In April, Spanish police charged a man with a massive distributed denial of service (DDoS) attack on anti-spam watchdog, Spamhaus.  He enlisted help from hacker friends and they slowed big parts of the Internet.  Also in April, LivingSocial said it suffered a cyber attack that exposed names, e-mail names, birth dates, and encrypted passwords for 50 million customers.   Between December 2012 and now, an international crew hacked credit card transaction processers and set up a $45 million cash haul.  Hackers are doing massive damage.

The Internet’s current design leaves us exposed to hacker attack because it allows anyone to assert a false identity, help themselves to information that isn’t theirs, and damage other’s property.  It was designed for open exchange of memos and data among academic researchers at DARPA, not for secured communications.

Major stakeholders are resistant to Internet design changes because their investments were built around today’s flawed design.  For example, even a highly constructive change such as IPv6 (which allows for more Internet destinations) faced foot-dragging.  Design changes that enforce strong identity verification may take several decades, and we can’t just change a few lines of code to flush the hackers from the system.

While we allow hackers to profit and to face inconsequential punishment, they will continue attacking.  Sternly worded speeches on the evils of hacker theft and attacks are worse than useless — they may convince a gullible audience that politicians will handle the problem.  It’s not that easy.   Without redesign, halting attacks depends on the hacker’s identity and protector.

When domestic hackers are arrested, court progress can be delayed by a defense attorney working the motions and appeals processes.  Some even argue that violating “terms of service” agreements are not a crime.  Other gambits claim the perp is a modern day saint – exercising first amendment rights; or have fellow “hactivists” invent socially redeeming intentions for their crimes while relying on the media to downplay the theft and vandalism of other people’s property, or hoping the readers are unaware that there is no first amendment entitlement to vandalize private property.  When convicted, these perpetrators are released or briefly incarceration.

The bitter irony is that hacking victims bear the direct cost of the crime, usually the cost for the perp’s public defender, the cost of incarcerating the perp, and often the cost for post-release welfare payments to the perp.  Until law forces a mandatory sentence of bankruptcy-proof full restitution for court costs and victim damages, the gain from hacking will continue to outweigh the pain from being caught.

It is more difficult to bring offshore hackers to justice.  A foreign commercial hacker who is pursued by U.S. police may attract support from other hackers, nationalist activists or politicians.  A U.S. decision to press forward with arrest has implications for international relations, dragging in the Department of State, muddying up the choice of jurisdiction, and perhaps converting the perp into prisoner exchange fodder.  Attorney costs, incompatible codes of law, and high profile opportunities for political narcissism push “justice” beyond reach.

State-sponsored hackers such as the Iranians and Chinese are beyond the reach of U.S. courts so must be handled differently.  Avoiding media coverage, we need to determine how reliably we can defend against the sovereign hackers and how severe the damage done by the hacking might become.  If we cannot defend against it or cannot tolerate the potential damage, then we should demand an immediate end and threaten painful retaliation (e.g. hobble the sponsor country’s communications, or banking system, etc…).  The big stick is necessary.  Stuxnet was a successful example of a big stick, even though no country has admitted ownership of it.

Letting a hacking sponsor off the hook in return for his promise of future righteous behavior is out of the question — which politician would be crazy enough to rely on the word of a proven sneak capable of harming us lethally?

Taking slack out of the post-arrest treatment for hackers is a useful project.  But redesign of the Internet so that it enforces identity verification is far more productive.

Alan Daley is a retired businessman who lives in Florida and who writes for The American Consumer Institute Center for Citizen Research

The reporter stayed in the courses long enough to grade them.  He gave his MOOCs an A grade for convenience.  He assigned a B grade to professors, assignments, student-to-student interactions, and the overall experience.  Teacher-to-student interactions earned a D grade.  Clearly better teacher access needs to be addressed.

Unionized faculty at all three California higher education systems oppose offering equivalent academic credit for MOOCs – even for students shut out of on-campus classes.  Some professors ridicule MOOCs as suitable to college “autodidacts” but unsuitable for others who need the “small liberal arts institutions that provide convenient social and academic engagement opportunities for students.”  To the contrary, students who lack access to $50,000 per year of someone else’s money will probably learn to thrive in MOOCs.

