Ariel Stulberg | Vox

New York’s crackdown on “commercial” Airbnb listings is misguided

2016-12-30T11:00:01-05:00

Lawmakers in New York have declared war on Airbnb, passing legislation last month that regulates short-term housing rentals in a way that threatens to reverse the company’s explosive growth.

As state assembly member Linda Rosenthal, one of the law’s sponsors, put it back in June, Airbnb has created “a black hole for New York’s housing stock — sucking in residential units and churning out commercial properties that deplete housing supply and drive up rent.”

In an attempt to stop more long-term rental units from being converted into de facto hotel rooms, New York legislators have made it illegal to advertise a sublet for fewer than 30 days unless the owner or resident is present. If strictly enforced, that would affect 20,000 current Airbnb listings in New York — roughly half the city’s total.

But many experts think the problem New York is trying to solve here is overblown. Airbnb rentals account for a tiny fraction of New York City’s housing stock, and research shows that they have a very small effect on affordability. Meanwhile, the law threatens to quash much of what makes short-term rental services innovative and useful.

If the law is fully implemented, said George McCarthy, president of the Lincoln Institute of Land Policy, “The most likely outcome is it will harm people who are just trying to manage their lives in what is unfortunately a very unaffordable market.”

Airbnb isn’t just about “sharing”

Short-term rental platforms like Airbnb, HomeAway, and VRBO allow ordinary people to take resources they already have — living spaces — and use them in new, useful ways. When someone rents out a spare room that would have otherwise been empty, it’s a win-win situation for everyone.

But not all Airbnb listings are like that. Some are posted by commercial operators renting out entire apartments that were acquired for that specific purpose.

How common is this kind of activity? A good way to estimate this is to look at the most active listings — those booked for at least 180 days over the course of a year. These listings account for about a third of all “host” income in Airbnb’s 25 largest markets, despite representing just 10 percent of all listings there. That’s according to an analysis based on data gathered from Airbnb’s website by analytics and consulting firm AirDNA.

We don’t know whether every such listing represents a unit of long-term housing that was removed from the market. But it’s a reasonable guess that a lot of them are. And in a market like New York where housing supply is tightly constrained, that raises red flags for a lot of people concerned about housing affordability.

Critics argue Airbnb has no obvious financial incentives to oppose commercial use of its site. Indeed, commercial listings seem to be getting more common, despite the company’s occasional en masse removals of such listings (often under political pressure).

New York’s law is part of a wave of harsher regulations aimed at commercial hosting

Worries about Airbnb cutting into a limited housing supply — and evading safety, tax, and other regulations that apply to conventional hotels — has inspired a number of cities to pass a variety of laws regulating short-term rentals.

Some smaller cities such as Raleigh, North Carolina, and Jersey City, New Jersey, have embraced Airbnb and its peers, fully legalizing the services in exchange for agreements for hosts to pay taxes equal to those paid by hotels.

Larger cities have tended to be tougher. New York’s rules were some of the nation’s toughest even before the new law. Renting space in residential units for less than 30 days without the owner present has been illegal in the state since 2010.

Hosts have largely ignored the restrictions, though. Actual rental transactions don’t appear on short-term rental sites. Only advertisements do, in the form of listings. That makes it difficult to identify specific cases of rule breaking.

The new law targets the listing itself, removing a major roadblock to enforcement. It also levies fines directly on hosts who violate the rules — $1,000 fines for the first infraction, $7,500 for repeat offenses.

New York is not alone in its aggressive approach. Santa Monica passed a similar law in 2015. Berlin’s effective ban on whole-unit rentals, passed in 2014, took effect this year.

Other cities, such as San Francisco, where Airbnb is based, have targeted their restrictions more narrowly at commercial use. The city mandates that all would-be hosts must register their listings, certify they live in them, and produce quarterly reports on their bookings. Hosts seeking to rent entire housing units must cap their activity at 90 days per year. San Francisco’s Board of Supervisors approved rules this week to reduce that cap to 60 days.

Many other cities have imposed or will likely soon impose such caps, including Los Angeles, Portland, New Orleans, Amsterdam, and Paris.

Commercial hosting has only a small effect on rents

New York’s law makes no attempt to distinguish commercial hosts from amateurs. Hosts who hope to rent out their living spaces while on vacation, say, will have to think twice for fear of incurring fines. Those listings are far more common than commercial ones.

The median whole-unit Airbnb listing in New York is booked for 37 nights a year, according to numbers the company released this month. Restricting such listings pleases some landlords, some angry neighbors, the hotel industry, and probably many others. But there’s every reason to think it’ll also hurt New Yorkers engaged in useful economic activity, some of whom rely on short-term rental income to afford their rent.

But even the harms from commercial hosting are overblown, according to many experts. Experts say that so far, the practice has had little effect on housing availability and rent.

Consider New York. As of last December, there were roughly 2,500 “commercial units” — defined as short-term rentals booked for 180 days or more over the course of a year — according to data Airbnb made available at a one-day-only, in-person viewing for reporters.

