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					      The Progress and Freedom Foundation

                       Annual Conference

         Making Markets –
Critical Information Policy Choices
                      August 19 – 21, 2007

                         Aspen, Colorado




                           Conference Report
                   respectfully prepared by Jean McClelland

                                  Praxis Reports
                                      www.PraxisReports.com

Dear Reader:

For those of you who regularly read my conference reports, you know that the first portion of a
Praxis Report is my opinion about the experience of attending the conference. Usually that
opinion is followed by session reports that provide an objective segment then opinions about
those sessions. This report is different because this conference is different. First, the
conference is best left at today’s approximate size – about 200 people; so there is no opinion on
whether or not you should attend. Second, the majority of Aspen Summit participants did not
want to be quoted nor offer an opinion on any particular session. After all, every session was
designed to share opinions, not present different information, except by influencing opinion.

This report is still prepared in a bullet point format like my other reports. This way you get the
flavor of the conference content and can quickly determine your areas of interest without having
to read the entire conference proceedings. The Progress and Freedom Foundation has posted
videos of most of the conference sessions on their website. If you want to know more about
what was said, check www.PFF.org.

If you choose to first skim the report on your computer, the links to additional information should
immediately take you to the appropriate website.

Thank you!



                                    Please read the disclaimer at the end of the report.

For additional information on Jean McClelland’s background and
other conference reports please reference www.PraxisReports.com.                           page 1 of 26
The Progress and Freedom Foundation’s Aspen Summit      Conference Report by PraxisReports.com


                                    Table of Contents
The Conference Experience
    What the Conference is About                                                            3
    The Participants                                                                        3
    The Conference Structure                                                                4
    My personal take-aways (by Jean McClelland)                                             5
The Sessions
  Making Markets: Critical Information Policy Choices                                       7
    Thomas M. Lenard
  Telecommunications in the Global Economy                                                  7
    Ambassador David A. Gross
  Keynote Address: Whatever Happened to the New Economy?                                    8
    Dale W. Jorgenson
  Whither Regulation? Telecommunications Policy in a Converged World                       11
    Moderator: Scott J. Wallsten
    Christopher Libertelli
    The Honorable Robert M. McDowell
    Roger G. Noll
    The Honorable Thomas J. Tauke
    Joseph W. Waz
  Property Rights and Patent Reform                                                        14
    Moderator: John F. Duffy
    Mark Chandler
    Bronwyn H. Hall
    F. Scott Kieff
    Michael Meurer
  Luncheon Address: Antitrust and the IT Sector                                            17
    The Honorable William E. Kovacic
  Keynote Address: Freedom of Speech and Press in the 21st Century:
  New Technology Meets Old Constitutionalism                                               18
    Laurence H. Tribe
  Building Awareness About Parental Controls                                               20
    Moderator: Adam Thierer
    Jeffrey Breuggeman
    Ellen East
    Michael D. Gallagher
    David George
    Timothy Lordan
    Hemanshu Nigam
  Let’s Make a Deal: Getting Content & Tech to the Table                                   21
    Moderator: Solveig Singleton
    Alan E. Bell
    Stan Liebowitz
    Bill Rosenblatt
    Thomas C. Rubin
    Matthew Zinn
  Chairman’s Dinner & Address                                                              24
    Eric Schmidt



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The Progress and Freedom Foundation’s Aspen Summit              Conference Report by PraxisReports.com


The Conference Experience
What the Conference is About
The Progress and Freedom Foundation (PFF) begins its mission statement with the explanation
that it is “a market-oriented think tank that studies the digital revolution and its implications for
public policy.” The mission statement goes on to talk about how their intent is to educate
policymakers, opinion leaders and the public about issues associated with technological change
where change is based on a philosophy of limited government, free markets and individual
sovereignty. (paraphrased)

The annual Aspen Summit is one of the ways they achieve their mission. The 200+ attendees
are incredibly fortunate to have been invited to participate in the well informed, high-powered
and intelligent conversations which created the conference. Dialog ensued about what is
happening and what might happen in the future in regards to technology, business and society.

Most conferences want to provide new information to a selected audience. This conference is a
discussion of opinions based on information and viewpoints formed by known data. The “new”
information is how to look at the statistics, trends, et al, from the perspective of the collected
participants. By gathering policy makers, academics and business people, different perceptions
on the common goal of progress and freedom can be explored without (as much) prejudice. To
ensure the opinions are openly shared, there were portions of the conference where the press
could attend for edification and potential follow-up, but could not directly cover. Naturally, they
were very lively sessions!

Listening to the information being shared and the opinions being discussed reminds me that
what we call “reality” is actually our personal perception of what we term “facts”. There are no
facts when you are discussing what people will think and do in response to a technological
offering. There are trends, but trends can change on the whim of a few. There will be policy, for
sure, but policy is influenced by many different viewpoints and most often lags innovation as
was repeatedly pointed out in numerous sessions.

                                          For three days, in a beautiful place, the Aspen Summit
                                          successfully expresses and explores prominent
                                          viewpoints, expertly weaving, tweaking and combining
                                          them, in order to form the new information that might
                                          influence the future. Then, all the participants go back
                                          to their normal habitats with fresh air in their lungs and
                                          new ideas in their head. The conference succeeds in
                                          allowing people to just talk, to express their thoughts
                                          without the normal prejudice and to relax their beings
                                          into openness to new viewpoints. This would not be
                                          accomplished without the beauty of the physical
                                          location and the atmosphere of openness. Kudos to
       Beauty on the road to Aspen
                                          The Progress and Freedom Foundation on both!


