparency, and if you don’t like, you can’t do anything about it.” It doesn’t matter. They’re like, “Here, we’re giving you crappy meat or crappy whatever, but we told you.” So kind of whatever.
Yeah, to some extent they’ve suggested, well you should take your complaint to my colleagues at the Federal Trade Commission. But again, I would say that the Federal Trade Commission doesn’t have any real network engineering expertise or even authority in this instance.
And separately, to get the attention of the Federal Trade Commission will take an awfully long time. They do not have the capacity to set up rules on these issues. They can only take a bad actor to court down the road, and for most households, startups and small businesses, you just can’t wait that long.
KS: You can’t wait that long.
LG: Yeah. You have to wait till after something happens.
KS: Let’s talk about the public comment period. Now what happened here? And you have talked about this.
Yeah, well, first let’s start with the idea that public comment is a good thing. We make lots of rules and policy changes in Washington, and there’s something fundamentally democratic about opening your rulemaking to the public and asking them what they think. Most of our rulemakings, we get some very expensive legal briefs that get filed. But then there’s a few of them that really strike a chord with the American public.
And what we find is they start sending us comments in droves. That’s democracy in action. It’s a good thing. Here I think at current count, we’re at 23 million comments. And in many ways, that’s really exciting. I don’t believe the FCC has ever had a proceeding with that many people filing in it.
But I spent some time just yesterday with the New York attorney general, and we’ve been combing through this record. And we’ve been finding a lot of things that look really funky. A lot of things that look irregular.
KS: Lots.
LG: Like what?
KS: The Russians, mostly.
Yeah, we got about half a million comments filed from Russian emails. We’ve got a million or possibly more comments that were filed with stolen identities. Real people, with their addresses who filed saying something about net neutrality, in many cases against it. And these individuals are like, “Hey, I never did this. Someone stole my identity,” which under state law in New York and many other states is identity theft.
KS: So these are fake comments.
Yeah, fake comments. We’ve also got lots of bots and bogus filings. And we’ve got 50,000 complaints that were filed with the FCC for net neutrality that are somehow not in our record. And when you stand back, it looks pretty tainted. It looks like our record’s been corrupted by a lot of these forces, and I think the agency needs to get to the bottom of it and figure that stuff out before proceeding with a vote.
KS: Because then they’d ignore public comment. There’s not real public comment.
Exactly, exactly. Listen, while I clearly support net neutrality, I think you’ve gotta figure out what happens with your process here in Washington. And if you don’t get to the bottom of that, we’ve got a problem that’s big, and it’s bigger than net neutrality. But so far, I haven’t gotten much of a positive response from the FCC chairman. He seems to want to proceed regardless of the problems in our record, which I think are really unprecedented. It’s a mess.
LG: It does sound like a mess. One of the arguments that Pai has made, and he wrote this in a WSJ editorial, that the Obama era of regulations regulate the internet like a 1930s utility. He called earlier light-touch regulations from back in the ’90s a free-market success story, and he generally seems to believe that if he rolls back these regulations that it would improve investment in broadband. And that investment in broadband has slowed. What’s your response to that?
Yeah, well, first that’s some buzzwordy kind of stuff, so let’s try to unpack it in English. Investment in broadband matters. Right? It’s essential infrastructure. But if you look at the facts, I think they’re different than the ones he describes. There’s data out there now suggesting that broadband investment for publicly traded companies was actually higher in the two years after passage of these rules than the two years beforehand.
Moreover, a lot of these CEOs both in front of their investors and in front of the Securities and Exchange Commission have said that yeah, these rules actually didn’t impact our capital structure or our investment. So I’m doubtful that they’ve had that much significance, and I’m wary of how that’s being thrown around in a kind of buzzword-like way.
Moreover, I think …
KS: Well, it’s also part of an idea of less government intervention. Right? That’s the idea.
Yeah, sure. But I also think when we talk about investment, let’s take a holistic view. Let’s not just say it’s about broadband providers, a handful of them. Let’s also talk about the broader digital economy, because that’s about one-sixth of the whole economy right now.
We want to make sure that grows, and so many of the companies and so much of the entrepreneurial energy we have in our economy is dependent on an open internet. And I think we actually have to take notice of that too. I think, in fact, the law demands we do that, so I think his view’s a little too narrow.