Constructive critics note that “online courses taught by professors at local universities can cultivate autonomous learning strategies and create opportunities for student-to-student engagement as well as student-to-professor engagement.”  This is already happening and it addresses the teacher-student interaction shortcoming.  A course offered to San Jose State engineering students is “circuits,” a difficult course where only 59% pass the traditional lecture version.  When offered as an MIT-authored MOOC with some traditional classroom time, 91% of students passed.  Children now in K-12 will likely acquire the skills needed to learn from MOOCs.   That should be an important goal for K-12 teachers.

It is unclear whether a MOOC-centric online degree will be seen as competitive in the job market against a bricks and mortar degree.  Professors with stellar reputations and schools with world class resources are investing themselves in MOOCs.  Students who proved they can interact virtually with others and thrive with challenging content online may have an advantage in some industries such as finance, engineering and marketing.

This week, the online education community received a proposal that would allow “any institution that had received state authorization for its online programs, based on certain quality and consumer protection standards, [to] be allowed to enroll students from other states that met the same basic standards and agreed to reciprocity.”  Udacity, EdX and Coursera are all offering proctored exams, and in some cases, certification for transfer credit through the American Council on Education.  Grants of state authority for these “schools” to operate are a financial issue.  States charge online schools more than $10,000 for authorization to operate in 5 nearby states for a few hundred students, up to $5.5 million for a public university to operate in 49 other states.  The state-imposed financial hurdle is inconsistent with keeping courses affordable.

Faculty resentments against MOOCs come from fear of being marginalized – being shunted from their prestigious lectern to a headset in a call-center.   But MOOCs benefit everyone else.  MOOCs can vastly improve access for underserved students of all ages and budgets since MOOCs can reduce the college’s costs and tuition prices.  Cash strapped states will see MOOCs as a budget victory.  Perhaps “big education” will encourage MOOCs evolution, even though it may cost entrenched union jobs.

Alan Daley is a retired businessman who lives in Florida and who writes for The American Consumer Institute Center for Citizen Research

So why exactly are the broadcasters so upset, enough to take legal action? It’s because Aereo represents a threat to a source of income that the networks have had for years—retransmission fees. Since 1992, network television channels (ABC, NBC, CBS, Fox) have been able to charge cable operators fees for carrying their channels on the cable operators pay packages. The networks, of course, don’t get these retransmission fees when someone watches their content over the airwave. So how is Aereo doing any different than watching you watching television with bunny ears?

It isn’t, as courts have affirmed. It’s really no different than placing an antenna on your computer, the same as you would with bunny ears on your television. The broadcasters are looking for a free ride—although their business model used to subsist on advertising revenue alone, these retransmission fees have become a source of revenue that they rely on. Broadcasters took in $2.36 billion in fees last year alone, and it’s predicted they’ll take in $6 billion yearly by 2018. Now, it seems that broadcasters are upset that consumers are actually using their product the way it was originally intended. How dare they! Broadcasters are hoping to get Aereo to pay the same retransmission fees that cable providers currently pay. As Barry Diller, a major investor in Aereo, put it: “When you get Radio Shack to pay you a slice of profit for selling an aerial, we’ll pay you.”

Now, broadcasters are threatening to pull the plug and become pay services. This would actually be great news—they’re sitting on billions of dollars of spectrum that is barely being used. Broadcasters have gotten a free ride on the consumers back, using the valuable spectrum for next to nothing–valuable spectrum that would be more useful the broadband market. Carriers like AT&T, Verizon and T-Mobile are dying to get their hands on it—and willing to pay billions.

The spectrum crunch is real and it’s huge. If the broadcasters find their revenue from retransmission fees to be so significant that they’re willing to become pay channels, then perhaps the spectrum they’re sitting on could be utilized elsewhere—perhaps in the upcoming spectrum auctions.

Zack Christenson writes on digital tech issues for the American Consumer Institute Center for Citizen Research

Somehow I have the good luck of avoiding most robocalls.  Perhaps it’s because my cell phone is usually turned off.  When robocallers reach an “off the grid” phone, they rarely leave a message.  And perhaps it matters that my area code is known to be Northern Virginia, but it’s nearly always serviced from cell towers in Florida.  People I know leave messages and I respond as needed.

My email service has been an even better filter.  For each email in my Inbox, I get ten in my Spam folder that I can toss at my leisure.  Over nine years, I trained the email service on what to keep and what to junk.  The triage is imperfect and a few offers sneak through from travel companies I dealt with in the past.