The Participants
Reading the participant list was an amazing event in itself. The fact that The Progress and
Freedom Foundation is so highly regarded that it can draw the people on the participant list is
one of its many accomplishments. For instance, Harvard has only ever elevated 55 people to
the title “University Professor.” Nineteen of those 55 are alive today, and two of the 19 were at
this conference providing their learned insight.
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The Progress and Freedom Foundation’s Aspen Summit                 Conference Report by PraxisReports.com



Reading the presenters listed at the beginning of each session summary will provide very
familiar company names – Cisco, Microsoft, Google – plus high ranking officials from the US
government’s Federal Trade Commission (FTC), the Federal Communications Commission
(FCC), academics and other organizations.

Conference participants ranged from these top-level people in their respective communities to
up-and-comers ready to make a difference where and when they can. Therefore, I was
surprised to observe one of these amazing people sign on to the internet and shop for shoes
during one of the keynotes. This was the same person with whom I had just had an interesting
conversation about the workings of our government.

A consultant to numerous government agencies
quipped that many people will listen with half their             “Ahhh… the digital age. Everyone comes to
brain while catching up on their email and other                 the meeting, opens laptops and listens to the
“mundane” tasks with the other half. Well, this was a
technology conference so I would expect technology
                                                                 presentation in the background.”
to be used, but maybe this is where some of those                Consultant to the government
half-brained ideas come from? ;-)


The Conference Structure
The agenda was simple. There were a couple of keynotes, and then the very effective panel
presentations provided multiple viewpoints on specific subjects. The academics weighed in with
their ivory-tower thinking to raise the level of consciousness and allow continued innovation on
the mass level. The politicians brought the government viewpoint, and the business people
responded with how the business world can satisfy (or not satisfy) their customers and
shareholders within the context of government policy and market desires.

Even the “U-shaped” seating arrangement worked to the advantage of sharing ideas and
opinions. Of course, this was achievable only because of the small size of the conference.

                                            The agenda included presentations at both lunch and
                                            dinner. The meals were so magnificent it was, at times,
                                            hard to pay appropriate attention to the presenter. After
                                            all, the Aspen Summit is held at the St. Regis, a five star
                                            hotel with food to match. One of my favorite quotes was
                                            from a young government person who remarked on the
                                            chairman’s dinner menu, “The sirloin of Elk was a bold
                                            move.” For me, it was a quote that epitomized the
                                            different form of thinking and expressing thought that was
                                            the quiddity of the conference.

  Larger-than-life elk statues that greet
                                         With plenty of time built into the agenda to relax and enjoy
     the guests at St. Regis Aspen      the fresh mountain air, there were many discussions the
                                        third day of the conference regarding mountain biking,
hiking, river rafting and other great outdoor activities recently experienced. And, naturally, there
was the town of Aspen, itself, with all its wonderful shops, restaurants and posh hotels for those
less inclined to rugged outdoor adventures.

Scheduling time for physical activity as well as mental activity is a winning combination. The
discussions occurred in the morning, relationships were established and then the fun activities

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The Progress and Freedom Foundation’s Aspen Summit                    Conference Report by PraxisReports.com


took place in the afternoon. The evenings held numbers of opportunities for networking and fine
dining. This is a structure that I wish other conferences would adopt because it allows for the
information to be absorbed and birth new creativity as people relax into non-stressed
conversations. Plus, many conferences are held in great places that the conference attendees
end up having no time to enjoy unless they skip some of the pertinent information being offered.


My personal take-aways (by Jean McClelland)
New Business Models: I was surprised to hear a couple of the presenters note that they had
not seen that new business models would arise from new technology. My surprise stemmed,
specifically, from my 20-year history of implementing technology in businesses. As the project
manager and/or the person in charge of change management, I’ve taught the need for new
business processes with which to address the increasingly rapid and voluminous information
deluge available to decision makers via technology. Data Warehousing was one of the first big
data-information changes that affected decision making. Data mining came next, and now a
variety of flavors of Business Intelligence is being implemented just about everywhere. On the
most basic level, new decision making equals new business models. Why the surprise?

Networks = Communication = Effect on Business, Government and People: There are a
couple of technical conferences I attend every year. In both 2003 and 2006, I have had the
privilege of listening to John Chambers of Cisco talk about the importance of computer networks
and how networking just the existing computers will change how business decisions are made.
In the panel discussion about regulation and convergence you will find Thomas Tauke (Verizon)
quoting Alan Greenspan saying essentially the same thing: networking computers will raise
productivity. Dale Jorgenson (Harvard) talked about how productivity (hence, business
decisions) increased after technology users figured out how to actually use the technology in
their business processes. For me, this was another confirmation of the power of humanity.
Very often we invent, then we figure out why we did that.

   Side Note: The effect that new, faster, and extensive networks may have on business was demonstrated
   by Chambers at the 2006 Oracle OpenWorld conference. (The conference report is free for the asking if
   you want to know what he was saying.)

Freedom of Speech = Definition of Language: An interesting combination of discussions was
Laurence Tribe’s (Harvard) keynote on Freedom of Speech followed immediately by a panel on
Parental Rights and Controls. For me, it evidenced how the large, bureaucratic mass we call
our government has to work through thought processes to determine what should be a law and
what should be under individual control. Of course, this still assumes that laws are made to
                                     help the American populace live together easily – not an
                                     easy mandate, since we are also a body of people that base
                                     our collective existence on respecting individual rights. The
                                     conundrum brings us to the subject of ethics. If we all acted
                                     through what we commonly hold as ethical behavior, would
                                     we need so many laws? Oops… that brings us to another
                                     point on the same circular thought process, what is “ethical
                                     behavior”? Human consciousness changes that definition
  Dr. Tribe addressing the attendees
                                     quicker than laws can be passed.