LG: What does this also mean for infrastructure if this proposal is voted in? For example, will internet infrastructure or equipment regulations change in any way? And would that potentially impact the rollout of things like 5G?
I think the biggest thing for the rollout of 5G is making sure we have more fiber facilities in the ground and more micro-cells around the country, which are very small tower-like facilities. I think that’s totally independent of this proceeding. I don’t actually think that there’s great relationship between this proceeding and those issues.
LG: Okay, so this is entirely related to web traffic and not necessarily about the infrastructure that is sort of creating that web traffic, providing the background for that.
I think that the chairman might argue that rolling back these rules will free up capital and there’ll be more spent on infrastructure and we’ll all be better off. That’s a common refrain in these parts. But I just don’t think the data suggests that that’s true.
KS: All right, so this may seem obvious, but internet companies were very strongly for this when they were passing and pushing hard against Comcast and others. I’m thinking of Netflix versus Comcast, essentially.
LG: Back in 2015, yeah, they were for it.
KS: Back in 2015, so it was a big deal. It was a big deal in many internet companies — especially by Reed Hastings, who was sort of the point person from it. So their argument in Silicon Valley is that startups couldn’t compete without tough net neutrality safeguards. And they’ve been in fights with the telecom industry, with the cable industry, over this.
Now Reed has been relatively silent. Some people say because he got what he wanted from Comcast through a side deal and other … You know, the big companies aren’t being as loud this time. Is that the case? And how do you get them involved?
Well, we have a lot of small companies that are involved now, and I think that’s just as important. I mean, small businesses is where job growth is in this economy. So I think the fact that they’ve all said that having an open internet has changed their cost structure, changed their ability to develop things, find customers, sell their services, both around the corner and around the world, I think that matters, and I think that that is what it’s all about. It’s not about the biggest companies who can probably …
KS: But they were there. Have they dropped off? Have those big companies just gotten their …
Yeah. No, they’ve offered some support. There’s a lot going on in Washington, and they’re fighting on a lot of different fronts right now, but they’ve offered support. But I think it’s important to highlight just how powerful this has been for smaller business and startups as well, not just the largest companies in our digital economy.
KS: No, you’re not gonna … You’re not insulting Netflix here, are you? I mean, they just were such a big player in this and such a vocal player.
Well you know what? But what’s amazing right now is think about online video and just how much it’s grown. And recognize that online video and watching online video is really dependent on having an open internet where net neutrality policy is in place.
Because if you have a broadband provider who also offers you packages of linear channels through a cable subscription, you have to ask, don’t they have business incentives to throttle the content of online competitors? And if they have business incentives and the legal ability to do so, if you take back net neutrality, what will happen? I guess we’re about to see if my colleagues succeed.
KS: Well, do you want those internet companies to be stronger voices in this one, as they were before?
LG: Yeah, because it’s worth noting that Reed Hastings was at one point pretty vocal. I mean, he wrote a post on his Facebook page and he spoke about it at Code.
KS: Yeah, very. He was onstage at Code. He was …
LG: But then in March of this year I was down at Netflix for an event and asked him directly what his thoughts were on what was going on with the new FCC Chairman Ajit Pai, and what would happen if he eliminated the Title II regulations that had guaranteed a neutral internet. And he said at the time, well, you know, I’m not that worried. The culture around net neutrality is very strong. Consumers have strong expectations.
So if the formal framework was weakened, he said we don’t see a big risk actualizing because consumers know they’re entitled to getting all the web services. So it was a relatively sort of blasé response to what he had initially been pretty vocal about.
But to Kara’s point, to follow-up on her question, are you in a position right now where you kind of wish people like that, especially in the internet sphere, were being more vocal or are being more vocal about what’s going on?
Well, I always think the more voices, the merrier. But I think the focus of what we have right now actually has to be on the future. It’s about that next video company that’s waiting to be born and making sure they have the same shot.
LG: So Netflix has a lot of power right now because it’s Netflix. But you’re saying for smaller companies, you want to make sure they have the same opportunity.
Right, the same opportunity to develop a service, develop a platform. Then grow and reach the same kind of scale. We want to make sure those next set of opportunities are available in the economy.
LG: Do you think that in some way the answer could be some type of classification that isn’t Title I or isn’t Title II?
That would take legislative action. In other words, that would take Congress getting involved. Right now I don’t have the authority to just write a new section into the law, so what you’re describing would take an act of Congress.