While 2,500 apartments isn’t peanuts, that represents just 0.11 percent of the city’s 2.1 million total rental units, according to the 2014 Housing and Vacancy Survey. That proportion roughly holds true in other large cities, according to AirDNA’s data.

“It is a valid concern, and a lot of cities are looking at it,” said Stockton Williams, executive director of the Terwilliger Center for Housing at the Urban Land Institute, “but it’s hard to discern any significant impact yet.”

Williams argues that other factors have had a much larger effect in pushing up rents, including strict zoning rules, rent stabilization policies, population trends, and the ongoing, gradual increase in the Americans’ demand for urban living.

We don’t know how tough New York regulators will be

The big question now is how strictly New York officials will enforce the law’s requirements. If regulators enforce the law to the letter, it could lead to tens of thousands of housing units being shuttered — an outcome that would be bad news for both Airbnb and a large chunk of the platform’s hosts.

But since New York’s law was signed, backers have signaled that they plan to keep enforcement fairly small-bore. Investigators will continue to work from phoned-in resident complaints rather than dragnet internet searches. And the focus will remain on truly commercial operators, not on residents making extra money while away on vacation.

Still, Airbnb isn’t taking anything for granted. In a statement, the company said the law failed to distinguish between ordinary users and illegal hotel operators. Its passage, the company argued, “was driven by Albany politicians seeking to target responsible home sharers at the behest of the price-gouging hotel industry and sends a message to the rest of the world that New York is not open for business when it comes to innovative ideas.”

Why Google is giving up on its dream to bring super-fast broadband to everyone

2016-12-30T11:13:44-05:00

Alphabet, the parent company of Google, announced on Tuesday that it was curbing its expansion of Google Fiber, an ambitious effort to bring blazing-fast internet access to a number of metropolitan areas. It’s the latest setback for those who hope to bring speeds of 1 gigabit per second — about 50 times faster than a typical connection — to every American.

A few dozen cities in America have next-generation broadband networks that offer gigabit speeds. These super-fast connections were supposed to revolutionize Americans’ experience of the internet and rev up the country’s noncompetitive broadband market.

When these networks were being built, advocates pointed to a number of potential applications. Gigabit networks, they promised, would enable users to interact in complex virtual reality environments. They’d make possible good-as-life teleconferencing that could allow seniors to visit doctors from home.

But six years after the first super-fast connections went live, even proponents concede no “killer” gigabit application has emerged. Most of their potential, critics say, is simply ignored by users. And building gigabit networks nationwide would be a colossally expensive undertaking.

That has caused even some former enthusiasts of these networks to wonder whether the early hype around gigabit networks was misplaced. Perhaps it makes sense to settle for more incremental — and much less expensive — upgrades to the networks we already have.

Fiber optic networks were supposed to be the internet’s future

Most Americans get their internet via telephone and cable television wires that have been in the ground for decades. These lines weren’t designed to carry digital data, and as a result internet service over them tends to be slow. New fiber optics networks, which send data as pulses of light along strands of glass, really are better.

The first Google Fiber network went live in Kansas City in 2013.

Along with making money, the company bosses said they hoped to strengthen the internet’s technological foundations.

“We don’t want incremental change,” Google Fiber’s Kevin Lo said in a 2012 interview. “Offering you a 10 Mbps service and edging it to 50 Mbps and then 100 Mbps, that’s not what drives real innovation.”

Google set an initial goal of signing up 5 million subscribers in its first five years. More than 1,100 municipalities applied to be part of the program. The company has expanded the service to seven cities so far, but it now looks like the expansion phase is winding down.

Google was a pioneer, but it wasn’t the first to reach gigabit speeds. That honor falls to Chattanooga, Tennessee — population 173,000 — which built a publicly owned fiber optic network in 2010, making it the first American city to offer gigabit speeds citywide. The network cost $330 million to install and initially offered gigabit speeds for $350 a month — a price that has since fallen to $70.

Last year, Chattanooga demonstrated just how fast fiber optic networks can be when it boosted its top speed to 10 gigabits per second. To put that in context, that’s more than 500 times faster than the average speed of a US internet connection of 15.3 megabits per second.

Chattanooga became the first city in America to deploy fiber-to-the-home internet service in 2010

When it began, Chattanooga officials spoke of the project as part a longer-term revitalization of the city’s deindustrialized economy. They believed that having one of the nation’s fastest broadband networks would give the city a decisive economic advantage — allowing the city’s residents to use, or maybe even develop, the next generation of internet applications.

And Chattanooga wasn’t alone; there were dozens of government-led efforts to install fiber in small cities nationwide.

The nation’s largest internet providers — Comcast, Verizon, AT&T — have rolled out some fiber offerings as well.

Advocates want the feds to push a nationwide fiber network

As a result, about 14 percent of Americans have access to gigabit speeds today. That’s not nearly enough for Susan Crawford, a professor at Harvard Law School. In her book Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age, Crawford called for a massive national fiber project comparable to Dwight Eisenhower’s creation of the National Highway System.