Another example of moving mass opinions and the business models that reflect them was
provided by Matthew Zinn (TiVo) in the panel discussion regarding which comes first – the
technology or the content. He reminded the attendees that TiVo was sued for their recording
service business model by the very same people that now distribute TiVo-like services. For me,


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The Progress and Freedom Foundation’s Aspen Summit                     Conference Report by PraxisReports.com


that’s another confirmation that the market – the desires of the people paying for products and
services – will eventually win.

Great Minds Think Alike: I attended two conferences back-to-back. The other conference
was hosted by The Institute of Noetic Sciences – an organization founded by Edgar Mitchell, the
astronaut. The theme of that conference was Consciousness in Action. The reason I’m
mentioning this, is that there turned out to be many of the same ideas about progress and
freedom discussed in both conferences. For instance, in Dale Jorgenson’s keynote, he
mentioned how the service and trade sectors are being neglected in economic measurements.
At the IONS conference, Riane Eisler provided a keynote on what she has termed “Caring
Economics” and, an even better IONS session was provided by Hazel Henderson (another
noted economist) about the relationship between Spirit and matter and how the economy is
affected by the combination. Both conferences noted how the European countries are ahead of
the US in beginning to find measurements for care-giving and other services. Both conferences
talked about how people feel about business and how policy helps to shape business models.
Both conferences talked about the policies we allow our governments to implement and how
those policies can be influenced.

The similarities between the conferences brought confirmation that the tide is turning back to
allowing the entire human being to be taken into consideration again. For so long people have
rhetorically been asked to leave their spirit at the work door, abuse their body for the good of the
business but keep their mind working overtime in order to make others succeed. These are the
trends that I personally watch and these two conferences provided me hope that we are finally
coming full circle back to vocations vs. jobs-we-must-do-in-order-to-exist. Soon, the mass
contribution of thought and ideas on how we can best live and work together will influence
government and business more rapidly and more clearly because communication will be more
rapid and significantly broad. The playing field of influence is being leveled by technology.

Wow. What an exciting time to be alive and contributing to an even better future. Get involved.
It’s your life.

Conclusion: As long as we keep the discussions going, and listen to the vast variety of
opinions offered before we completely make up our minds, we will somehow figure out how to
live on this planet with each other. Thank you, Progress and Freedom Foundation for providing
a great venue to help.



               Note: When you find an interesting topic and want to hear the entire presentation,
                                        watch the archived webcasts.




                                                                                                    page 6 of 26
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 The Sessions

Making Markets: Critical Information Policy Choices

Thomas M. Lenard
Senior Fellow & Acting President, The Progress & Freedom Foundation

Telecommunications in the Global Economy

Ambassador David A. Gross
United States Coordinator for International Communications & Information Policy,
US Department of State
                                                                Click here for more from Ambassador Gross


   Lenard: The digital revolution is not only a technology revolution but also a revolution of
   business models and policy.

   “We must create an environment where the ‘Googles’ of the future can thrive”

   Lenard introduced Gross as a “tireless advocate” of the digital revolution and the businesses
   that create it. [Balance of this session report is from remarks made by the Ambassador.]

   “The US is still unquestionably the [tech] leader of the world.” The impact of that leadership has
   been truly profound. The world wants to know how we do it.

   Look where we all were in 2001 and where we are today.

   Global telecomm
      2001 = <2Trillion users
      Today = >3Trillion users

   Internet subscribers
       2001 = 360 Million subscribers
       2007 = 1.2 Billion subscribers
       fastest growth = Middle East and Africa

   Cell phones
       2007 = 3 Billion (approx ½ the world population)
       China = .5 Million cell phones
       experienced 5X growth in last 6 years
       India = 6-7M new subscribers/mo (One impact cell phones have made in India is the ability
       to find work more easily because the work candidate is accessible.)

   Start with the fundamental premise that this must be a world class debate on the effect of
   technology; e.g., in 2000 there were 30 democracies in the world. In 2007 there are 120.




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Keynote Address: Whatever Happened to the New Economy?

Dale W. Jorgenson
Samuel W. Morris University Professor, Harvard University
http://www.economics.harvard.edu/faculty/jorgenson/


     “The IT boom is not coming back but we are not in the midst of another
     ‘dot.com’ crash.”

     Jorgenson’s book, Productivity and Cyclicality in Semiconductors: Trends,
     Implications, and Questions -- Report of a Symposium, has US economy
     broken down by 85 industries1

     The service and trade sectors of the economy are neglected in economic
     measures.

     Data sources now becoming available for other countries around globe;               Dr. Jorgenson
                                                                                     Picture compliments of
     e.g., EU and Japan                                                                   IQSS website

     Key to understanding growth: Understand what’s going on in services and trade sectors.
        How has economy changed since the crash?
        Did the economy grow in a different way?

     Click here for Jorgenson’s PowerPoint presentation (2nd paragraph, look for PFF reference)

     His research split IT related industries into “IT Producing” & “IT-using”. Also noted that non-IT
     Industries create less than 15% of their revenue from IT sources.

     Composition of output and how it changed after it crashed.
       Definition of output shares of IT: value add that can be contributed to IT application.
       ($ magnitude of GDP)
       Output contribution to Economic Growth = % of growth rate that results from IT application

     Software has added a little over ½ of the value-add.

     The crash was centered on the telecom capital investments needed to support new
     requirements.

     The 3% of the economy based on IT contributed 10% to economic growth.
        graph in presentation showed how telecomm equip was a negative contribution

     Another graph showed how the non-IT sectors were stable throughout the time period. The
     economic growth and decline was all happening in the IT sector.

     Software prices have not declined like the hardware prices have declined.




 1
  Google Book preview
 Buy the book from Harvard
                                                                                             page 8 of 26
The Progress and Freedom Foundation’s Aspen Summit                                         Conference Report by PraxisReports.com


  Sources of US economic growth:
     Capital Input
     Labor Input
     Total Factor Productivity (TFP = output per unit of input)

  When reporting on output, journalists rarely know which concept of productivity the information
  source is referencing.