LG: But if something like that were to exist around the right way to sort of approach the internet in the United States, what do you envision that would look like?
Oh, if you serve at the Federal Communications Commission, you are keenly aware that you are a creature of Congress. And what the good men and women of Congress tell you to do in their new laws, you are responsible for implementing. So that’s not one of those things that I’m gonna voice thoughts on at the moment because it’s up to them to write the laws. We strictly implement them.
KS: All right, so what can … We’re gonna get to questions in a minute, but what can consumers do if you’re in a city, we talked about, you only have one or two ISP choices, usually one. What can consumers do when this passes, which is likely to pass, what Chairman Pai wants to happen. Or is that not enough foregone conclusion? I mean at this point, it’s just …
Well, we’re nine days out from a scheduled vote, and I have this fault where I’m kind of an optimist, and I feel like if people make a ruckus and make some noise and do some old-fashioned things like lighting up the phones with their elected representatives, we might, in fact, create some movement to change the course of history here. To get Congress paying attention to what’s happening at this regulatory agency.
I mean, doesn’t it seem a little funny that three unelected officials at the FCC get to change the future of the internet? There’s something about that that doesn’t sit right with me.
KS: All right, but what do you imagine’s gonna happen? Because they’re a little busy with a lot of other things. I mean, I understand they’re mostly stupid …
I know, but nothing’s more important than this.
KS: Of course not. No, I get that. Yes, yes, but …
There is no aspect of civil and commercial life that hasn’t been touched by this. So this is one of those things that even in a busy day where there is a lot of activity, gets attention. So I hope in the next week and a half or so, we can draw some more attention to these things and make a ruckus and make some noise. Then should this actually come to pass, I think that we will find ourselves soon looking at litigation.
KS: Litigation, and then it goes from there. And then after this happens, what is the next thing that the FCC is gonna take up if this net … Well, the next president will probably switch it back again, but what’s the next thing? This has sort of kept the FCC busy for a long time. It’s the only topic they seem to talk about.
Right. There are a lot of things that the agency’s working on to increase the amount of wireless spectrum that’s available. There’s a lot of auctions associated with that. But there’s also an ongoing effort under the existing FCC leadership to allow broadcast companies to really bulk themselves up.
A big transaction before us involving Sinclair and Tribune and together, they’ll be able to reach more than 70 percent of our nation’s households, which is unprecedented. And that’s a big deal too and could benefit from a little more public attention because the consequences are so big.
KS: Yep. That is another big … We’ll have you back for the next show on that one.
All right.
LG: I think what Kara’s wondering is whether or not there’s gonna be a 500-page proposal with handwritten notes in the corners pushed through at the last minute.
KS: That’s right. At the last minute.
Yeah, I don’t understand what you’re referring to. Are laws made that way? Yeah, I can’t really … I don’t have a crystal ball on the …
KS: Do you know they do it better on … What was the show that did when a bill becomes a law? That was, um … Not Sesame Street, Conjunction Junction.
Conjunction Junction. Right?
KS: Remember when a bill becomes a law?
I’m a bill sitting on Capitol Hill.
KS: I’m sitting on Capitol Hill. They did it better in the cartoons than they do it today.
I know. But I think we’re dating ourselves by referencing that.
KS: That’s true. That’s true. No, it’s still around. I showed it to my kids.
Schoolhouse Rock. It was Schoolhouse Rock. That’s right. Rock.
KS: Anyway …
LG: Is that on the internet?
KS: Schoolhouse Rock does a better job at legislating than our legislators. Let’s just make that clear. All right, you can’t say anything Jessica. It’s okay. We can insult them.
No, I can’t.
KS: No. Yes. Well, they suck, just so you know.
All right, we have more questions for your Jessica. All of them do, actually. Every one of them. We have more questions for you, Jessica, but first we’re gonna take a quick break with a word from our sponsors. We’ll be back in a minute with Jessica Rosenworcel. She’s a member of the FCC, and we’re talking about net neutrality.
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And we’re back with Jessica Rosenworcel from the FCC. There’s about to be another historic vote on net neutrality shifting things back to the way they were before the last historic vote on net neutrality. And we have some questions from our listeners. Why don’t you start, Lauren.
LG: Sure, first question is from @makersphereHQ on Twitter. “What would an appeal of net neutrality in the United States mean for Europe and the rest of the world? And some United States based ISPs are also IP transit providers, so could international transit traffic also be affected?” Good questions.
