cyckV4

The Theories Behind Intellectual Property 3
• Every day our activities produce effects on others. When we are not forced to
internalize those effects, we call them externalities. Some of those externalities
are negative (pollution, for which the factory does not have to pay) and others
positive (the great TV chef who starts a cooking craze that ends up making
most food served in a culture better, including food served by and to people
who never watched the show.) Many intellectual property claims have to do
with positive externalities. Someone says “you have benefited from what I did!
Therefore I should be able to control your activity, or at least get paid!” When
do we find these arguments convincing and when not? Why?
Those are our three basic questions about intellectual property.
Let us now turn back to the preliminary step, the framing of information issues in
the first place.
PROBLEM 1-1
FRAMING.
Every time someone uses a phone, the phone company necessarily ends up with
a lot of information: what number was called, when it was called, how long the call
lasted. In the eloquent regulatory parlance of telecommunications law this data is
called Customer Proprietary Network Information or CPNI.
This data accretes over time, so that the phone company can see how often a particular
customer calls a particular number, and when he or she typically does so and so
on. What’s more, this information can be cross-indexed with other sources of information
or other databases. On the macro level, calls can be grouped by area code, which gives a
rough guide to the geographical location of the person called, though less so in the era of
cell phones. On the micro level, numbers can be identified by reverse lookup, so that the
company—or the entity it provides this information to—can identify exactly who or what
is being called: your mother, your local market, your hairdresser.
CPNI is important for another reason. By having unrestricted ability to use their
own existing customer data, incumbent telephone companies have an advantage over
startups that want to break into the market. The advantage comes in two related areas.
First, marketing. Because they have the CPNI of their own customers, telephone companies
know precisely the people to whom they might market a “friends and family
plan”, or a long distance plan, a big data plan, or an international calling plan with
unlimited talk time. Caller data identifies the chatty out-of-stater, the lonely expatriate,
or the small town queen bee. It is a treasure trove for the marketing of the plans that
would appeal to each—rather than a confusing welter of options broadcast to the world
at large. Studies have shown that consumers respond much more positively to this kind
of targeted advertising rather than the “shotgun” approach that those seeking to enter
the market must use. Second, CPNI is also (though telephone companies do not typically
stress this fact) extremely valuable in pricing such offerings. Willingness to pay
is best gleaned from past behavior and CPNI reveals past behavior. For these two reasons,
new telephone companies have claimed incumbents’ ability to mine their own
customers’ data is a significant barrier to market-entry.
We have mentioned four “frames” into which information issues can be placed.
i.) Information as that which must be controlled to protect privacy.
ii.) Perfect information—free, instant and available to all—as a necessary