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Trevor Wagener: State Regulation of Content Moderation Would Create Enormous Legal Costs for Platforms

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2 years ago

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The author of this Expert Opinion is Trevor Wagener, director of research and economics at CCIA

Dozens of bills regulating internet content moderation have been proposed in at least 30 state legislatures, and one in Utah currently sits on the governor’s desk awaiting his veto or signature. If enacted, many of the bills would impose prescriptive state regulations governing internet content moderation practices, with requirements differing significantly from state to state.

Many of the bills would also create private rights of action or state enforcement action powers. This could lead to enormous legal costs for platforms. If several of these bills are enacted into law, the resulting patchwork of regulatory requirements and legal risks could create daunting compliance challenges, astronomical costs, and unpredictable legal liability, which only the largest of platforms might be able to manage.

At present, each American internet platform can choose to moderate user-generated content using a variety of approaches depending on the nature of the platform and the desired user experience. A common approach is to utilize automated content moderation to perform triage on specific categories of prohibited content that can be categorized easily. For some, databases already exist. Human moderators are then used to judge a small fraction of hard-to-categorize content.

Automation is the primary tool in content moderation because of efficiency

Using automation as the primary tool in content moderation is common because of cost-efficiency—for example, Microsoft and Alibaba both offer third-party automated content moderation services for about $0.40 per 1,000 images or posts at scale. This implies an automated content review cost of about $0.0004 per image or post. When a human moderator must review content, by contrast, it takes an average of 150 seconds for them to review a post on even the most efficient platforms.

This work requires skill and judgment: Moderators often must quickly make complex decisions with limited context. Even assuming services could retain personnel to do this challenging work at $15/hour, the cost would be at least $0.625 per reviewed post, or 1,500 times the cost of automated moderation.

Some state bills, including Florida’s H.B. 7013 and Utah’s S.B. 228 require platforms to send a written notice to the user and/or the state government every time a post is moderated. This could require a human moderator for most or all user-generated content in those states, increasing moderation costs by a factor of 1,500. In cases where moderation would affect users from multiple states, the process could require two human moderators’ time, duplicating costs.

Florida’s moderation bill also mandates that users be able to request detailed information about the moderation of their posts, while Utah’s mandates that users be allowed to appeal moderation decisions, have appeals reviewed by a human moderator, and even have that moderator explain their decision to the user.

State bills will exponentially increase the cost of content moderation

Depending on the post, the requests for information, the appeal process, and the specific requirements of each bill, that could take anywhere from 5 minutes to half an hour of a human moderator’s time for each instance. At $15/hour, that would cost between $1.25 to $7.50 on top of the $0.625 for initial review. For each request, the process could cost 3,000 to 18,000 times as much as the present baseline.

Not every moderated post would be appealed. However, with current appeal rates of one in 40 to one in 10, the costs would add up. With content moderation rates ranging from one per 20 users annually on some platforms to almost twice per user annually on others, we can establish a range of incremental compliance costs for a hypothetical startup with 20 million users.

These compliance costs multiply with the number of distinct state content moderation bills enacted. If users from multiple states engage with a post, that could require duplicative reviews of the same content based on distinctive state requirements. If only two out of fifty states enact such bills, duplicated reviews might be required for 4 percent of moderated posts; if thirty out of fifty states enact such bills, duplicated reviews might be required for 60 percent of moderated posts.

In the low case, where one in 20 users has a post moderated, one in 40 moderations are appealed, each appeal takes about 5 minutes, and only 4 percent of moderations involve duplicated review of content from users from multiple covered states, that adds up to about $0.68 million in aggregate annually, or $0.034 per user annually.

In the high case, where two posts per user are moderated, one in ten moderations are appealed, each appeal takes about half an hour, and 60 percent of moderations involve duplicated review of content from users from multiple covered states, that adds up to $70 million in aggregate annually, or $3.50 per user annually.

Even in the best case, a ‘low-cost’ compliance total could be ruinous

For a startup, even the low-case total compliance cost of about $0.68 million annually could be ruinous. The high-case total cost of $3.50 per user annually would be an enormous financial hit for platforms of all sizes, since leading platforms only have global average revenue per user of about $10 annually. Therefore, a patchwork of state content moderation bills could unwittingly create a significant barrier to entry, discouraging tech startups from operating in certain states. This would reduce competition, inhibit job creation and curtail the range of online services available in those states.