Yeah, these are good questions. I think my primary concern right now is big picture. And that the United States has led the world with its internet economy and has been … We’ve made a real clear demonstration to lots of world economies that keeping your internet open is important politically, and it’s important for economic growth.
I’m worried that some of these changes could be read in unhelpful ways by foreign economies. I’m also worried that there’ll be others that will claim the mantle of internet openness and wind up being leaders on the world stage. I mean, we’ve seen some interesting actions in favor of net neutrality in Canada and India. And we’ve seen some other European economies take different approaches.
Going forward, I’d like it if the United States would lead with internet openness, and I’m worried about this proceeding and this change taking us out of being a driving force.
KS: All right, next question. This is Eric Palonsky @palonskE. “Thank you for picking this topic. I’m so confused when it comes to public comments. How are the bot comments affecting public comment? Why are some comments being ignored? What does a good comment look like?”
Well, first of all, Eric, this has been a problem on lots of issues. But Jessica, I want you to talk about this. How do you sort them, and how much attention do you all pay to these comments? Given if there’s 23 million, how can you even pay even a slight amount of attention to any of them?
Well, the comment process actually dates back over 70 years with the Administrative Procedures Act. It’s based on this principle that if you’re gonna change rules and policies that affect the American public, they have a right to offer their thoughts and the agency has a duty to take them into consideration. That might be decades old, but I like that principle, and I think it should still matter.
So when lots of people write us, I think we have to take note of individual citizens taking their time to tell us what they think. And it can’t be that we only rely on these dense legal briefs filed by really expensive lawyers and lobbyists. So it’s a combination of looking at the volume that came in, what they say, and who said it.
But I would never discourage anyone in the American public from trying to write in and plead their case to the federal government. I think that they need to do so. We need to hear voices in Washington that are not just from the usual crowd who shows up for these kind of proceedings. So for my part, I think the volume of public comments and the individually written comments are really important, and the agency should take notice of them.
KS: And what do you do to take notice? I mean really, from a real perspective, you don’t have 9,000 hours a week to look at all the comments. How do you process them as a commissioner, for example?
Well, going forward, if it was up to me, I think we should have better automated sorting functions where we have information about which comments were individually written. And we gotta come up with some common tagging schemes so we can know the number of small businesses that wrote us, for instance, or the number of individuals or people with disabilities who wrote us and explained how they’re using this service for health care or something like that.
I think that the agency would do well if it actually invested in that kind of software processing because I think we need to make sure that we do in fact use all these comments when the public is writing us in droves as we’ve seen here.
LG: So right now, when you’re identifying millions of comments that appear to be fake, duplicates coming from Russia, generated by bots, however you want to classify them, you know that because of third-party data analysis?
That’s right.
LG: I mean, outside firms are looking at them for the FCC.
Exactly. And it’s terrific that we can have outside firms do that, but how about the FCC invest in some resources to do that itself? How about we decide that the integrity of our record matters and come up with ways to deal with that? This is bigger than just net neutrality. It’s about public participation and democracy, and in the digital age, we’re gonna need to come up with new ways to manage this process.
KS: And to keep out bad actors, which we think is almost impossible.
Yeah, and we have a problem with that clearly here with all of these stolen identities and Russian emails.
KS: Well, Facebook and Google can’t fix it for themselves, that’s how difficult a problem it is.
It is.
KS: I’m guessing the FCC’s not gonna be able to, I’m sorry to say that to you, but I think it’s …
Well, I think you gotta make a try, though. I don’t think you throw your hands up. I think you’re gonna say, if we’re gonna invite public participation, what can we do to increase the integrity of this process? I mean, for starters, we can say we’re gonna investigate it before we vote. Then on a going-forward basis, we should come up with better processes, and it’ll be iterative. I don’t think we’ll get it right on the first draw, but it seems worth it.
KS: I think we go back to letters.
Right?
KS: Letters. Letters.
Letters.
KS: Letters, Jessica.
LG: Yeah, but think of how many people aren’t going to bother to write letters.
KS: No, I know. I’m teasing you. I don’t know if there’s a way.
LG: I don’t think there is.
You know, I get an enormous amount of email, and I read much more of it than people would understand. I just think seeing that someone spent some time to write me a few paragraphs about why this matters to them, it merits a read. So I set aside time every day to comb through that. I hope my colleagues would do the same kind of thing.