The gigabit applications we’ve seen so far, she told me, are only the vaguest hints of what’s to come.

“It’s a phase change, like ice turning into water”

“One helpful analogy is to the history of electrification,” she said. “We thought when electricity first came on the scene it would just be a few street lights, maybe one light at home.”

Crawford dismissed talk of building gradually on current speeds. In her view, gigabit networks represent a revolution over current broadband, not simply a marginal improvement.

“It’s a phase change,” she said, “like ice turning into water.”

A few countries, notably South Korea, have invested more in super-fast networks than America has. But there isn’t yet much sign that the faster networks have given these countries a big technological edge.

Crawford argues that’s because countries like South Korea lack the United States’ entrepreneurial dynamism.

“If you come up with something there, you just get bought by Samsung,” she said.

Skeptics say a gigabit fiber network isn’t worth the cost

Of course, there’s another possibility: Maybe people just don’t have any use for so much bandwidth. That’s the view of Doug Brake, of Information Technology & Innovation Foundation, a think tank funded by foundation and government grants as well as donations from firms such as Google and IBM.

“There are no apps today and no apps on the horizon,” he said, though he acknowledged that development of new applications would probably proceed more quickly with far broader gigabit coverage.

The basic issue is that even the most bandwidth-hungry of today’s applications use far, far less than a gigabit — 1,000 megabits per second — of bandwidth. Right now, one of the most bandwidth-hungry applications out there is Netflix. Netflix recommends users have at least 3 Mbps of bandwidth for standard-definition video — meaning that you could stream about 300 Netflix videos simultaneously on a 1 gigabit connection. If you want Netflix’s highest-quality streaming, called Ultra HD, that requires 25 Mbps. So a gigabit connection would allow you to stream 40 Ultra HD videos at a time.

“There are no apps today and no apps on the horizon”

“People throughout history have been proven wrong, so I’m open to that,” Brake said, “but nothing before our eyes justifies spending hundreds of billions of dollars on this stuff.”

He rejected Crawford’s federal approach as “an absurd waste of government resources.”

To the extent that there’s any problem with US internet service, he said, it’s with connectivity in remote, rural areas.

The focus of policy should be on “making sure our nation’s poor have access to the internet at acceptable speeds,” he said. For the most part, that means incentivizing the major broadband providers to expand and upgrade their existing networks, which are often much slower than 1 gigabit.

Brake points to Vector DSL and DOCSIS 3.1, new standards that allow telephone and cable networks, respectively, to carry more data than before. He also highlighted the forthcoming fifth generation of mobile broadband (5G), which will have speeds about 10 times those of 4G devices.

With that kind of steady progress, he argues, it would be foolish to spend billions of dollars on a fiber networks that would deliver far more bandwidth than most households know what to do with.

New networks have benefits beyond gigabit speeds

Blair Levin has a long record as a cheerleader for faster broadband networks. He oversaw the creation of the Federal Communications Commission’s National Broadband Plan in 2009 and 2010. Then he led Gig.U, a private group promoting gigabit networks on college campuses.

But his enthusiasm for gigabit networks has cooled a bit in recent years — a situation he calls “highly ironic” given his earlier views.

“There’s nothing magical about a gig,” he said. “The gig has become the marketing nomenclature.”

It’s not the speed of the networks he cares about, but their impact on the broader broadband marketplace.

When he and his colleagues set out to write the National Broadband Plan in 2009, Levin said, most US households had no more than two options for broadband service — usually a cable company and a local telephone company. The weak competitive pressure inherent in that structure reduces firms’ incentive to invest in better technology, especially because building a new network can cannibalize usage of existing networks.

“There’s nothing magical about a gig. The gig has become the marketing nomenclature.”

“I don’t begrudge anyone their return on investment,” Levin said. However, he noted, the major providers’ incentive “is not to provide ‘better, faster, cheaper,’ but to maximize return on investment.”

So without pressure from outside, incumbent broadband providers have a tendency to rest on their laurels.

In contrast, when a third party announces plans to build a new network in a particular city, the local cable and DSL providers often responded by offering faster, cheaper service of their own. Comcast, for example, recently announced a new 2 gigabit cable service that will be available in both Chattanooga and Atlanta, Georgia — a Google Fiber city.

Fiber upgrades are losing momentum — and that might be okay

Google Fiber’s rollout was painstaking and slow, and the project failed to meet its growth goals.

From 2014 onward, the company required wannabe “Fiber cities” to promise they’ll expedite Fiber’s installation in various ways. These included providing detailed information on and access to existing infrastructure, streamlined construction permitting, and other concessions. Getting cities to buy into the whole program has proved difficult.

AT&T is continuing to expand its fiber optic network, called Giga Power. Verizon invested heavily in its own fiber optic service, called FiOS, over the past decade. But in recent years, new FiOS investments have practically ground to a halt.

All three firms have recently signaled plans to shift away from laying fiber lines directly into subscribers’ homes. The new initiatives revolved around covering the so-called “last mile” using 5G wireless, which is easier to install but runs at slower speeds.