  The character of innovation has shifted from IT Producers to IT Users.

  After the crash, innovation in the IT producing sector increased – which is counterintuitive
  because it was slipping backwards during the boom. Jorgenson credits the innovation
  increase to the IT Users sector. The Users of the new technology were the innovators, not the
  companies providing the technology.

  IT Users' innovations were necessary in order for the new IT systems to be adopted. So when
  the IT systems finally worked (vs old paper systems), productivity soared.



                                         Industry Contributions to Productivity Growth
                                                          Domar weighted productivity.
             1.60


             1.40


             1.20


             1.00


             0.80


             0.60


             0.40


             0.20


             0.00


             -0.20
                          1960-1995                                1995-2000                                2000-2005

                                      Non-IT Industries        IT-Using Industries       IT-Producing Industries



                              PowerPoint slide provided by Jorgenson.
                               Entire PowerPoint presentation available here.
                          (Look in 2nd paragraph for reference to PFF conference)

  Labor Productivity = output per labor hour worked
     The IT User sector innovation will contribute to the Labor Productivity measure at the same
     rate achieved at the recovery rate projection.

  The International Monetary Fund (IMF) raised their projection of all countries to 5.2% for world
  economy. Compare that to the 2.9% projection for the US. Potential for economic growth
  remains the same (2.9%) for the near future.

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   In answer to the IT-User contribution within the Health-care industry - "Health Care is an island
   of socialism.” Health-care has not yet invested heavily in IT.

   Bill R [attendee] provided an alternative explanation for IT Productivity increase: The “boom”
   shoved a fire-hose of new technology down our throat and it took a while to adjust to the
   opportunities and figure out how to use it.
        Dale J replied with agreement and offered a reminder of the concept of "creative
        destruction”: some companies will fail and leave the economy while others will embrace
        change and continue their progression.

   Education is the other socialist concept/camp in the US.


Additional notes from Jean McClelland:

   The “creative destruction” concept was discussed as an element of progress at the IONS conference as
   well. It was interesting to hear the similarities in how society, business and the government will progress
   over time to adopt new ideas. When Edgar Mitchell (the Apollo 14 astronaut and founder of IONS) was
   questioned on how more people could be convinced that paying attention to human consciousness can
   help science understand business progress beyond its current circumstances, Mitchell replied “funeral
   by funeral”.

   As an experienced IT implementer, I can confirm from the layman’s point of view that the IT industry
   sector’s innovation emanates from a circular process. An IT Producer presents a product to meet
   market demand. A willing company implements the product but also decides how it can be used more to
   that individual company’s advantage, usually resulting in changing the product. The IT Producer looks at
   the changes to their product by the individual companies in order to bring innovation full circle by issuing
   a new version of their product to meet market demand. I graphed this out in an article written for Quest,
   a JDEdwards independent user-group magazine. If you would like a copy, email me. (Please note: the
   main portion of the article is about technical aspects of the JDEdwards Enterprise Resource Planning
   software.)




                                                                 Sunlight through the Aspens.

                                                                 What an amazing place to hold
                                                                    an August conference!




                                                                                                 page 10 of 26
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Whither Regulation? Telecommunications Policy in a Converged World

Moderator: Scott J. Wallsten
Senior Fellow & Director of Communications Policy Studies, The Progress & Freedom Foundation

Participants:
                                                      Senior Director, Government Regulatory Affairs,
Christopher Libertelli                                Skype North America
                                                      Commissioner,
The Honorable Robert M. McDowell                      Federal Communications Commission (FCC)
                                                      Professor of Economics Emeritus,
Roger G. Noll                                         Stanford University
                                                      Executive Vice President -- Public Affairs, Policy
The Honorable Thomas J. Tauke                         and Communications, Verizon Communications
                                                      Vice President, External Affairs & Public Policy
Joseph W. Waz                                         Counsel, Comcast Corporation


Panelists’ Opening Remarks

Robert McDowell: FCC
   The FCC directly influences about 1/6th of the economy.

   “Freedom" has been a theme throughout McDowell’s tenure with the FCC.

   The philosophy he’s been working under since becoming commissioner: government cannot
   possibly represent the billions of business decisions that happen daily but when failure is
   potentially imminent, regulation may be necessary in order to
      assure/create competition where necessary
      ensure deregulatory policies are working well
      be sure that broadband penetration continues: 65M American users (2Xs as many as any
      other country in the world and we are only 3% of the world)

   Wireless is growing at 99% per year.

Christopher Liberetti – Skype North America
   Since the 1996 bill, a different model of defining success has emerged (i.e., the game has
   changed) – now there is multi-modal competition vs competition between internet brands that
   compete at the application layer.

   3 things will happen:
       A new group of companies will come to the FCC to "tell their story".
       In the new context, companies will look at not only the investment sectors but also the
       applications sectors and how regulation affects investment potentials.
       New Questions will be asked: What kind of reg. is appropriate? Clearly articulated price...?

   The bill was good in that it helped conversations continue unhindered.


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Thomas Tauke: Verizon
   Looking at trends
      As regulation increased, investment in the telecommunications sector declined. As
      deregulation came about, investment increased.
      Quoted Greenspan saying it was not the computers that increased productivity but the
      networking of the computers.
      Broadband service: 51% of households have now purchased
      Wireless Text Messages: Jan 2006 = IB text messages. Jun 2007 = 10B text messages
      Wireless services’ price = 27% decline per minute usage

   Kentucky and others have worked within the "Connect the Nation" effort and KY expects to
   have state-wide broadband access by the end of 2007 - admittedly a tough state.

   "Gov't should not decide what the business plan is, nor should it decide the price of services."

   Government has a role to play, but it should not thwart market forces.