In addition, some state content moderation bills, such as Oklahoma’s S.B. 383, Iowa’s S.F. 580, and North Dakota’s H.B. 1144, create legal risks for online platforms. Purported failures to follow state-specific content moderation rules could subject platforms to both government enforcement actions or private rights of action. Even in clear-cut cases with all facts in the platform’s favor, litigation could cost $80,000 through a Motion to Dismiss or $150,000 through a Motion for Summary Judgment, in addition to possible statutory and/or punitive damages. This would be on top of compliance costs.

It is difficult to forecast legal costs under a patchwork of distinct state regulations, as they scale with the number of affected users and the number of states with such bills enacted. Some of the bills would grant rights of action to the user posting content, while others would grant rights of action to users prevented from seeing content. Some would grant private rights of action to both. Many create enforcement powers for state governments in addition to private rights of action. In principle, the moderation of a single post with comments from residents of multiple states could result in a number of enforcement actions and private lawsuits greater than the total number of affected users times the number of states they reside in.

Spiraling legal costs associated with even a single post by a user in a covered state

The moderation of a single hypothetical post by a user in one covered state with comments by users in 29 other covered states would result in 30 affected users in 30 jurisdictions. This could mean more than 900 lawsuits, each plausibly costing the platform $80,000 for a Motion to Dismiss. If each were litigated, that would cost the platform at least $72 million for a single content moderation decision even if one assumes the success of every Motion to Dismiss. These legal liabilities would be capable of bankrupting a startup or midsize platform. If even one in a thousand moderated posts were fully litigated, platforms would have to account for this enormous tail risk as a recurring phenomenon, as many platforms moderate thousands of posts per day.

Startups with limited initial capital are reluctant to operate in jurisdictions with higher legal risk. They may not only avoid locating offices and jobs in high-risk states but also bar state residents from using their platforms altogether. Platforms that continue operating or offering services in such states may dramatically curtail content moderation to manage risk, resulting in a dramatic increase in financial scams, lewd content, and all-around abusive and unpleasant content. This would likely reduce use of such platforms, decreasing both consumer welfare and platform revenue.

In addition to deleterious impacts on platforms, users, and competition, a patchwork of state content moderation bills would burden taxpayers with administrative costs, enforcement costs, and possible litigation damages.

Administrative costs for most state content moderation bills would likely be in excess of Utah’s estimate of $90,000 annually for each such state. In addition, enforcement costs would likely surpass Iowa’s estimate of $700,000 annually for each such state. Given constitutional concerns around such bills and potential legal challenges to governments that force private businesses to host content to which they object, each such state could easily find itself paying damages and fees.

Trevor Wagener is the director of research and economics at the Computer & Communications Industry Association.  Wagener previously served as deputy chief economist of the U.S. Department of State. This piece is exclusive to Broadband Breakfast.

Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to commentary@breakfast.media. The views expressed in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

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Broadband Breakfast is a decade-old news organization based in Washington that is building a community of interest around broadband policy and internet technology, with a particular focus on better broadband infrastructure, the politics of privacy and the regulation of social media. Learn more about Broadband Breakfast.

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Broadband Mapping & Data

Tom Reid: Accountability in Broadband Maps Necessary for BEAD to Achieve Mission

The sheer magnitude of the overstatements in the FCC’s map makes the challenge process untenable.

Published

4 days ago

on

June 1, 2023

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The author of this Expert Opinion is Tom Reid, president of Reid Consulting Group.

With millions of American households stranded in the digital desert, we need to achieve accountability in broadband to make sure the Broadband Equity, Access and Deployment funding achieves its mission. The broadband gaps can be readily identified despite the air of mystery surrounding the topic.

Broadband improvements have been constrained for decades by inaccurate maps, yet the Federal Communications Commission continues to accept dramatically exaggerated availability and capacity claims from internet service providers. The cumbersome challenge process requires consumers and units of government to prove a negative — a logical fallacy.

The Reid Consulting Group and other parties, including Microsoft, have developed robust algorithms to reliably identify actual broadband availability. RCG utilizes Ookla Speedtest Intelligence data due to the large quantity of consumer-initiated tests. In Ohio, as an example, we draw on more than 16 million speed tests reflecting the lived experience from millions of households. We combine the speed test findings with FCC and Census data to deliver irrefutable identification of unserved and underserved locations.