Democratic presidential nominee Hillary Clinton has proposed an additional $275 billion in spending on America’s infrastructure over the next five years. Some of that money would flow to boosting internet access to underserved areas. Another tranche would go to grants for towns looking to create “modern digital communities,” part of which would likely to go fiber buildout.

Levin and Crawford praised the proposal as a step in the right direction. Brake praised it too, citing its focus on broadband availability (rather than speed) and its neutrality as to which technology to employ.

But more ambitious proposals, like Crawford’s dream of a national, federally subsidized fiber network, don’t seem likely to materialize. “Let’s get real,” several experts told me.

Maybe that’s not such a bad thing. Right now, incremental improvements to existing broadband networks seem to be providing most Americans with plenty of bandwidth for today’s applications. On the other hand, maybe some scrappy tech entrepreneurs in South Korea will shock everyone into rethinking the question.

This chart shows how Uber is devastating New York’s taxi business

2019-03-05T16:31:24-05:00

Uber’s devastating effect on the New York cab industry is plain to see in this chart, produced by Goldman Sachs, showing the change in the price of New York City taxi medallions since 2004.

New York’s yellow taxicabs are the only vehicles in the city allowed to pick up passengers who hail them from the street. The medallion system, in place since 1937, sets an upper limit on the number of those cabs. As demand grew, medallions became more and more valuable.

This chart shows how medallion prices rose from about $250,000 in January 2004 to a peak of just over $1 million for an individual medallion — and about $1.3 million for a corporate one — in March 2013.

But starting in 2010, Uber’s drivers — who aren’t allowed to accept street hails — started filling this government-created vacuum. As Uber added more and more drivers, medallion priced stagnated, then started to fall precipitously. The more people hail cars through Uber, the less money cab drivers make, and the worse taxi medallions look as an investment.

One of the city’s largest taxi companies, White & Blue Group, saw its monthly medallion-leasing income drop as much as 50 percent in the past year, according to a lawsuit it filed against the city last month.

A new Obama rule could save ordinary investors billions in hidden fees

2019-03-05T16:25:34-05:00

This woman looks friendly, but if she's not following a fiduciary standard then she may be hurting her clients. | Monkey Business Images / Shutterstock

You know setting aside money for retirement is smart, but you don’t know anything about how it works. You need advice. Where do you turn?

Maybe you have a financially savvy friend or family member. But a lot of people turn to professional advisers.

Until now there have been two different kinds of investment advisers: those who are required to work in your best interests, and those who — amazingly — are not.

But a new rule from the Department of Labor, which becomes final today, aims to change that. Under the new rule, savers will gain the right to sue or initiate arbitration against advisers who don’t meet high ethical standards or who fail to disclose conflicts.

The effect, say both experts and many industry advocates, will be to drive many advisers to change their business models, while pushing others entirely out of the business.

And that’s probably a good thing.

The new rule will require retirement advisers to act in their clients’ interests

The Department of Labor developed the new standards over the past few years, as part of a larger regulatory effort to reduce risk for middle-class savers after the 2008 financial crisis.

The two kinds of retirement savings pros are called “registered investment advisers” and “broker-dealers.” Registered advisers — who often work with wealthier, more sophisticated clients — are required to uphold fiduciary standards, a special legal arrangement most often associated with lawyers and doctors. They are required to work in the best interests of their clients and can be punished for doing otherwise. Registered advisers are paid directly by their clients, and generally charge based on the size of the fund they manage.

“Broker-dealers,” on the other hand, are often more like salespeople (a dealer is a broker who works independently). They’re often paid commissions, increasing their incentive to suggest products with higher fees. Many also receive “revenue-sharing” payments from the banks and mutual funds that generate the investments the brokers sell, again potentially influencing them to steer savers toward products that charge more.

The suggestions broker-dealers make to clients are held to a “suitability standard.” That is, brokers are required to only propose products that are appropriate for the saver given his or her age, retirement goals, etc.

What brokers dole out is “advice” in the conventional sense, but the current rules don’t require it to be particularly good, or even fully well-meaning.

“A sales pitch where they’re going to get a huge commission isn’t ‘advice,’” says Betsey Stevenson, a professor of economics and public policy at the University of Michigan and a former member of the White House Council of Economic Advisers (CEA) who co-authored its report on the rule.

“Car salesmen get commissions, and everyone’s fine with that,” she adds. “But I’ve never met anyone who’s going to go to a dealership to ask advice about whether to buy a new car or take the bus.”

Savers lose a lot of money because of conflicted advice

A decades-long shift from traditional pensions to 401(k) savings plans means more people than ever are responsible for deciding where to invest their own retirement savings.

The CEA’s report, published in February 2015, found that bad advice from conflicted broker-dealers reduced savers’ returns by about 1 percent a year — as much as $17 billion a year nationwide.

The greatest losses occur when workers roll their 401(k) balance into a higher-fee individual retirement account when leaving a job, rather than keeping it with their former employers.

