T-Mobile Forced to Stop Hiding Slow Speeds From Throttled Customers

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Thursday Lunchtime Links: The Startup Bubble

Every Thursday I will try to provide an assortment of links on a prevalent issue in the internet, gaming, and legal areas.

GeekWire:  Yes, Things Are Hot in Startup Land, But This Ain’t No Dot-Com Bubble

The Economist:  The Startup Explosion

CBS San Francisco:  Silicon Valley Venture Capitalists Warning of Tech Bubble Due to Startup Spending

BBC:  Silicon Valley’s Billion Dollar Start-up Failures

Business Insider:  Here’s the Evidence That the Tech Bubble Is About to Burst

The Atlantic:  The View From the Valley

Bloomberg:  Twitter Engineering, Analytics Executives Leave in Reshuffle

Modding: The Relationship Between Gamers and Developers

With the upcoming release of GTA V for PC and next-gen consoles, most gamers would not pay too much attention the port of a last generation game.  However, a new addition has sparked renewed interest in the game, making it a must buy for many gamers.  The new port adds a first-person point of view to the traditional over the shoulder look.  This is the first time Rockstar has taken the lead in adding FPS to its GTA franchise.  Yet, amongst gamers, this is not the first time that FPS (First-Person Shooter) has been added to GTA. Years ago, videos and files emerged showing GTA IV in as an FPS .  These videos didn’t come from Rockstar, though, but from people who loved playing the game.  These people are known as “modders.”

Modders do simply what the name implies: modify video gaming code to alter the structure, look, or gameplay of the video game.  These modifications are simply known as “mods.”  It allows games to live second lives and take on new looks.  In some instances, it even makes games run better.  Modding games has existed as long as games have existed.  From Doom to Skyrim, gamers have always been cracking open the code to changing it.  However, the legal aspect of modding has always been murky.

When dealing with modding, companies have been wary to give their blessing.  Dice and Blizzard have been wary of modders and often refuse to allow access to the source code for the game.  An often cited issue is where copyright laws come in conflict with the distribution of mod packets.  Copyright laws allow the exclusivity and protection of certain works.  Some argue that those works include video games and the stories within them. Rewriting those stories and codes within could potentially breach copyright laws.  Furthermore, it could take control of the game out of developer hands and place them in the hands of gamers.  The result can be a loss of control of the game and its story, impeding future sequels.

Another issue is the control over mod packs.  While gamers develop mods, they often do so with the code and content created by developers, much like writers cribbing from other works or musicians taking riffs from other songs.  However, with mods, gamers have a greater problem than writers.  Large chunks of code, including 3D renderings, gameplay, and soundtracks, are often reused by modders. As a result, true ownership of the mod pack is often in dispute. So when a gamer decides to monetize a mod pack, a developer often has a right to the proceeds of its sales.  Furthermore, should a developer seek to halt the mods distribution, they may have the legal ground to do so.

However, other companies and developers such as Valve, Id (Quake & Doom), Bethseda (Skyrim), and Crytek (Far Cry) have taken a more favorable view of the modding community.  These companies, rather than litigate or restrict gamer access, open their source code up to allow gamers to take control and expand the footprints of games.  One of the biggest examples is Valve and Team Fortress 2.  The game originated from a mod for Quake back in 1996. Valve seized on that gamer centered origin and created Team Fortress 2.  While the game updated every aspect of the previous, the true success of the game lay in the vibrant community modding it allowed and even encouraged.  The tools and equipment unlocked within allowed gamers to design unique outfits and weapons.  Taken in the abstract, the idea of new outfits and weapons seems quite pointless.  However, the game’s popularity has only kept growing, long after the natural lifespan for a video game.  What this popularity does is create strong brand loyalty to Valve.  Valve would further expand on modding with the creation of Steam, an online video game market and modding community.  Steam allows gamers to create and share mods for various games.

It’s encouraging to see Rockstar’s open embrace of the modding community. In the end, it is better for both developers and gamers when they can work together.