Such methodologies offer State Broadband Leaders the opportunity to reverse the burden of proof in the BEAD program, requiring that ISPs submit concrete evidence supporting their availability and speed claims. As an example, in Ohio, RCG’s maps were accepted as proof of unserved status for the 2022 state grant program. BroadbandOhio then required ISPs to submit substantial proof in their challenge process. In other words, the ISP’s were tasked with proving a positive instead of expecting citizens to prove a negative.

ISPs and the FCC denounce crowdsourced data unless conducted under unusually restrictive conditions. The ISPs have successfully promoted unsubstantiated myths regarding the value of consumer-initiated speed tests.

Myth: Bad tests are because of poor Wi-Fi.
Reality: RCG eliminates speed tests with weak Wi-Fi and includes GPS enabled wired devices. Even first-generation Wi-Fi would saturate a 25 Megabits per second download and 3 Mbps upload connection.

Myth: Residents only subscribe to low-speed packages.
Reality: According to the National Rural Electric Cooperative Association, in areas where rural electric cooperatives offer broadband, 25 to 33 percent of rural subscribers opt for the top speed tier offered. We can clearly see this trend in areas where fiber has been deployed in recent years, as described later in this article.

Myth: People only test when there is a problem.
Reality: Network problems prompt tests, as do resolutions of problems.  RCG recommends focusing on the maximum speed test results to eliminate this “unhappy customer effect.”

Finding the truth: Broadband and the lived experience

In Ohio, RCG analyzed more than 14 million consumer-initiated speed tests over a three-year period. The data reveals a clear pattern of carrier overstatement. The stark visual contrast between the two maps is hard to ignore — and while this study is focused on Ohio, the issue remains nationwide in scope. The sheer magnitude of the overstatements makes the FCC challenge process untenable.

Figure 1: Ohio Broadband Reality vs. FCC ISP stated coverage map.

RCG utilized the “maximum speeds ever seen” at a location for generating maps and coverage figures, but we also examined the results from the average of speed test. Switching between average and maximum speeds does not change the overall picture of broadband availability. As an example, Figure 2 focuses on an area around Bolivar, Missouri. Looking at the maximum speed turns Bolivar itself a deeper green, meaning “better served,” but the rural areas around Bolivar remain predominantly red, meaning “unserved.”  The preponderance of evidence clearly demonstrates that much of the rural area around Bolivar remains unserved, even at maximum speeds.

Figure 2: Map visualization illustrating the difference between viewing average speeds in the Bolivar, Missouri area and maximum speeds documented.

When rating broadband availability in the Bolivar area at the Census block level and overlaying with ISP coverage claims at the H3 R8 level, you can see that many of the unserved and underserved areas have been reported as served to the FCC by ISPs (Figure 3).

Figure 3: Carrier overstatement small scale in Bolivar, Missouri. RCG speed map with FCC H3 R8 hexagon overlay.

Zooming out to examine the entirety of Missouri (Figure 4), the pattern of ISP overstatement becomes quite clear. According to the FCC maps, most of the state is served, whereas the analysis conducted by RCG shows that significant areas remain in need of broadband investment. As with Ohio, the scope of the overstatement in Missouri presents an unreasonable burden on the public to challenge.

Figure 4: Missouri reality vs. ISP Reports, March 2023.

Showing Progress: Change of State Analysis

Change-of-state analysis taps progressive releases of Ookla records to identify areas where broadband speeds have set new highs. This approach works not only for grant funded projects but also private investments. The area surrounding Byesville, Ohio (Figure 5) reveals a significant uptick in test volume, test locations, and speeds from 2020 to 2022. Side-by-side comparison shows a large number of “green” (served) speed test locations where there used to be only “red” (unserved) and “orange” (underserved) results. This change is a direct result of a Charter Communications Rural Digital Opportunity Fund deployment.

Figure 5: The unserved area around Byesville, Ohio before and after broadband deployment.

State Broadband Leaders can use these capabilities to document progress and identify lagging projects. Any service area will always exhibit a mix of speed test results.  Even in an area like Byesville where fiber-to-the-home has been deployed, not all the location “dots” will turn green. However, the preponderance of evidence clearly shows that a funded ISP — in this case, Charter — has made good on its commitment to expanded broadband access. ISPs can help by conducting speed tests at the time of installation from the customer’s premises and by increasing minimum packages to 100/20 Mbps or higher.