“A typical worker who receives conflicted advice when rolling over a 401(k) balance to an IRA at age 45 will lose an estimated 17 percent from her account by age 65,” the CEA’s report said. The report adds that if there is $100,000 in that account, it could grow to $216,000 in 20 years without the bad advice, as opposed to $179,000 with the conflict of interest.

Opponents say conflicts of interest aren't a problem

Opponents of the new rules argue that most brokers already act the way regulators want them to.

“If you don’t help someone, they’re not going to continue with you as a client,” said Lisa Bleier, managing director at the Securities Industry and Financial Markets Association, an industry group, in a December interview.

Bleier said the Labor Department’s proposed rules were haphazard, applying only to retirement advisers and not to investment advisers generally. They’d require savers to sign extra contracts, including one the moment they walk in the door, she said, and would expose brokers to frivolous lawsuits.

I pressed Bleier on the ethical issues involved in advisers receiving commissions or revenue-sharing arrangements. “I don’t see those compensation structures as a problem, no,” Bleier responded. “The SEC has approved them.”

The new rule will probably drive a lot of advisers out of the business

Both Stevenson, the professor and former Obama administration economist, and Bleier agree on one likely effect of the rules: A lot of brokers will stop serving middle-class clients.

Broker-dealers will have three options:

They can operate as they do now, but adhere to the new standards. Because it’ll be harder to steer clients toward high-fee products, they’ll make lower commissions — while still risking lawsuits from disgruntled clients.
They could move away from commissions, charging the client a fixed fee the way registered advisers do.
They could give up advising entirely.

In late 2012, the UK passed a set of regulations that were similar to the Obama proposal — but stronger. The regulations not only imposed a fiduciary standard on retirement brokers, but also banned nearly all commissions, while also strengthening disclosure and professional training requirements.

The result: The number of advisers in the UK fell from about 27,080 in 2009 to 23,640 in 2014, a reduction of about 13 percent, according to the Association of Professional Financial Advisers.

The revenue generated by advisers was impacted as well. Advisers’ total income never fell, but it stopped growing for three years, from 2011 to 2013. But growth resumed in 2014 with a surge of fee-based income replacing a very large drop in commissions. (Outside factors like the eurozone debt crisis likely influenced advisers’ revenue, as well.)

In the years since the new rules went into effect, both government and industry have expressed concern about a growing “advice gap” for middle- and lower-income retirement savers. While regulators have said it’s difficult to measure the gap — measuring something customers aren’t doing — a research firm called Fundscape found, based on survey data, that many advisers were turning away investors who had less than about $148,000 in total assets. The average British investor has a portfolio of about $30,000.

Bleier and Stevenson both believe something similar will happen here in the United States — less wealthy clients simply can’t afford the upfront fees charged by non-conflicted investment advisers. But while Bleier sees that as a big problem, Stevenson disagrees.

Stevenson argues that most savers would be fine with so-called robo advice from online services that use data and algorithms to offer advice based on savers’ specifications. Another option: They can read the Vox guide to retirement savings.

“It’s not about good guys and bad guys,” said Stevenson. “These guys are just trying to feed their families. And if they can offer a product where they get a $500 commission versus one where they get an $800 commission — they don’t want to give bad advice, but what if it’s hard to tell?”

With the fiduciary rule, the government aims to resolve that tension and legally obligate advisers to put aside their self-interest. The result for savers, though, won’t necessarily be better advice. It could be less advice, at least of the kind you get from human beings.

But that’s okay. Most people don’t need much advice, because the principles of saving for retirement aren’t complicated: Save 20 percent of your income, invest in low-cost index funds, and don’t touch the money until you reach your retirement age.

A new court ruling could get you kicked off the internet for file sharing

2019-03-05T16:36:54-05:00

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Internet service providers almost never terminate their customers’ connections over illegal file sharing. Why would they? It’s bad for business. But a new court ruling this week could make it a lot more common.

On Thursday, a federal jury in Virginia found Cox Communications, the fourth largest internet provider in the U.S., liable for “willfully” contributing to copyright infringement by its users, and ordered the company to pay $25 million in damages.

At issue was whether Cox had adequately responded to notices from music publisher BMG Rights Management, the plaintiff in the case. BMG argued that the law requires Cox to ban users who repeatedly engage in illegal file sharing. Cox did technically have a policy for banning repeat offenders, but BMG argued it was so convoluted as to be essentially toothless.

On Thursday, the jury sided with BMG, finding Cox liable for the illegal file sharing of its users. If upheld on appeal, the ruling will be a major victory for copyright owners, who will have a powerful new weapon in forcing internet providers to battle copyright infringement on their networks.

So if you engage in illegal file sharing: watch out. If media companies catch you, your internet provider may not be able to save you.

Cox let customers re-connect immediately after they got kicked off

Cox claimed that it was complying with the law — specifically, a 1998 law called the Digital Millennium Copyright Act that provides ISPs a “safe harbor” from liability if they terminate the accounts of repeat infringers. Cox claimed they had such a policy. In practice, though, Cox customers that did a lot of illegal file sharing didn’t have very much to worry about.