Joe Waz: Comcast
   The telecomm industry has come to symbolize convergence and it arrived there through good
   regulation.

   The cable industry has transformed itself since the 1996 act. The 1996 act drove the growth of
   cable in the home.

   A 2004 government report shows that homes have more communications choices than ever
   before.

   94% of US homes can access cable broadband. This level of access stirred the phone
   companies to go digital.

   Cable is now providing 11 million homes with phone service. (Comcast = 3M)

   Congress and The FCC have provided a hands-off approach that has helped the growth.
   Recently, that seems to be changing. (Gave list of examples where there are contradictions)
      cable companies to be limited on cable-only programming that fosters differentiation
      investors in cable are subject to restraints
      "This is a strange way of saying ‘Thank You’ to the cable industry for investing in the
      growth of America."

   Call to Action: “Bring the discussion back to center. Bring it back to addressing open
   competition and convergence.”

Roger Noll: Stanford
   The US is the leader of the world in technology because so many other countries have so
   much government intervention.

   Noted a (nameless) country he was recently visiting that feels convergence is not wanted, nor
   worth the investment. Specifically that country's leaders feel the way to go is numerous
   protected monopolies.



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   Whenever you have high level of regulation, you have high levels of business concentration.
   Ex: Satellite radio had to work with FCC (plus others) for 10 years before it could offer services.

   The crucial FCC act must be to remove or lower barriers to entry so that competition can rule
   the market.

   The FCC is doing well but is still not eliminating the barriers.


Question and Answer Period

Q: Is the current FCC offensive or defensive?

       Joe W (Comcast) – Government kind of grinds to a halt during an election year so not
       much will happen until after the next election.
       The buzz word now is “Broadband Mapping” - where does broadband exist and where
       doesn't it?
       Must really address sectors that are lagging – e.g., healthcare and education.

       Thomas T (Verizon) – Can't find a consensus in congress right now. We need to refresh
       the thinking; tell the story of the policy steps that have been taken and decide how
       continued investment can be sustained.

       Christopher L (Skype) - The other part of the discussion is how people can continue to
       invest in the joining together of Network Neutrality with Universal Service Systems.

Q: What is the right way to approach policy pertaining to new technologies and to requirements
   for security etc.?

       Thomas T (Verizon): With certain rights come certain responsibilities but should these be
       regulated obligations? The FCC must be very careful so that the obligations do not deter
       the ability to provide the service.

       Roger N (Stanford): The FCC's problem is not of the FCC's making. We need to realize
       that the FCC cannot respond to the flavor of the month requirements set forth by special
       interest groups.




                                                                                          page 13 of 26
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Property Rights and Patent Reform

Moderator: John F. Duffy
Oswald Symister Colclough Research Professor of Law, George Washington University, and
Adjunct Fellow, The Progress & Freedom Foundation

Participants:
                                                       Sr. Vice President, General Counsel and
Mark Chandler                                          Secretary, Cisco Systems, Inc.
                                                       Professor of Economics,
Bronwyn H. Hall                                        University of California, Berkeley
                                                       Professor of Law, Washington University School
F. Scott Kieff                                         of Law & Research Fellow, Hoover Institution
                                                       Link to draft paper on property rights of DNA
                                                       Professor of Law, Michaels Faculty Research
Michael Meurer                                         Scholar, Boston University School of Law


Panelists’ Opening Remarks

John Duffy: GW Univ. & PFF
   "We are now seeing an unprecedented era of innovation"

   Quoted Frank Wright of Chicago [paraphrase] “Patent rights are absolutely necessary to
   protect innovation"

Michael Meurer: Boston University
   Patent system imposes significant costs to the inventors but they also reward the inventor.
   Patent benefits exceed the patent cost in chemical and pharmaceutical industries but the
   reverse is true in other industries.

   Patents cannot work like property rights because there are major differences:

                  Land (Property)                     Patents
                      Clear boundaries                   Fuzzy boundaries
                      Registry                           Application for registry
                                        …plus other differences

   The meaning of claim language is unstable. (This is partially what creates fuzzy boundaries.)

   Chemical structure patents are more like land because chemical structure boundaries are
   clearer – the composition of a molecule is more easily defined.

   Evidence suggests that a lot of patent infringement is inadvertent
      defendants are normally larger & have spent more money on R&D & patented the ideas.
      most infringement comes from the fringes, not direct competitors


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Bronwyn Hall: USC-B
   Economists feel patents encourage an inventor to provide a timely monopoly on the idea.

   Michael Meurer’s book’s question may not be able to be answered with the data currently
   available. She questioned some of the book’s formulations due to lack of appropriate data.

   Agreed that the patent calculation cost (in Meurer’s book) is real but questions whether the
   method to value the benefits from a patent is valid – especially when you are considering only
   one patent (the last patent to be filed) and not the value of the entire patent portfolio (including
   all patents that led up to the current patent being filed).

   You can have equilibrium without patents but the first company that defects and puts patents in
   place, makes the most money.

F Scott Kieff: Washington U
   “Patent reform is a lofty goal.”

   There has been a new patent bill introduced to Congress.
      core changes focus to “prior art”
      proposals would defer to government examiner’s discretion

   One unintended consequence of the patent process is the influence by lobbyists. This creates
   an atmosphere where the big guys win and the competition loses.

   An absence of property rights leads to monopoly.

   Lawyers will take cases and charge high-fees on patent infringement cases because patents
   are presumed valid until proven invalid. Reducing the assumption that a patent is valid could
   bring symmetry to “fee shifting” for baseless patent infringement cases. [i.e., winning a patent
   case is easier than other cases so lawyers have shifted to increasing their fees/income by
   initiating patent cases. JEM]

   Lowering the presumption of patent validity may help people avoid infringement cases through
   more open communications; i.e., talk first, litigate later.
      Example of why more open communications would work better: The patent infringement
      cast against RIM ultimately settled for $600M to the original patentee. The patentee had
      gone to the infringer and offered to settle for $3-5M but the infringer decided to go to court.
      The court awarded the original patentee $600M. Was it worth it? The final opinion
      depends on “what facts you listen to”.