KS: Yeah, we could consult Santa. I don’t know. I’m trying to think of something.
LG: Sure.
Yelp. Yelp is better.
KS: They’re all full of dirty comments. Every single proposal there’s something.
LG: Yelp for proposed legislation. Yeah, three stars.
KS: Three stars.
LG: Two-and-a-half.
KS: All right, next question is from Noel Walling. “Why won’t Ajit Pai answer opposing questions? Is he afraid he’ll be unable to defend his position?”
LG: Well, in fairness, he’s not here to answer for himself.
I know, I was about to say, I don’t think that’s one that I can answer for you.
KS: Well, everyone’s doing it. Look, look at the mayor of New York is now not taking questions. I mean this is … It’s worked for Donald Trump is what’s happening, unfortunately, which is not what public servants are supposed to be doing, but here they are.
LG: Here, they are. Not responding to the public.
Yeah but I’m here. I’m here today.
KS: Okay, here’s … Yes.
LG: Hello. Thank you for chatting with us.
KS: Thank you. All right.
LG: The next question is from Akshay Patil, Twitter handle @foodjunkieguy. “Are there any positives if the world walks away from net neutrality? If not, then what are the reasons these people give to mess with the current scenario?” They also wrote, “P.S. whatever USA chooses, the world ought to follow.” Unless it’s the Paris agreement. I mean really, I don’t know about that, but are there any positives if the world walks away from these net neutrality protections?
I don’t see them. I think you’d have to bet on the idea that if you remove these rules, there’ll be a lot more investment, and that somehow we’ll see more broadband in more places in this country that presently don’t have it. And that somehow new competitors will emerge out of the shadows like Swisher Net to provide service.
KS: I’m working on it.
I don’t see those things as being likely or plausible, so I’m probably not the person to make this case, but I suspect that that would be the one that would be made.
KS: The one that they would make. Okay. We’re going to take another quick break for a word from our sponsors.
LG: I’m not gonna say ka-ching because I’m working on that new phrase. You told me 2018, pin it.
KS: I’m gonna litigate that in a second.
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And we’re back with Jessica Rosenworcel. She’s a member of the Federal Communications Commission — called the FCC in case you don’t talk about it in a longer word. We’re talking about net neutrality, the future of which the FCC is expected to vote on next week.
All right, next question. Ivan Rodriguez: “How do you prevent net neutrality rules from changing with every new administration?” That’s what I sort of was asking. “Should the government block any future big media merger to avoid biased providers from blocking uncomfortable content? And why would the current rules make a corporation invest less in innovation?” Which I think you were making that point already.
But how do you get it from changing with that, because you can see a sweeping Democratic … At some point that’s gonna happen. And then they just change them again.
Right, but I really contest the idea that this stuff really started off partisan, and that the first time the FCC put net neutrality rules on paper in a policy statement was during the Presidency of George W. Bush. This was not, in fact, an especially partisan issue for a decade. And the choice in 2015 to put these rules in this new title in the statute called Title II was just based on a bunch of court opinions telling us that was the only logical home for them.
So the attack that we’re seeing right now, it’s unfortunate to me that it’s partisan, and that somehow we’re viewing this now through a prism whereby one type of administration says yes, the next says no. I don’t think that kind of back and forth is good for the economy. I think that we could use some stability on these issues, but that stability should include some fundamental commitment to internet openness.
KS: All right. Next question.
LG: Next question is from Matt Cotter. There are a few questions here. “As a web developer, I believe a lot of advocates for net neutrality wrongly portray it as being similar to buying HBO, as in if you don’t have the package, you can’t get it. You’d still be able to access the internet, but without a package, the consumed data counts toward a data cap. It gives the illusion of choice, when you’re really locked into a partner of the ISPs. It’s very subtle, and I worry that people won’t see zero rating as anti-net neutrality because companies are already doing it. Can you provide good examples of how net neutrality is portrayed and examples of bad ones that are maybe pro-net neutrality but are vaguer and correct?”
It’s probably worth stepping back a little bit and just quickly covering this idea of zero rating because zero rating is a big thing here. And in my understanding of it — and Jessica, I’d love to hear your thoughts on it — is that basically, content providers start to make deals with some of the service providers.