Cox staffers were warned not to talk publicly about the policy

Jason Zabak, Cox’s Manager of Customer Abuse Operations, laid out Cox’s approach in stark terms in an internal email titled “DMCA terminations” that came up at trial. “As we move forward in this challenging time we want to hold on to every subscriber we can,” Zabak wrote. “With this in mind if a customer is terminated for DMCA, you are able to reactivate them after you give them a stern warning.”

Zabak added that “We must still terminate in order for us to be in compliance with safe harbor but once termination is complete, we have fulfilled our obligation.” Zabak described the re-connection rule as an “unwritten semi-policy” and warned Cox staffers not to talk about it publicly.

Judge Liam O’Grady, who presided over the case, cited this email and others when he refused to dismiss the case against Cox last month, writing that the company’s repeat offender policy didn’t measure up. The jury, it seems, agreed. Cox representatives say the company plans to appeal the decision.

Cox’s refusal to join the copyright enforcement pack was its undoing

The odd thing is that many major ISPs don’t terminate repeat infringers at all. Instead, larger firms such as Comcast and Time Warner signed a kind of detente with major content companies in 2011 and joined a program called the Copyright Alert System. Under this system, ISPs promise to send users increasingly ominous messages when they’re caught engaging in illegal file sharing. But the rules don’t require ISPs to ever fully cut a customer off.

Cox pointedly refused to join the program, angering content companies. Many observers believe that that’s why BMG chose to sue them.

In its defense, Cox argued that its repeat infringer program met the legal requirements for the safe harbor, and that it was therefore entitled to immunity from liability.

Cox pointedly refused to join the Copyright Alert System, angering content companies

The company’s lawyers also questioned the process by which BMG had identified illegal file sharers on Cox’s service. BMG hired a company to scan popular file sharing platforms searching for users sharing BMG-owned music. It would then send Cox lists of thousands of internet addresses and demand that Cox punish their owners.

Cox’s lawyers asserted that this process wasn’t rigorous enough to definitely prove that a particular subscriber had broken the law. Therefore, Cox argued, it was appropriate to treat BMG’s supposed “proof” as a mere accusation, and not enough on its own to obligate Cox to punish users.

The verdict is a major victory for media companies

Peer-to-peer file sharing remains extremely popular online. The total amount of data shared between users in 2014 was 797 petabytes, equivalent to about 70 million HD movies.

The Cox verdict represents a major win for the record labels and TV and film studios that have battled illegal file sharing for over a decade.

If the verdict survives appeal, internet service providers will have a powerful new incentive to work with media companies, either through programs like the Copyright Alert System, or by maintaining more robust termination and repeat-offender programs.

For those engaged in illegal file sharing, that means more scrutiny, and perhaps a higher likelihood of being caught and punished.

Comcast CEO to angry customers: It’s not me, it’s you

2019-03-05T15:47:22-05:00

Comcast CEO Brian Roberts. | Justin Sullivan/Getty Images

Everybody hates Comcast. The cable giant consistently ranks last or near last among all companies on consumer satisfaction surveys. Hurling insults at Comcast — its prices, its speeds, its customer service — has risen nearly to the level of a national pastime.

But what if there’s nothing the company can do to change its customers’ minds? What if most of what people hate about Comcast has its roots in the structure of America’s cable market?

That’s what the company’s CEO, Brian Roberts, suggested last weekend when asked about the company’s poor record in an interview with Business Insider founder Henry Blodget.

Comcast CEO Brian Roberts says the company is a victim of its licensing fees

Roberts argues that people might hate Comcast, but they hate other cable companies too:

We’re with all the other cable companies, within spitting distance of each other. As a group, that is what the results show.

Like… “Well, your people didn’t show up on time” and therefore let’s fix that and will that actually change the score and suddenly we’re the best company in America? Google’s free. Facebook is free. We charge, and we collect for every piece of content rights. Every movie star. Every athlete. Every possible piece of content we pay.

We’re up to well in excess of $13 [billion] to $14 billion a year at this one company to procure that content on behalf of the consumer, and it’s grown on average as an industry about 8% to 12% a year compounded for a decade. If you drop a channel, you’re incredibly unpopular, and if you pass along a rate increase, you’re incredibly unpopular.

The problem isn’t Comcast’s service, Roberts is saying; it’s that people have to pay for it. Comcast operates by striking deals with content creators and publishers — ABC, CBS, FOX, ESPN, HBO, and the rest — for the right to broadcast their shows, movies, football, baseball, and basketball games. And as Roberts said, it doesn’t come cheap.

And there’s not much the company, or other cable companies, can do about that, in Roberts’s view, because content companies have too much leverage.

Licensing fees may be expensive, but Comcast can afford them

One problem with Robert’s argument is that Comcast makes money too — a lot of it.

In 2014, it brought in nearly $69 billion in revenue, with $14.9 billion of that being operating income, a.k.a. profits.

So, yes, Comcast has to charge its customers, but it could charge them less if it wanted to. It could also invest more heavily in more and better-trained customer service workers. It could boost those data caps that customers are always complaining about.

