Big Bang Disruption vs. Conventional Wisdom

HBR March 2013Last month, Paul F. Nunes and I hosted an audio webinar for Harvard Business Review on “Big Bang Disruption,” our article from the March, 2013 issue of the magazine.  An archive of the webinar has now been posted, including the PowerPoint slides.

We had a lively discussion with the audience, who posted some terrific questions and comments during the course of the session.

What companies, products, start-ups, and industries do you see being transformed by this new kind of disruptive innovation?  We’d like to know.

Abuse of the CFAA: The Problem of Prosecutorial Indiscretion

With renewed interest in the failings of the Computer Fraud and Abuse Act and the role of prosecutorial discretion in its application in light of the tragic outcome in the Aaron Swartz case, I went back to what I wrote about the law in 2009.

Back then, the victim of both the poorly-drafted amendments to CFAA that expanded its scope from government to private computer networks and the politically-motivated zeal of federal prosecutors reaching for something—anything—with which to punish otherwise legal but disfavored behavior was trained on Lori Drew, a far less sympathetic defendant.

But the dangers lurking in the CFAA were just as visible in 2009 as they are today.  Those who have recently picked up the banner calling for reform of the law might ask themselves where they were back then, and why the ultimately unsuccessful Drew prosecution didn’t raise their hackles at the time.

The law was just as bad in 2009, and just as dangerously twisted by the government.  Indeed, the Drew case, as I wrote at the time, gave all the notice anyone needed of what was to come later.

Here’s the section of The Laws of Disruption from 2009 discussing CFAA:

What did Lori Drew do?

The late-forties suburban St. Louis mother was apparently unhappy about the “mean” behavior of Megan Meier, a thirteen-year-old former friend of Drew’s daughter Sarah. The Drews, along with Ashley Grills, the eighteen-year-old employee of Lori Drew’s home business, hatched a plan. They created a fake MySpace profile for a bare-chested sixteen-year-old boy named “Josh,” who would befriend Megan and encourage her to gossip about other girls. Then they would take printouts to Megan’s mother to show her what the girl was up to.

Not only was the idea stupid, it wasn’t even original—Sarah and Megan, back when they were friends, had done the same thing, creating a profile for a boy who didn’t exist as a way to talk to other boys. This time, however, the plan went awry. Megan became deeply infatuated with Josh. She pressed for his phone number. She wanted to meet him in person. The women behind his account looked for a way out.

According to Grills, “We decided to be mean to her so she would leave him alone . . . and we could get rid of the page.” After deliberating on the easiest way to end an ill-conceived hoax that was going very wrong, Grills sent an instant message to Meier: “The world would be a better place without you.”

The consequences were tragic. Meier, who was being treated for depression, took the suggestion all too literally. After an argument with her parents, who had closely monitored the relationship with Josh from the beginning, Meier went to her room and hanged herself.

Media accounts of the teen’s suicide and the subsequent revelation of who was behind “Josh” created a froth of outrage and hand-wringing. Commentators invented and then proclaimed an epidemic of “cyberbullying.”

When it became clear that the mother of one of Meier’s former friends was involved, Drew herself was subjected to death threats and vandalism. A fake MySpace page for her husband was created. On cable news and the blogosphere, Drew was instantly convicted and sentenced to hell. (“Call me vindictive,” a typical blog entry read, “but i hope that someone kills the woman who is responsible.”)

In the midst of the media storm, state attorneys in Missouri announced there would be no prosecution of Drew for the simple reason that no criminal law had been broken. Federal prosecutors weren’t so sure. They found a 1986 law, the Computer Fraud and Abuse Act, that set stiff penalties for breaking into and damaging computers.

Drew was charged under the novel theory that since the MySpace terms of service agreement prohibits posting false information in one’s profile, the creation of Josh violated Drew’s contract. Hence, she “accessed” MySpace computers without “authorization.” The creation of Josh, in other words, was a kind of hacking. The victim was not Meier (who with her parents’ permission had also violated the TOS, which requires users to be at least fourteen years old). The victim was MySpace.

Although the jury ultimately refused to convict Drew on the felony charge, they did convict her of the lesser crime of unauthorized access. Valentina Kunasz, the jury’s foreperson, made no apologies for the conviction. “It was so very childish; so very pathetic,” she told reporters after the trial. “She could have done quite a few things to stop it, and she chose not to. And I think she got kind of a rise out of doing this to another person and that bothers me, it really irks me.” Drew faces up to three years in prison and $300,000 in fines.

Legal scholars were generally in agreement that the prosecution was deeply flawed and will very likely be set aside or reversed on appeal. (N.B.  Later, it was.) First, there were gaping holes in the government’s case. For one thing, it was Grills, and not Drew, who set up the Josh account and therefore agreed to the TOS (Grills, testifying for the prosecution in exchange for immunity, admitted she never read the TOS). Drew herself was only occasionally involved in the hoax.

By a weird twist of irony, one of the few times she communicated with Meier it turned out she was talking to Meier’s mother, who told Josh he ought to be looking for friends his own age. The fateful message was sent by Grills without Drew’s knowledge, and wasn’t even sent through MySpace.

As a matter of public policy, the prosecution is even more disturbing. Even assuming Drew was bound by the TOS, these contracts are notoriously long and intentionally unreadable. Most of us, even lawyers, don’t read them.

Yet following the logic of the Drew prosecution, anyone who misrepresents some of their personal details on an online dating service has committed a federal crime. Anyone who gives a nonworking telephone number when signing up for a Web site has committed a federal crime.

Indeed, after the verdict, one social network researcher was pained to admit, “We’ve been telling our kids to lie about ID information for a long time now.”