A Quick and Dirty Guide to Net Neutrality

For the past month, the internet has been publishing articles, blogs, opinions, and quotes on “net neutrality.”  It effectively blew up last week when the White House released a statement on net neutrality with President Obama throwing his full support behind it.  However, for well over a year, net neutrality has been a concern for gamers, internet users, and business owners that depend on internet “traffic” for revenue.  I touched on it months ago, but now that it is getting the attention it deserves, it’s time to give people a crash course on net neutrality and the potential effects of what the FCC may decide.

How does the internet currently “work”?

To understand net neutrality, we need a basic understanding of how the internet works.  Admittedly, I lack the technical knowledge to describe the transfer of data and packages between computers in a coherent way.  However, the term “information superhighway,” though dated, is aptly suitable to understand how it works.  Essentially your computer/phone/laptop communicates with other devices or servers.  It does this by sending streams of data through cables or routers.  Imagine your computer as a small shack connected to a 2-way road.  Up the road, it connects to a 4-way road, and further on it connects to a 8-lane highway.  The roads all intertwine and connect to each other, but essentially you are sending data out and also receiving data coming in.  At the top-level of this superhighway are the Internet Service Providers (ISPs).  These establish the rules of the road.  Costs, speeds, usage, and access are controlled by them.  We know of them as Comcast, Time Warner, RCN, AT&T, Verizon, etc.

What has changed?

For the longest time, the internet was governed by a simple principle: all content, know matter its size or origin, should be treated equally.  Data from a Google server travels at the same speed as data from a site bought on GoDaddy.  Furthermore, ISPs could not prevent access to competitors.  This rule was formally established in 2011 by the Federal Communications Commission (FCC).  However, Verizon challenged the rule in court and won.  The result was that the FCC could not enforce net neutrality rules against ISPs as they are not “common carriers.”  Skipping through a lot of legal definitions, the practical result was an elimination of net neutrality.  The FCC announced it would establish new rules, but a new chairman and recent events have given rise to concern as to who would benefit from the new rules.

What are the “Special Lanes” I hear about?

The “special lanes” that keep getting tossed around come from the FCC proposed rules earlier this year.  If put into effect, they would allow ISPs to build special lanes allowing faster internet service to customers for certain websites.  Returning to our highway analogy, let’s imagine the internet having a speed limit of 65mph.  The rule would allow the ISPs to build a special lane with a 90mph speed limit.  However, access to this new lane would cost you.  The ISPs would be able to affect the flow of internet traffic to websites depending on the price they set for faster lanes.

Do you have any examples of such actions?

Yes. Yes I do.  Just this past February, Netflix came to an agreement with Comcast on usage rates, paying a much higher level.  At first, the deal was considered just a market-based agreement to deal with Netflix’s higher demand.  However, something stunk.  Netflix speeds were slowing leading up to the deal and then quickly surged afterwards.  While the surge was expected, some began calling foul play.  Sure enough, the data speeds seemed off than just mere congestion.  In fact, it’s becoming clear that Comcast had decided to start “throttling” Netflix’s usage speeds.  Prior to the negotiations, Netflix used a 3rd party provider that had an agreement with Comcast.  As usage increased with the 3rd party, Comcast would adjust the routes to allow more data to flow freely.  However, once Comcast learned that Netflix was the cause of the increases in usage, the adjustments stopped.  What had been an amicable agreement quickly turned sour as Netflix customers could no longer stream content quickly.  Forced to the table, Netflix eventually paid more money for direct connections through Comcast.  While there was no rule against it, the idea of restricting someone’s access to users in exchange for money starts to feel like extortion pretty quickly.

How can this affect me?

If you stream video, work online, or use the internet regularly, the costs of faster lanes will undoubtedly get passed on to you.  Furthermore, once a precedent of charging for usage is set, ISPs could easily turn it back on customers that have high usage rates as well.