Customers don’t hate every service they pay for

To be fair, elsewhere in the interview Roberts described some of the company’s plans to improve its customer service, including an Uber-like tracking system for Comcast’s technicians.

But he seems to believe that it may just never be enough. No matter how hard Comcast tries to make its customers happy, they still wind up disgruntled. Customers just can’t stand paying for things, and the only way Comcast could really earn their love is by giving away its product, as Google and Facebook do.

The problem with this argument is that most companies do charge for their products, and few if any are as hated as Comcast. Indeed, the cable TV industry’s upstart rivals — Netflix, Hulu, Amazon Prime — charge their customers as well.

And customers don’t hate Netflix the way they hate Comcast. In 2014, Comcast scored a 54 out of 100 on the American Customer Satisfaction survey — down from 64 in 2001. On the same survey, Netflix came in at 81. In eight years of measurement, it’s never dropped below a 74.

One reason for this: Online streaming services charge a lot less. Netflix’s basic service costs $7.99 a month, as does Hulu’s. Comcast’s “digital starter” TV package, which doesn’t include premium channels like HBO, costs $49.99.

On the other hand, some companies charge a premium while still earning high marks, because their products are great. For instance, iPhones are way more expensive than a lot of Android-based smartphones, yet they’ve earned fanatical customer loyalty.

So maybe Comcast can’t please its customers. Maybe it’s doomed to its abysmal Yelp reviews and a rock-bottom reputation. But it could probably try a bit harder too. Who knows?

Disclosure: Comcast is an investor in Vox Media, the parent company of Vox.com.

Vox Featured Video

Podcasting is getting huge. Here’s why.

2019-03-05T15:44:55-05:00

Sarah Koenig, host of the popular Serial podcast, poses with her award at the 74th Annual Peabody Awards Ceremony on May 31, 2015. | Cindy Ord/Getty Images

Serial, one of the most popular podcasts of all time, returned last week with an episode chronicling the capture of Bowe Bergdahl, a US service member imprisoned for five years by the Taliban.

The show’s first season — a deeply researched reinvestigation of the 1999 murder of Hae Min Lee, a Baltimore teenager, and the subsequent trial and conviction of her ex-boyfriend, Adnan Syed — put podcasting on the map. Host Sarah Koenig, long of This American Life, narrated lengthy, penetrating interviews with Syed himself, speaking from prison, as well as painstaking recapitulations of every detail of evidence and testimony.

It made for gripping storytelling, and listeners ate it up. As of March of this year, the show’s first season’s 12 episodes had been downloaded a total of 75 million times. And that was part of a broader trend: Podcasting is becoming a mainstream phenomenon.

About 17 percent of Americans 12 or older, about 46 million people, listened to a podcast in the past month, up from 12 percent in 2013.

The medium is taking off now because of the happy convergence of three big trends. The technology has finally improved enough that listening to podcasts is easy and convenient for ordinary listeners. Talented professionals — many of them veterans of NPR or other radio outlets — have begun to focus on the medium. And a new generation of podcast-focused businesses are figuring out how to convert these professionally produced, popular podcasts into serious money.

Technology has finally made it easy to listen to podcasts

The old and busted way to listen to podcasts. (raneko)

Podcasting has been around for about a decade — the term is a reference to the iPod, which older readers will remember as an iPhone that only played music. But while the idea of listening to music on an iPod quickly became popular, it’s taken a lot longer for the concept of listening to podcasts to catch on.

A big reason for this is that downloading podcasts to an iPod or other MP3 player was cumbersome. Typically, you had to subscribe to podcasts on your computer, download episodes, transfer the episodes over to your iPod player using a USB cable, and then listen to the episodes on your iPod.

And you’d have to repeat this ritual every time new episodes came out, which might happen every day, week, or longer. Most users simply didn’t have the patience for this. Some people listened on their computer; many didn’t listen at all.

The wide adoption of smartphones with mobile internet capabilities, beginning around 2010, removed these hurdles. Only 10 percent of Americans owned smartphones in 2009. This year, that number has jumped to 71 percent. Fans gained the power to tune in to podcasts much like they tuned in to radio shows, instantly, wherever they happened to be.

New software platforms like Stitcher, Overcast, and Castro, along with Apple’s own undeletable Podcasts app, have emerged in recent years, making the process of aggregating, downloading, and streaming podcasts even easier.

Podcast listeners have migrated to mobile in droves. In just one year, from 2013 to 2014, the percentage of listeners who said they primarily listen on smartphones, tablets, and portable audio players rather than on a computer jumped from 34 percent to 51 percent.

It’s becoming a lot easier to listen to podcasts in the car

(Charles Wiriawan)

The thing that’s really driven the widespread adoption, though, has been new technologies that make it easier to listen to podcasts in your car.

The market for in-car audio programming is huge. A disproportionate share of radio listening — about 44 percent — takes place in cars, compared with about 29 percent at home and 15 percent at work. More than 50 million Americans each week tune in to news-talk radio stations, which offer programming that sounds a lot like what you can find on many podcasts. Programs like The Rush Limbaugh Show and NPR’s Morning Edition draw millions of listeners every day, and have done so for decades.