   Is a patent a property right or a regulatory entitlement? The details matter.


Mark Chandler: Cisco
   Patent system is not based on a natural right but a right created by the government.

   The current system is fraught with uncertainty. A government agency is already the point of
   discernment.

   Cisco has experienced an increase in patent infringement litigation. Their products are

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    complex and much of the litigation is on a small, insignificant part of the complex product.

    The problem is the new industry of leveraging patent litigation for profit not that people with
    value-add inventions don’t need defending.

    From PI to IP - Sited how law firms once dedicated to personal injury (PI) cases have switched
    to Intellectual Property (IP) cases because IP litigation is more profitable. This is how
    uncertainty in the system is leveraged.

    Cisco will spend $45M on patent infringement in the next year. It costs them $3M to just
    dispose of a case. It costs more than $10M to take a case to trial (not including damages).

    The risk profile of the case drives whether the case goes to trial. The uncertainty of the system
    drives the risk.

    Call to Action: Make the plaintiff prove how their invention is key to the market of the resulting
    product.


Additional observations from Jean McClelland:
If you haven’t heard it before, you are hearing it here first. There are no facts, only perceptions. Perception
is reality. The courts have proved it – especially when it comes to patent rights.

Another way to put Mark Chandler’s opinion across is to realize that the term “Intellectual Property” is
probably an oxymoron, but we have made it a “fact”. Muerer’s fuzzy boundary explanation provides an
excellent description of the problem – it’s hard to pin down a definition of intellectual property. Hey! I
personally benefit from the IP regulatory right, so my observations are not to be construed as complaints. I
would like only to provide a couple of additional notes to the discussion.

One of the most telling statements from the panel was Bronwyn Hall’s observations that you can have
equilibrium without patents, but the first company that defects and puts patents in place, makes the most
money. Oh, how true that is. And, it brings us full circle back to ethics. If we all acted ethically, would we
need patents?

At the IONS conference I attended just prior to the Aspen Summit, I had the pleasure to reconnect with an
old teacher-turned-friend of mine. He was a founding lawyer of one of the largest law firms in Dallas, TX.
When Texas went through the banking and real estate crisis in the 80s, he used accounting principles and
T-accounts to trace the crisis directly back to the ethics involved in the deals made that eventually resulted in
the crash. Quite a concept, yes?

Just taking the ethical road to a commonly good end is an even more appealing concept. If you hold a
patent or other IP and you believe someone is infringing on your truly unique idea, communicate like Kieff
suggests. If it’s not really an infringement, stop litigating. Save the world some grief and lots of businesses
some money. Intellectual Property rights are not meant to create profit through litigation; litigation is meant
as a last resort, if a perpetrator hasn’t listened to you and you have a valid complaint.




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Luncheon Address: Antitrust and the IT Sector

The Honorable William E. Kovacic
Commissioner, Federal Trade Commission


   Antitrust deals with abuse of dominant positions.

   The US is one of the most permissive governments in existence today in regards to antitrust.

   Dominant firms are better off today than any other time in history.

   Antitrust laws can only be enforced if they are clearly stated; “administrability” = describe in 15
   words or less what you can or cannot do.

   The FTC is experiencing the highest rate of litigation since the 70s.

   If litigation occurs, invest in analyzing the knowledge base of prior cases.

   The measure of performance for FTC is how many cases have been brought during your
   tenure. Make investments in how much change is made for the greater good.




                                                                         Birdseye view…




                      Listening, eating and enjoying the sunshine.




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Keynote Address: Freedom of Speech and Press in the 21st Century:
New Technology Meets Old Constitutionalism

Laurence H. Tribe
Carl M. Loeb University Professor, Harvard Law School



   Reminded us that the first “talkies” were not considered "speech" and were, therefore, not
   covered by free speech legalities.

   Also, electronic eaves-dropping was not considered "search & seizure" at first, because there
   was no physical search. That question went to the Supreme Court. Justice Stewart said that
   the 4th amendment did apply because the amendment applied to people not places.

   Today, one of the current freedom-of-speech questions is email. No matter how it is advertised
   that the government may be listening / watching, the law is catching up that a person should be
   able to expect privacy and that the right to privacy is analogous to the right to private property.

   Basically, it is not up to the government to require someone to say or not to say something.

   TV violence as a form of freedom of speech: TV violence has been proved to cause short
   term aggression, nightmares, etc. These results created the suggestion for time channeling
   (show late at night), mandatory ratings, and potentially opt-in requirements for bundles of
   channels that would show violence.

   Tribe showed how any of the remedies discussed regarding how to protect both freedom of
   speech and the populace would violate the 1st amendment (freedom of speech) because:
       The only time the gov't is going to act is when a majority feel the speech is "sick".
       However, that’s exactly when the individual should make the decision, not the government.
       If suppressed on one media outlet, it will just pop up somewhere else.
       Law cannot be made clear enough to enforce it because definitions are fuzzy and the ability
       to define what’s right or wrong gives too much power to the government.
       “There is no relaxation of the principle of protection.”

   The way to help rid ourselves of “speech” we choose not to support is to drive up the cost of
   viewing the offensive content so that it becomes less profitable to create.

   What's really trying to be achieved is the non-glorification of violence.

   The government cannot forbid the idea of violence, adultery or other illegal activities. You can
   act on the illegal action but cannot act on the idea or attitude.

   Basically, the government is not allowed to control thought.

   When Regulation is appropriate: Regulation could be called "strict scrutiny".