However, the bigger issue is the effect on internet businesses.  As the internet becomes an even more necessary part to running a business, greater rates for more access to customers will become a problem.  The costs for owners to run an online marketplace will increase.  Established companies such as Google, Amazon, and Facebook will survive the rate increases, but the sluggish speeds for smaller companies could easily kill their chances to succeed.  Companies that try to pay the higher rates will eventually pass on the costs to consumers.  Such lanes hurt competition, which hurts consumers.

What else could the ISPs do?

There are major concerns about blocking, throttling, and the effect a lack of regulation would have on both the ISP market and internet businesses.  Let’s look at them individually.

  • Blocking:  Blocking refers to the ISPs blocking access to a website for certain consumers.  For example, Comcast provides television, phone, and internet access.  In addition, the company recently acquired NBC Universal.  As an internet provider, Comcast controls the flow of data from Netflix, YouTube, Amazon, etc. to its consumers.  However, as a television provider and network owner, Comcast also has an incentive to increase viewership of NBC and its television properties.  Since internet video providers are a threat to NBC properties, there is an inherent conflict of interests in having to provide internet access to competitors.  What blocking allows is for Comcast to deny their customers access to competitors.
  • Throttling:  Throttling is the purposeful slowing down of data speeds.  The perfect example is the Netflix and Comcast deal above.  Essentially, ISPs can control the speed of websites as a negotiating tactic.  The problem is that the higher prices of those contracts will get passed on to the average consumer at the end of the day.

Won’t competition among the ISPs keep these things from happening?

Short answer: No.  Long answer: No because competition does not exist.  While there are dozens of internet providers across the country, the top 3 (Comcast, AT&T, and Time Warner) cover the vast majority of Americans (almost 50 million customers).  On top of that, Comcast and Time Warner are still seeking to merge and effectively monopolize the internet.  In Chicago, I currently have a choice between Comcast or AT&T in my building.  While RCN and some smaller providers to exist, their service is only found in certain locations.

The fact is that infrastructure costs, existing market shares, and the opposition of current competitors make it difficult to start an ISPs.  So far only Google and small municipalities have been able to start their own internet services.  While regulation is often seen as the bane of a free market, in this situation a free market simply does not exist.

So what is net neutrality then?

Well, net neutrality can mean a lot of things to a lot of people.  But the overarching theme is equal speeds and equal data.  A rule enforcing net neutrality would seek to outlaw throttling, blocking, and special lanes.

The common idea thrown around is establishing the internet under Title II of the Telecommunications act with forbearance to rate regulation and provisions not related to broadband service.  This would effectively establish net neutrality by equating broadband with your phone service.  Under Title II you are allowed access to a phone line and you cannot be restricted in calling someone else who has another provider.  Basically, it would make it illegal to throttle, block, or prioritize data.  What the forbearance line means is that the government will not set rate prices or use regulations that clearly don’t relate to broadband services.

So why are all these politicians getting involved?

Money, youth vote, anti-government, freedom of internet.  You can pick your reason and find an opinion out there to match.  When President Obama made a statement on the issue, it became the forefront topic of politicians for the week.  Some politicians immediately came out against net neutrality, likening it to “Obamacare”.  However, such rhetoric serves no one.

The simple thing you need to remember is that regardless of your politics, 3.7 million people sent comments to the FCC in favor of Net Neutrality, the most comments on any FCC rule.

Admitted to the Illinois Bar

I apologize to my readers for the lack of posts.  Between the Bar, looking for employment, and planning a wedding, this site fell to the wayside.  However, I am back and prepared to get articles out on a more regular basis.  I’ll be rolling out a schedule for topics over the week, but thank you for your support and readership.  Here’s to a new beginning!