So you might have expected podcasts to disrupt the talk radio market the way digital music disrupted the record labels. But until recently, that wasn’t happening because — again — the technology was too cumbersome.

Driving with headphones is a bad idea no matter how smart your phone is. Would-be listeners could use tape-deck adaptors or digital transmitters, but both cost extra, were a hassle to use, and could mangle the audio quality.

But in recent years, carmakers have made it a lot easier to pipe audio from customers’ smartphones to their stereo systems. Carmakers added auxiliary audio inputs, then USB ports (which had the added benefit of charging your device). More recently, they’ve begun adding support for Bluetooth, which allows you to play podcasts from your smartphone without even taking it out of your pocket or purse.

Tech giants such as Google and Apple are investing heavily in the development of “connected car” platforms, which allow smartphones to totally take over the interface of cars’ in-dash entertainment consoles. One consequence of this is that listening to podcasts in your car is becoming as easy as listening to AM or FM radio.

Podcasting is becoming professionalized

Many early podcasts were amateur efforts; others were simply on-demand versions of radio programs produced by major outlets such as National Public Radio or BBC Radio. But recently, there’s been a new wave of professional, dedicated podcasters making shows with the same high production values you hear on the radio.

Serial’s Koenig is only the most famous example. Another This American Life vet, Alex Blumberg, co-founded NPR’s Planet Money podcast, and, more recently, created StartUp, a podcast chronicling the rise of a podcast network, Gimlet Media, that he co-founded with another former NPR producer, Matt Lieber.

The host of Gimlet’s Mystery Show, Starlee Kine, is also a This American Life alum. The hosts of its Reply All, Alex Goldman and P.J. Vogt, were once producers at On the Media, and were hosts of its short-lived spinoff podcast TLDR. Roman Mars, host of 99% Invisible and founder of the PRX’s Radiotopia podcast network, is also a public radio vet.

Other successful podcasters — such as Marc Maron, host of WTF, and Joe Rogan of The Joe Rogan Experience — got their start in standup comedy, TV, commercial radio, or all the above.

Major media outlets have also jumped in with more conviction than before. Slate recently brought its various podcasts together under an umbrella organization called Panoply, whose owners recently bought a stake in Gimlet as well. Public Radio International and American Public Media have both recently launched networks as well, called SoundWorks and Infinite Guest, respectively.

Podcasting has a viable business model

Alex Blumberg and Matt Lieber, co-founders of Gimlet Media. (Yana Paskova/the Washington Post via Getty Images)

One reason the medium has been able to recruit so much talent recently is that podcasts are making money. Many podcast hosts, like some radio hosts, read or even write their own ads. Listeners connect with a host’s voice and personality in a deeper and more intimate way than, say, the readers of newspapers or magazines or their web equivalents.

And talented podcasters are often talented admakers. A Mailchimp spot that aired during Serial — which featured a tourist mispronouncing the company’s name (“Mail … kimp?”) — became a bona fide web phenomenon in its own right.

Podcast ads are lucrative. As of late last year, podcasters reported CPMs — cost per a thousand ad impressions, the standard industry metric — of between $20 and $45. Network TV programs, for comparison, earned about $5 to $20 per thousand impressions, radio ads made between $1 and $18 per thousand, and regular web ads between $1 and $20.

Those kinds of numbers have attracted a bit of a gold rush to the podcasting business.

Slate’s Panoply network produces podcasts, but it also offers distribution, sales, and audience development services.

Many shows on its 58-podcast roster are long-running Slate staples —such as the Political Gabfest and Culture Gabfest. Others are made in partnership with outside news organizations, such as the New York Times, New York Magazine, and Popular Science, which are choosing to take advantage of the platform Panoply offers rather than develop their own podcasting operations from scratch. (Vox’s own The Weeds podcast debuted on the network in September).

Gimlet Media — the startup featured in season one of StartUp — is, at least for now, a smaller operation, with just four shows in production. But its founder’s reputation and his idea of the company as an “HBO for podcasts” have attracted keen interest from investors.

Chris Sacca, an early backer of Twitter and Uber, was one of the first investors in the company. Just this month, Gimlet raised $6 million in Series A financing round that valued it at $30 million. Of that, $5 million came from Panoply’s parent company, Graham Holdings, former owner of the Washington Post.

The latest investment — discussed at length in a recent StartUp episode — will allow the company to add eight new shows and triple its headcount from 25 to 75 employees.

Podcasts may not replace radio talk any time soon. Live radio, live TV, and their streaming equivalents seem likely to dominate key niches like breaking news and sports into the future.

But smartphones and car integration mean podcasts will finally exist right beside radio, giving many more listeners a chance to choose between them. Some of radio’s top producers — along with some savvy investors — are betting they’ll choose podcasts more often.

Correction: This story originally misidentified This American Life as a National Public Radio program. It’s actually produced by WBEZ and distributed by the Public Radio Exchange.