Where I as a consumer would be able to maybe watch a video that wouldn’t go against my T-Mobile data cap or whatever service provider I might have because of the deal that’s been made between the content provider and the internet service or the wireless service provider. It seems great initially for consumers but also seems like a slippery slope. Can you talk a little bit about that, and then provide some examples of how people are maybe portraying both side of this argument here that could be detrimental to the bigger picture?
Well, first of all, I thought you actually just gave a really good explanation of it.
LG: Oh, well thank you.
A lot about zero net rating is about data caps. If there’s some constraints on how you use your online service because you can only access so much content a month, your broadband provider, without net neutrality, could go ahead and set up some sweetheart deals with certain content providers. They’ll get paid for them, and will make sure your traffic doesn’t count towards that data cap.
So it’s a way that they have of setting up revenue from two sides, both from you as the consumer and also from some content company that has online service. It’s good for the broadband provider, and for some consumers it might feel good too in that they’ll be able to access some content they like, and it doesn’t count towards their data cap.
But over the long haul, what that does is it constrains where you can go and what you can do online. Because you’ll get a fast lane to go to all of those sites that your broadband provider has set up a deal with, and you’ll get consigned to a bumpy road if you want to see anything else. And that erodes net neutrality over time.
Now to be clear, what we’re dealing with at the FCC right now gets rid of all of our net neutrality rules. So these distinctions going forward may not be as significant, but it is an important issue in thinking about net neutrality to date. I just think going forward, if you wipe away all of our rules, we’re gonna see a lot more of those sweetheart deals, those pay-for-access kind of situations, because if you take away these rules, they’ll be wholly lawful.
KS: We have no more questions now, but I have one final one that I want to ask you. The way that it was put into place before in the Obama administration was quite contentious. Do you think the way it was done perhaps has led to this absolute backlash in the other direction?
Because I think a lot of the fighting that went on was quite aggressive. The Obama administration was aggressive, and it sort of created a situation that would lead to something like this. Or not, or just they didn’t like them in the first place. There could have been a slower way to do it that was less dramatic on either side.
That’s a good question. I don’t actually think it was about how it was done before. I think what happens is you bring this issue up, you get people riled up. I mean, all of us use the internet every day in countless ways. It’s where we create. It’s where we connect. And it is fundamental to our work and personal lives. And finding out that there’s some agency in Washington that most people have never heard of who are gonna muck around with that, well guess what, a lot of people don’t like that.
They think it’s strange that some unelected folks have this much power and authority, and I think whether it was the Obama administration or the new Trump administration, what happens is people speak up. And that’s what we saw last time. It’s what we’re seeing this time. And I think that that’s why it was so noisy before, and that’s why it’s noisy now.
That’s ultimately a very democratic thing, small D democratic, in that people want to get engaged on these things, and they want to get active. I don’t actually see it as a function of how it was done before. It’s more that people care deeply about this, and they speak up about it.
KS: Meanwhile, the rest of the world surpasses us in internet ability for people to access the internet. That’s the part that really is most disturbing is that the rest of the world has increasingly better internet access, and we get …
LG: And open internet.
KS: And open internet, and we get left behind.
United States leadership on these issues is at stake, and that matters for the economy. It matters for diplomacy. It matters for human rights, and these issues are big. That’s why so many people are getting so noisy about it, and they have real consequences.
LG: So let’s say on the 14th, let’s say this vote passes, and Title II regulations are stripped away. We revert back to earlier rules around how the internet works in the United States. You mentioned earlier, you thought that there could be litigation.
Litigation.
LG: What kind of litigation? What does that involve? Do you think that there could be some type of action taken because of the lack of acknowledgement of public comments? Do you think that the litigation is going to occur on the part of companies that are coming after it? How does that actually work if we get to that point?
I’m going to leave it to the really good appellate lawyers to tell you what their best theories of the case are, but I suspect that we’ll have lawyers around this country running to federal courts, federal appellate courts to try to see if they can overturn these policies and even get a temporary injunction or stay them before they go into effect. It’s hard to predict with any kind of certainty what will happen. But I am convinced that there will be litigation should this go forward.
KS: You know we never run out of lawyers.
We never do. Somehow these things …
KS: We never have lawyer neutrality.
These things always wind up being good for the lawyers and litigators. Bad for the public and bad for democracy, but I think the lawyers are gonna win out.
KS: This has been another great episode of Too Embarrassed To Ask. Jessica, thank you for joining us.
Thank you for having me.
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