-Tim

LEGAL TEMPLATES AND THE DANGERS FOR THE CONSUMER

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In an age of Amazon, Uber, and Scott Trade, the power of choice and affordability for the consumer has never been stronger.  Thus, it makes sense that such choice and affordability would be available in the legal world.  Businesses like Legal Zoom and Nolo provide template forms that allow the average consumer to make contracts, write wills, establish trusts, and do other transactional work.  It addresses a pressing need in the market: affordable, simple legal work.  And it comes as no surprise that transactional attorneys and estate litigators love the advent.  The simple answer is that a legal need cannot be satisfy by a template.  They can be a great starting point, but too often consumers assume that the template covers all of the bases.  The reality is that the template becomes a time bomb that will explode as soon as their is trouble.  My Wills & Trust professor said that when you are planning an estate, you will need a lawyer; the only question is how much you are going to end up paying him.  A lawyer can draw up an effective estate plan for a couple of thousand dollars.  While it may seem like a lot, a dispute in court over the distribution of an estate will cost much more.

What legal templates cannot provide are strategy, analysis, and flexibility.  Though you can argue that law school has a lot of useless aspects, the fact remains that practicing law takes an education and an understanding of more than just rules.  A lawyer’s end product may end up being just a 10 page document, but the service the consumer paid for includes an analysis of the consumer’s needs and a flexibility to maximize potential and minimize risk.  In addition, a lawyer provides legal cover when things go bad.  A lawyer has certain duties and obligations to his client and to the quality of his work.  Using legal templates do not provide that coverage.

So why do legal templates succeed if they are not the best quality?  Simple: they address an obvious need.  The majority of people, small businesses, and start-ups cannot afford a lawyer on retainer of hourly.  Without a better alternative, people will turn to templates over and over again.  It can be worth the risk fill out a template rather than pay the exorbitant fees that some firms charge.  So until the prices come down for transactional work, expect legal templates and services like Legal Zoom to continue working.  Just don’t expect the output to be high quality.

(Also posted at blog.lawstud.io)

Guest Blogging on LawStud.io

Hey everyone,

I will be doing some guest blogging at LawStud.io’s blog.  LawStud.io (pronounced Law Studio) is a fantastic new start-up that connect small businesses and start-ups with attorneys on an open market.  Go check out their blog and website.  I’ll be cross-posting between the two so check them out.

AT&T Mobility LLC v. Concepcion: How Class Actions Got Castrated by Contracts

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Have you ever looked at the terms and conditions of your phone contract?  I know I didn’t before law school.  What you might not have realized, though, is that you may have signed away your ability to sue the phone company.  Even more so, when a company has practiced deceptively across all of their customers, your chance to sue en mass may also have been signed away.  It all stems from a case called AT&T v. Concepcion.

The facts of the case are that the Concepcions saw AT&T offering a deal for a free phone when you signed up with them.  They signed up, but were surprised to find out that they still owed $30 in sales tax based on the phone’s value.  They found out that others had encountered the same issue across the country.  For one person to sue a company for $30 is foolish as they will spend exponentially more.  But in a class action suit, the cost is spread among the people and the accumulated $30 of thousands of people come make the case worthwhile.  The bigger incentive of class actions is to keep companies in check and keep them from shady practices.

Unfortunately, AT&T had written a mandatory arbitration clause into the contract.  They believed that each person had to go to arbitration individually, which would be pointless for each person.  In a controversial decision, the Supreme Court agreed with AT&T that the clause was binding and held that such clauses were enforceable, regardless of class actions.

While the ability to come to an agreement via contract is essential to a free market, the class action suit serves as a necessary check to unscrupulous businesses and harmful tactics.  Even worse is that the contracts are usually non-negotiable.  While the Court says you can always go elsewhere, this ruling all but guarantees that every phone company will have an arbitration clause.

An interesting footnote to this case is the new attempt by companies to stretch this holding to your likes on Facebook and follows on Instagram.  As the New York Times discusses, large food companies are adding legal terms to its pages in the hopes of having you agree to giving up your right to sue.  It is a fascinating side effect of $30 bill.

What a Fast Lane on the Internet means for the average consumer.