Some businesses are asking the FCC to take a closer look at the robocall issue.  There are some calls that promote public safety or which are for opinion research, but which are being treated in court as wanton violations of regulations that ban telemarketing using a predictive dialer (which dials a database of numbers predictively splicing in an agent to speak to any dialed party who answers).  It is the nature of telemarketing tactics, aggressiveness and frequent deceit that merits its ban.

And surely the purpose of the call matters far more than the technology used to place the call.   Public safety messages are often the most important calls.  Opinion research is almost always non-threatening.  Public safety and opinion research calls should be permitted using any call-placing technology.  They are far more socially redeeming than vacuous assertions and dirty tricks from politicians who exempt themselves from the robocall ban.  Next thing we know, they’ll be exempting themselves from ACA participation.

Alan Daley is a retired businessman who lives in Florida and who writes for The American Consumer Institute Center for Citizen Research

Online Taxation to Crush Competition

On Monday, the Senate voted to take up the Marketplace Fairness Act, the bill that would force Internet retailers to begin collecting sales tax on purchases made online. Currently, Internet retailers have no obligation to collect sales tax, as the process would be a burdensome and arduous task, on both the businesses and consumers. The Senate could take a full vote later this week.

The bill’s name is a misnomer, because it’s anything but fair. As I explained in a previous blog post here at ACI, the bill would allow sales taxes to be collected by states from companies that are outside of their jurisdiction. So for example, Internet retailers found in California would have to abide by the tax jurisdictions in New York, Virginia, Illinois and all other states, as well as all city and municipal tax jurisdictions.  In all, it amounts to 9,646 different tax codes that Internet retailers would have to adhere to.

This obviously puts small businesses that operate on the Internet at a major disadvantage. Brick and mortar stores only have one, maybe two, tax codes to deal with. And Internet giants, like Amazon, have teams of lawyers, accountants and consultants to help guide it through the maze. Small businesses don’t have that luxury. They struggle as it is against larger retailers.  

The result of this legislation would potentially put small and medium sized business out of business or forced these businesses to raise their prices to cover costs.  Either way, consumers lose — they’ll either have to pay higher prices at the small businesses, or be faced with less choice as the small businesses are forced to shut down.

If you had any question over who would benefit and who would hurt if the bill were enacted, just take a look at who’s lining up on either side of the bill.

In favor of the bill are the Internet and brick and mortar giants—names like Amazon, Best Buy and Wal-Mart. These big businesses have lined up teams of lobbyists to push this bill through. If they can take out any competition before it gets too big, they stand to increase their bottom line by cutting out competition. This gives less choice to consumers, which in turn gives potential to raise prices with no check from the competition that doesn’t exist anymore because they were driven out of business.

It also can’t be a coincidence that Amazon sells tools for small businesses to attempt to comply with the regulatory demands that come with abiding by the 9,646 tax jurisdictions. There are others who have been around Washington longer, but I’m not sure I’ve seen such an agreement between Big Government interests and Big Business interests. Both will harm the consumer.

On the other side, you have companies like eBay, who help small businesses to connect with their customers. They’ve been opposed to the bill from the beginning, even sending out a system-wide email to their members warning what could happen to small businesses and consumer choice should this bill pass. As eBay points out in their letter, the bill would put single employee stores and Amazon in the same category—without taking into consideration the vast resources at Amazon’s disposal which allows them to jump through administrative and regulatory hoops. 

Another glaring example of the corruption inherent in this bill is an anecdote from a Reuters story—how one man who runs a fly-fishing business will be forced to move his business from eBay to Amazon, as Amazon could run his fulfillment and tax compliance.

I don’t know if you can find a better example of a business using big government to take out a rival.

If government was really concerned with leveling the playing field for Internet retailers and brick and mortar establishments, there are plenty of other solutions. There’s origin-based sourcing, which allows states to collect sales tax on where the Internet retailer is headquartered—the same way a brick and mortar establishment is taxed. Bottom line is this bill is bad for consumers and bad for small businesses – which means that it is also bad for the economy.

Congress should look at alternatives to this poorly conceived bill.

Zack Christenson writes on digital tech issues for the American Consumer Institute Center for Citizen Research, a nonprofit think tank.  For more information, visit www.theamericanconsumer.org.