There is no mystery to solve — we know how to identify areas lacking broadband services. For many rural Americans, even their telephone services have become unreliable, still dependent on the now-decrepit copper cables built in the 1940s through 1960s. We all depend on a healthy rural economy for our food, water and energy. Let’s make the commitment to build the infrastructure needed to bring these households into the internet age — starting by bringing reality and accountability to the availability maps.

Tom Reid is the president of Reid Consulting Group, a firm specializing in broadband. They work with clients to generate insights, create actionable plans, and identify funding sources to connect unserved and underserved areas. RCG’s engagements in eight states have delivered 6,000 miles of fiber construction with a total project value of $1.6 billion and has secured over $330 million in grant funds on behalf of clients. This piece is exclusive to Broadband Breakfast.

Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to commentary@breakfast.media. The views expressed in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

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Expert Opinion

Johnny Kampis: Broadband Industry Hopeful to Get Waivers from Biden Administration Protectionist Policies

The Buy America mandate could seriously hamper the Broadband Equity, Access and Deployment program.

Published

1 week ago

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May 26, 2023

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The author of this Expert Opinion is Johnny Kampis, director of telecom policy for the Taxpayers Protection Alliance.

In a presidential administration rife with protectionist policies, the broadband internet industry is optimistic it will receive waivers from the “Buy America” mandate that threatens to derail plans to close the digital divide.

The National Telecommunications and Information Administration is likely to announce state funding allocations for the $42.5 billion Broadband Equity, Access and Deployment program by the end of June. That is the biggest piece of the taxpayer-funded pie allocated by Congress to extend broadband infrastructure across the U.S. over the next several years.

But, as the Taxpayers Protection Alliance has reported, broadband industry leaders say the Buy America mandate could seriously hamper the effort. As part of the mandate, the Biden administration has said that at least 55 percent of the component parts of a product used in federal construction projects must be sourced domestically. That rule applies to any infrastructure project, but broadband has taken center stage recently with the BEAD funding imminent.

Because fiber-optic cables primarily used in broadband infrastructure projects include materials such as aluminum, copper, glass, plastic and steel that are primarily manufactured in other countries, under the current rules they would be forbidden. And many other important cogs in the broadband machine, such as routers and switches, are mostly made overseas. Even the left-leaning Brookings Institution noted the policy “could put broadband deployments as risk.”

Fortunately, the Biden administration is softening on its Buy America policies — at least in the broadband industry. NTIA chose earlier this month to exempt several categories of equipment such as broadband routing equipment, transceivers and antennas from the domestic manufacturing requirements in the Enabling Middle Mile Infrastructure Program. The agency said that “although there are public and private efforts underway to increase manufacturing capacity… industry will not be able to address shortages of the manufactured products and construction materials required for middle mile network deployment within the timeframes required.”

Broadband Breakfast pointed out in a recent article that it will take several years to ramp up production of semiconductors in the U.S. and the BEAD program has set a five-year timeline for project completion.

“The estimates are that it would take at least, at a minimum, three to five years to bring a semiconductor chip plant to the U.S.,” said Pam Arluk, vice president of NCTA – The Internet & Television Association. “And even though the BEAD program is going to be over several years, that’s still just not enough time.”

The inherent difficulties in meeting the Buy America mandate, and the precedent now set with the middle mile program, provide optimism that waivers will likely be offered with BEAD. But that is just one of many infrastructure programs now being funded by taxpayers through federal recovery programs.

As President Joe Biden said in his State of the Union Address in February, “American-made lumber, glass, drywall, fiber optic cables…on my watch, American roads, American bridges, and American highways will be made with American products.”

Washington Post columnist Fareed Zakaria pointed out that what he calls the “Biden Doctrine” violates the spirit of the World Trade Organization and its framework of open trade. And another Post columnist, former Clinton administration Treasury Secretary Lawrence Summers, noted that protectionist policies tend to hurt more people than they help — giving as an example steel tariffs that aided 60,000 steel workers, but threatened the jobs of 6 million other workers in industries paying inflated prices for steel.

Strides in broadband waivers are a good sign, but the Biden administration must do more to curtail its protectionist policies as industries use economic recovery funds to build infrastructure in the coming years.

Johnny Kampis is director of telecom policy for the Taxpayers Protection Alliance. This piece is exclusive to Broadband Breakfast.

Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to commentary@breakfast.media. The views expressed in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

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Angie Kronenberg: The FCC Must Act Now to Save the USF

While the USF remains vital in an ever-increasing connected world, it is in serious jeopardy of surviving.

Published

3 weeks ago

on

May 18, 2023

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The author of this Expert Opinion is INCOMPAS President Angie Kronenberg.

Last week, the Senate Subcommittee on Communications, Media and Broadband held a hearing titled “The State of Universal Service.” The Universal Service Fund is our nation’s critical connectivity program that helps ensure that voice and broadband services are available and affordable throughout the country.

Since its creation by Congress in the 1996 Telecom Act, the USF has become a program that millions of families, community anchor institutions and small businesses rely on to get connected. It has been especially valuable for families and businesses that rely on it for work, school and telehealth at home.

The USF spends about $8.5 billion annually to help fund affordable connectivity in rural areas, low-income households, schools, libraries and rural hospitals. Today, the Federal Communications Commission is working to make high-speed broadband as ubiquitous as telephone service, and broadband is the essential communications technology the USF now supports.

While the USF remains vital in an ever-increasing connected world, it is in serious jeopardy of surviving. To fund the programs, telecom providers are required to pay a certain percentage of their interstate and international telecom revenues, known as the “contribution factor.” Typically, telecom providers collect these USF fees from their customers on their monthly bills.

However, the telecom revenues that fund the USF have declined over 60 percent in the last two decades. As a result, the contribution factor has skyrocketed from about 7 percent in 2001 to a historic high of about 30 percent today, as a higher portion of telecom revenues is needed to sustain the fund. That means certain consumers and businesses are now paying an additional 30 percent on top of their phone bills in order to fund the USF.

Telecom revenues continue to decline so rapidly because customers today rely more on broadband services and less on landline and mobile phone services, but broadband revenues do not pay into the USF. While the FCC has modernized each USF program to help support broadband service, it has not modernized its funding mechanism to require broadband services to pay into the Fund even though historically the agency has required supported services to be included in the contribution system.

Without intervention, the contribution factor is predicted to rise to 40 percent by 2025. This is unsustainable and puts the stability of the entire USF at risk. In fact, the contribution factor has become so high that it has led some groups to challenge the USF in federal court as unconstitutional, which also threatens the sustainability of the USF.

Reforming the USF funding mechanism is urgently needed and long overdue

Over 340 diverse stakeholders have come together as the USForward Coalition calling on the FCC to move forward with USF reform by expanding the contribution base to include broadband revenues. This solution is based on the recommendation in the USForward Report (that INCOMPAS helped commission), which was written by USF expert and former FCC official Carol Mattey.

The USForward Report explains that the most logical way to reform the contribution system and sustain the USF is to include broadband revenues in its funding assessment. Under this approach, the contribution factor is estimated to fall to less than 4 percent. It also means that the services that get USF support are paying into it, rather than solely relying on telecom customers, including those that have not made the switch to broadband, such as older Americans.

In fact, some members of Congress understand the urgency of reform and also want the FCC to act. The Reforming Broadband Connectivity Act, for example, is a bipartisan, bicameral bill that would require the FCC to reform the contribution system within one year.

Some question whether large tech companies should be assessed to contribute to the USF, and the short answer is “No.” Tech companies invest $120 billion each year in global internet infrastructure, and unlike broadband providers, these companies do not request or receive USF funding for these investments.

The FCC also lacks the authority to regulate tech companies and doing so would require Congress to act. This would further delay reform and expand the FCC’s regulatory authority over all online content and services — an overreach that many question as too broad since nearly every business today has an online presence and uses the internet to conduct business. Moreover, proposals to target certain tech companies risk skewing the online marketplace and competitive markets.

Some also question whether we still need the USF at all, and the short answer is “Yes.” While Congress allocated tens of billions for broadband, most of this investment is targeted for deployment, yet a significant portion of the USF programs focus on affordability. We not only have to make sure we build out our broadband networks, but also that communities can then afford to subscribe to these services.

The FCC should not wait to reform the USF. The USForward Report sets out a real plan that the FCC can and should implement. Congress should encourage the FCC to act now and save the nation’s critical connectivity program.

Angie Kronenberg is the president of INCOMPAS, where she manages the policy team and its work before federal, state and local governments, as well as leading the association’s efforts on membership and business development. This piece is exclusive to Broadband Breakfast.

Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to commentary@breakfast.media. The views expressed in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

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