   The less restrictive solution is parental controls – the ability to block content.




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  Malleability of children works against great restrictions. The argument is that kids are malleable
  – in both ways. They can be influenced to be bad or they can be influenced to be good. The
  kids’ parents should be in charge.
      Example of how law was bent to accommodate parents being in charge: Amish children
      are not required to go to public school. They can be home-schooled. The presiding
      principle had to consider the context of parental control over their children.
      Questions such as, "How sexy is this?" "How violent is this" are opinions and opinions are
      fine. So, how can you create objective labeling?

  "What to include and what to exclude is at the heart of the first amendment"

  "The right to speak is also the right to speak for a profit."
  (referencing people working for outlets like newspapers or TV shows writing articles on their
  own time for profit)

  "It is vital that our right to freedom of speech stay at the core of who we are as people and as a
  nation." – Even in these scary times of new forms of digital delivery.

  Referenced Roosevelt's quote – “The only thing we have to fear is fear itself" and encouraged
  us all to emphasize and focus on what is positive.

  "You can't stop people from fantasizing."




                                                        The U-shaped room provided great views for
                                                            understanding multiple viewpoints.




           Evening networking worked for everyone.




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Building Awareness About Parental Controls

Moderator: Adam Thierer
Senior Fellow & Director of the Center for Digital Media Freedom,
The Progress & Freedom Foundation

Participants:
                                                      Vice President, Regulatory Planning & Policy,
Jeffrey Breuggeman                                    AT&T
                                                      Senior Vice President, Communications,
Ellen East                                            Cox Communications

                                                      President, Entertainment Software Association
Michael D. Gallagher
                                                      Director of Strategic Planning,
David George                                          Access Security Team, Microsoft Corporation
                                                      Executive Director,
Timothy Lordan                                        Internet Education Foundation
                                                      Senior Vice President and Chief Security Officer,
Hemanshu Nigam                                        Fox Interactive Media & MySpace


Panelists’ Opening Remarks

   Gaming: all panelists noted how parental controls and ratings are more common today. More
   parents are aware of the available controls and more parents are actually using the ratings.

   Filters & Monitoring Tools are a growing industry – and most of them are free.

David George: Microsoft
   Told story about kid with My Space page and how she used her cell phone camera for voting
   on which prom dress to buy; i.e., kids today communicate with technology using it whatever
   way they choose.

   Social Networking (My Space) 200 million users in 12 different countries – people are taking
   care of each other through social networking

   We are no longer a portal environment; we are now a Search Engine environment.

   His PowerPoint presentation listed numerous sources for parental controls. (Available at
   www.pff.org on the webcast.)

   "Education is important but engagement is even more important." Get involved!

Timothy Lordon: Internet Ed Assoc
   "Monitoring tools have become more popular than blocking tools."




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Let’s Make a Deal: Getting Content & Tech to the Table

Moderator: Solveig Singleton
Senior Adjunct Fellow, The Progress & Freedom Foundation

Participants:
                                                      Executive Vice President & Chief Technology
Alan E. Bell                                          Officer, Paramount Pictures
                                                      Ashbell Smith Professor of Economics,
Stan Liebowitz                                        University of Texas, Dallas
                                                      Founder, GiantSteps Media Technology
Bill Rosenblatt                                       Strategies
                                                      Associate General Counsel for Copyright,
                                                      Trademark and Trade Secrets,
Thomas C. Rubin
                                                      Microsoft Corporation
                                                      Senior Vice President, General Counsel, and
Matthew Zinn                                          Chief Privacy Officer, TiVo


Panelists’ Opening Remarks
   WalMart is going DRM free. (DRM = Digital Rights Management)

Alan B: Paramount
   Provided the following “little known fact” – “Studios do want to sell content.” ☺

   Studios have been searching for new, stable business models.

   CSS tech used to encrypt CDs. (CSS = Content Scrambling System)

   Cannot deliver popular content without the medium to deliver. The new mediums provide many
   advertising-based business models.

   What DRM does is take the business model ideas and help consumers keep to the rights they
   have purchased.

   Open standards like CSS help multiple content owners provide content to multiple markets and
   all those markets can view / listen / use the content.

Matt Z: TIVO
   Noted that TIVO was sued for their method of business by the same companies that now
   distribute TIVO-like machines as part of their package.

   CSS is an adequate protection created by the industry without government intervention.

   Flexibility does not equal copyright infringement.

   Technology and content providers can come to the table and make good, mutually acceptable
   decisions. It just takes effort on both parts.

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   Tech companies will come up with a way to deter piracy.

Stan L: UT Dallas
   Reminder: A voluntary deal includes agreement between two parties.

   You Tube Case
      Dijure: Content owners can opt out. We can have real deals.
      Detracto: YouTube only removes content after someone complains and content owners
      can put on more content than YouTube can take off. Not a two party deal.

   Parasitic Technology = technology that provides a free ride for the consumer like technology
   that removes advertisements.

Bill R: Giant Steps Media   www.DRMwatch.com
   Strong IP rights will help the industry grow.

   Current digital rights are narrow and cheap – specifically CSS & Apple's FairPlay

   Call to Action: “We need a trade negotiation." (between technology to deliver content and the
   content providers).
       Universal Music Group has some interesting tech to watch.

Tom Rubin: Microsoft
   Building Blocks for success for digital distribution were created years ago. CDs are now over a
   decade old. Amazon is also a decade old and Napster is almost that old.

   There are several new services that show progress – Netflix, the new Amazon/TIVO offering,
   Universal Music Group experiment. These all provide a better consumer experience.

   One example of collaboration between content and tech is the use of fingerprinting technology
   to reduce piracy.

   Microsoft launched "Soapbox" and uses fingerprinting technology. MS takes a "fingerprint" of a
   file to be uploaded and then compares it to a database of content that's copyrighted.