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Fresh off a defeat in the appellate courts, the Federal Communications Commission decided to tweak its new rules by allowing Internet Service Providers to create fast lanes for web traffic.  Essentially this means that your regular ISP’s will be able to charge companies like Google, Netflix, and Disney for faster service to provide web content.  According to the New York Times, would likely raise prices for streaming video or any other higher volume websites.  While these companies can easily foot the bill for faster speeds, it is unclear to what extent these companies will pass the costs along to the consumer.

Charging more for companies that seem to use more bandwidth makes sense on its face.  But when we dig deeper down, we can see that these new rules will forever change the internet as it exists today and leave loopholes that are rife for abuse.  The first problem is that ISP’s will be able to double bill for their services.  As a middle man, the ISP’s will be able to bill customers and websites for their services.  This might be fine if we had the internet infrastructure like the rest of the industrialized world, but unfortunately we still lag far behind on download/upload speeds and pricing.  Further more, those services can be billed at varying degrees for websites.  If the companies that own the sites are unable to pay for the faster web speed, their traffic (and thus ad revenue will suffer).  While it may be gradual at first, faster internet speeds will be a must for companies that want to survive online.  This will result in the second problem of these new rules: the stifling of innovation

A major part of the internet’s growth and the rise of tech and internet companies has been the ability for programmers, web designers, and entrepreneurs to innovate on the web.  With all companies paying the same price, smaller startups have been able to grow.  Facebook, Twitter, and other common institutes of the internet grew because of high traffic communities.  As ISP’s are able to favor one company over another, smaller startups will be unable to grow.  Their slow speeds will be a turnoff to consumers.

In a previous post, I talked about the conflict of interest of having a cable company also provide the necessary infrastructure for streaming video websites.  With the FCC’s capitulation on Net Neutrality, it would be surprising to see those streaming sites suffer more.  And if you don’t think that the ISP’s are not above playing shady business games and taking any steps to make a profit, ask them what they did with $200 billion of tax payer money.

The Need for Better Infrastructure

Comcast Merger

 

What is corporate doublethink?

Corporate doublethink is the ability of corporations to hold two competing markets and business plans at the same time in public view.  The most obvious instance of this is the existence of cable companies that also provide internet services.  Cable companies like Comcast have been able to hold two separate, competing views in the public’s eye while in private working towards only one.  They have the ability to provide cable subscription services while also providing internet services.  For years, these services have coexisted with few overlapping interests.  Today, though, with the rise of Netflix, Hulu Plus, Amazon Prime, and countless streaming websites, Comcast and other cable companies are finding themselves promoting opposite interests.  More and more people today in younger generations are forsaking the costs of cable TV for the costs of internet.  With less advertisements and more control over what to watch, younger adults are turning away from traditional cable packages.  As sporting events are streamed online, the cable companies are finding that their internet services are cutting into the bottom line of their cable services.

How does this affect my internet?

Well, the cable companies have chosen Television.  With data capping, a refusal to update infrastructure, and attempts to charge both ends of the internet (users and websites) for data, Comcast and are cable companies are fighting tooth and nail against change.

Can’t I just go elsewhere?

Luckily, this stagnation on the part of cable companies has pushed for innovation by other companies.  Competition by Google fiber and AT&T Fios are pushing data speeds faster than ever before.  Unfortunately, the expansion is slow and rife with roadblocks from politicians and the companies themselves.  Because most companies own the existing cable infrastructure, new internet companies must have the capital and incentive to take on building new networks.

Why hasn’t the government stepped in yet?

While the amount of lobbying and ignorance in the government should answer this, you may be surprised to learn that the government did try to improve internet across the country by giving $2 billion dollars to cable and internet companies.  Unfortunately, the money was never used for infrastructure and no audit has been done to actually determine what happened to it.  Tax dollars at work!

In the end, folks, the internet is the “New World” of the 21st century.  The capabilities of what can be done on it are still being explored.  Business, exchanges, communications, entertainment, and the myriad of other uses for the internet must be improved for a 21st century economy.  Here is one simple fact that I’ll leave you with.  In 2013, you could get 500 megabytes per second for over $300 per month through Verizon.  In Hong Kong, you can get 500 mbps for around $25 per month.