The computer fraud law began as a protection against hackers targeting government computers. The law has never before been used in connection with the violation, willful or otherwise, of private terms of service. There’s no reason to believe Congress intended to criminalize cyberbullying in 1986 or any other time.

Supporters of the conviction argue that the real problem here was a hole in the law—the lack of a statute outlawing whatever it was Lori Drew had done.  But the decision of lawmakers not to criminalize a behavior is no reason to correct the problem in a way that undermines the very idea of law.

People are often cruel to each other. Other children, adults, and even parents can and do humiliate children in the real world. No laws, in all but extreme cases, are being broken.

It’s difficult to see how this case differs in any respect other than the use of a computer and the tragic outcome.

If the conviction stands, it effectively gives every federal prosecutor a blank check to charge anyone they want with criminal behavior, subject only to their discretion of whether and when to use that power.

Some commentators, pleased with the result if not the process, argued that there was no cause for alarm. Prosecutors, they said, will only use this power in extreme cases.

The Drew prosecution suggests precisely the opposite. For elected prosecutors in particular, the real temptation is to exercise discretion not when the law would otherwise let a heinous crime slip through the cracks but when passions are high and the facts (at least the version presented by the media) are the most lurid—when, in other words, an angry mob demands it.

Where to next for the FCC?

crossroads

Tuesday was a big day for the FCC.  The Senate Commerce, Science and Transportation Committee held an oversight hearing with all five Commissioners, the same day that reply comments were due on the design of eventual “incentive auctions” for over-the-air broadcast spectrum.  And the proposed merger of T-Mobile USA and MetroPCS was approved.

All this activity reflects the stark reality that the Commission stands at a crossroads.  As once-separate wired and wireless communications networks for voice, video, and data converge on the single IP standard, and as mobile users continue to demonstrate insatiable demand for bandwidth for new apps, the FCC can serve as midwife in the transition to next-generation networks.  Or, the agency can put on the blinkers and mechanically apply rules and regulations designed for a by-gone era.

FCC Chairman Julius Genachowski, for one, believes the agency is clearly on the side of the future.  In an op-ed last week in the Wall Street Journal, the Chairman took justifiable pride in the focus his agency has demonstrated in advancing America’s broadband advantage, particularly for mobile users.

Mobile broadband has clearly been a bright spot in an otherwise bleak economy.  Network providers and their investors, according to the FCC’s most recent analysis, have spent over a trillion dollars since 1996 building next-generation mobile networks, today based on 4G LTE technology.

These investments are essential for high-bandwidth smartphones and tablet devices and the remarkable ecosystem of voice, video, and data app they have enabled.  This platform for disruptive innovation has powered a level of “creative destruction” that would do Joseph Schumpeter proud.

Mobile disruptors, however, are entirely dependent on the continued availability of new radio spectrum.  In the first five years following the 2007 introduction of the iPhone, mobile data traffic increased 20,000%.  No surprise, then, that the FCC’s 2010 National Broadband Plan conservatively estimated that mobile consumers desperately needed an additional 300 MHz. of spectrum by 2015 and 500 MHz. by 2020.

With nearly all usable spectrum long-since allocated, the Plan acknowledged the need for creative new strategies for repurposing existing allocations to maximize the public interest.  But some current licensees including over-the-air television broadcasters and the federal government itself are resisting Chairman Genachowski’s efforts to keep the spectrum pipeline open and flowing.

So far, despite bold plans from the FCC for new unlicensed uses of TV “white spaces” and the  passage early in 2012 of “incentive auction” legislation from Congress, almost no new spectrum has been made available for mobile consumers.  The last significant auction the agency conducted was in 2008, based on capacity freed up in the digital television transition.

The “shared” spectrum the agency has recently been touting would have to be shared with the Department of Defense and other federal agencies, which have so far stonewalled a 2010 Executive Order from President Obama to vacate its unused or underutilized allocations.  (The federal government is, by far, the largest holder of usable spectrum today, with as much as 60% of the total.)

And after over a year of on-going design, there is still no timetable for the incentive auctions.  Last week, FCC Commissioner Jessica Rosenworcel, speaking to the National Association of Broadcasters, urged her colleagues at least to pencil in some dates.  But even in the best-case scenario, it will be years before significant new spectrum comes online for mobile devices.  The statute gives the agency until 2022.

In the interim, the mobile revolution has been kept alive by creative use of secondary markets, where mobile providers have bought and sold existing licenses to optimize current allocations, and by mergers and acquisitions, which allow network operators to combine spectrum and towers to improve coverage and efficiency.  Many transactions have been approved, but others have not.  Efforts to reallocate or reassign underutilized satellite spectrum are languishing in regulatory limbo.  Local zoning bodies continue to slow or refuse permission for the installation of new equipment.  Delays are endemic.

So even as the FCC pursues its visionary long-term plan for spectrum reform, the agency must redouble efforts to encourage optimal use of existing resources.  The agency and the Department of Justice must accelerate review of secondary market transactions, and place the immediate needs of mobile users ahead of hypothetical competitive harms that have yet to emerge.

In conducting the incentive auctions, unrelated conditions and pet projects need to be kept out of the mix, and qualified bidders must not be artificially limited to advance vague policy objectives that have previously spoiled some auctions and unnecessarily depressed prices on others.

Let’s hope today’s oversight hearing will hold Chairman Genachowski to his promise to “[keep] discussions focused on solving problems, and on facts and data….so that innovation, private investment and jobs follow.”  We badly need all three.

(A condensed version of this essay appears today in Roll Call.)