Question and Answer Period

Q: Consumers are not at the table when these deals are being made. Consumers concerns: How
   can they affect these deals?

       Matt Z (TIVO) – The industry has to offer something to consumers that they are not already
       getting. If they don't, TIVO doesn't have a market.

       Stan L (UT Dallas) – “Use” is a legal concept and serves a particular function but with the
       advent of digital distribution, this concept may have to change. The cost of getting
       permission often exceeds the value of using the content resulting in the creator losing their
       reference and thereby losing the potential for more recognition or new markets.




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Q: How can competitors come together to discuss business models and not go against anti-trust
   laws?

       Bill R (Giant Steps) - Get together to discuss possibilities and get the research and analysis
       done on what will work. Then publish the results to everyone to make their individual
       decisions.

Q: How do we get to a deal that ends with both sides being happy?

       Tom R (MS) - It is possible that pre-screening and filtering as a combined solution and
       where both industries share the cost would be a dual solution.

       Bill R (Giant Steps) – To keep cost down, standardize notice and take-down messages and
       standardize fingerprinting. Then require submission of a fingerprint date base.

       Ed B (CCIA) – A significant portion of the economy depends on the Fair Use provisions.

       Bill R (Giant Steps) – Fair Use is a tiny wedge between legal use and illegal use that has
       spawned too many usage litigation cases.

       Bill R (Giant Steps) – Fair Use will be playing a smaller part as technology makes it
       obsolete.

       Matt Z (TiVo) – “We have hit upon a very controversial topic!”

Moderator – “Demand will be the orient of the definition of Fair Use.”




                                        Another impressive panel.
                                    (Photo compliments of www.pff.org)




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Chairman’s Dinner & Address
Eric Schmidt
Chairman & CEO, Google Inc.
                                                              Click here for more information on Eric Schmidt


   Intro: Google symbolizes both new technology and a new business model.

   New opportunities are growing more quickly than in the past.

   It is important to keep the internet open. With an open internet, instead of the traditional small
   number of people influencing the masses, the tables are turning. More people can be heard.

   We have an opportunity to influence how the 1Billion people about to gain internet access in
   the next 10 years acquire that access and what they have access to.

   In 2019, you will probably be able to carry around a hard drive that will be able to hold 85 years
   of video.

   There are many ways that the Internet is affecting how we elect our public officials. Take the
   YouTube entries and webcasts for example.

   Approximately 120K new blogs are begun each day (but many may not have a lot of readers).

   $3B Google paid to SMB's

   Now you can merge without merging because physical space is no longer a barrier.

   Calls to Action:
       Defend freedom of speech as more speech comes on line.
       Make universal broadband access a reality.

   The last mile controller should not also be able to control what flows over it.

   We have every reason to have great hope that these principles will empower the people.

   A mission that this group can export
      provide a sense of hope
      impact the access to broadband (therefore information)
      support and exemplify the basic principles that we hold

   "The world is a better place when people realize they have a choice."

   Responsibility for kids:
      "It makes us very upset when information in Google is misused."
      “We made the Safe Search product because we have a legal obligation and a moral
      obligation. The moral obligation is more important.”

   Google felt they got "the spirit" of what they were after in the recent FCC ruling.

   Google wants an open network.


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Question and Answer Period

Q: An open network is not a question on which collusion is possible. Plus not all of the world
   believes in free speech and the other principles we hold dear; therefore, what can we do that
   fits different cultures’ proprieties?

A: Every government is responsive to some level of public pressure. Now we have
   communication that is easily global so even if the information is banned, it will get out. The
   smart governments will figure out how to manage the info, not ban it. Allow the people to
   choose.
      “Culture is more important than tech.”
      Ex: Google was one of the companies that brought to light the atrocities in Sudan and
      helped people figure out how to stop it. Expand that effort.
      "Transparency is viral."

Q: What changes do you see in advertising?

A: Google has participated in the transition to targeted ads. Google and its competitors will take
   the traditional advertising and help them extend their reach by providing the advertising to a
   targeted audience.
       Advertising on the cell phone will depend on convergence / networking and must include
       the choice to receive the ads or opt out of them.

   Copyrights are crucial. What should we do when a user violates?
      Provide them a choice to do the right thing for a small fee.
      Ex: iTunes [Schmidt is on the Apple board] "iTunes provides a way to do the right thing for
      a small fee”
      Watermark your content.
      Google will register your copyrighted material and not allow it to be downloaded illegally.
      “We have to decide as an industry how best to do this.”

   Conclusion: "We are just at the beginning of the empowerment. It's all happening now and the
   message is overwhelmingly positive.”



 You can watch this presentation both on the PFF website and on YouTube.




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The IONS Conference Report

There were so many congruent thought processes between the Aspen
Summit and the Consciousness in Action conference hosted by IONS that I
encourage you to request the IONS Conference Report and explore some
of the concepts discussed there. The report is available through

www.PraxisReports.com

You can explore the IONS organization at www.IONS.org.


Thank you for your readership!




   Praxis Reports Disclaimer:
   Jean McClelland does her best to report what was said on an objective basis in the appropriate section. If
   you are the presenter and disagree, please contact Jean immediately at jean@PraxisReports.com. The rest
   of the report is opinions and are not necessarily representative of the opinions held by other attendees
   (except where noted) nor by The Progress and Freedom Foundation (PFF).
   Trademarks and Copyrights:
   All intellectual property is the property of the respective presenters or PFF. Please respect these rights by buying their
   products as you become more interested in their works.

  Disclaimer Short Form: Let’s all be reasonable and respect each others’ property - including this report which is
  copyrighted by Praxis Reports. You have permission to quote this report if you provide appropriate credit and
  reference www.PraxisReports.com.


                                                 Editing by Barbara A Worrall




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