Articles by Eli Dourado 
Eli is a research fellow at the Mercatus Center at George Mason University with the Technology Policy Program. His research focuses on Internet governance, the economics of technology, and political economy. His personal site is elidourado.com.
Brookings has a new report out by Jonathan Rothwell, José Lobo, Deborah Strumsky, and Mark Muro that “examines the importance of patents as a measure of invention to economic growth and explores why some areas are more inventive than others.” (p. 4) Since I doubt that non-molecule patents have a substantial effect on growth, I was curious to examine the paper’s methodology. So I skimmed through the study, which referred me to a technical appendix, which referred me to the authors’ working paper on SSRN.
The authors are basically regressing log output per worker on 10-year-lagged measures of patenting in a fixed effects model using metropolitan areas in the United States.
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As some of you know, I’ve been closely following the World Conference on International Telecommunication, an international treaty conference in December that will revise rules, for example, on how billing for international phone calls is handled. Some participants are interested in broadening the scope of the current treaty to include rules about the Internet and services provided over the Internet.
I haven’t written much publicly about the WCIT lately because I am now officially a participant—I have joined the US delegation to the conference. My role is to help prepare the US government for the conference, and to travel to Dubai to advise the government on the issues that arise during negotiations.
To help the general public better understand what we can expect to happen at WCIT, Mercatus has organized an event next week that should be informative. Ambassador Terry Kramer, the head of the US delegation, will give a keynote address and take questions from the audience. This will be followed by what should be a lively panel discussion between me, Paul Brigner from the Internet Society, Milton Mueller from Syracuse University, and Gary Fowlie from the ITU, the UN agency organizing the conference. The event will be on Wednesday, November 14, at 2 pm at the W hotel in Washington.
If you’re in the DC area and are interested in getting a preview of the WCIT, I hope to see you at the event on Wednesday. Be sure to register now since we are expecting a large turnout.
Today, Jerry and I are pleased to announce a major update to WCITLeaks.org, our project to bring transparency to the ITU’s World Conference on International Telecommunications (WCIT, pronounced wicket).
If you haven’t been following along, WCIT is an upcoming treaty conference to update the International Telecommunication Regulations (ITRs), which currently govern some parts of the international telephone system, as well as other antiquated communication methods, like telegraphs. There has been a push from some ITU member states to bring some aspects of Internet policy into the ITRs for the first time.
We started WCITLeaks.org to provide a public hosting platform for people with access to secret ITU documents. We think that if ITU member states want to discuss the future of the Internet, they need to do so on an open and transparent basis, not behind closed doors.
Today, we’re taking our critique one step further. Input into the WCIT process has been dominated by member states and private industry. We believe it is important that civil society have its say as well. That is why we are launching a new section of the site devoted to policy analysis and advocacy resources. We want the public to have the very best information from a broad spectrum of civil society, not just whatever information most serves interests of the ITU, member states, and trade associations.
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Today is a a big day for WCIT: Ambassador Kramer gave a major address on the US position and the Bono Mack resolution is up for a vote in the House. But don’t overlook this Portuguese language interview with ITU Secretary-General Hamadoun Touré.
In the interview, Secretary-General Touré says that we need $800 billion of telecom infrastructure investment over the next five years. He adds that this money is going to have to come from the private sector, and that the role of government is to adopt dynamic regulatory policies so that the investment will be forthcoming. It seems to me that if we want dynamism in our telecom sector, then we should have a free market in telecom services, unencumbered by…outdated international regulatory agencies such as the ITU.
The ITU has often insisted that it has no policy agenda of its own, that it is merely a neutral arbiter between member states. But in the interview, Secretary-General Touré calls the ETNO proposal “welcome,” categorically rejects Internet access at different speeds, and spoke in favor of global cooperation to prevent cyberwar. These are policy statements, so it seems clear that the ITU is indeed pursuing an agenda. And when the interviewer asks if Dr. Touré sees any risks associated with greater state involvement in telecom, he replies no.
If you’re following WCIT, the full interview is worth a read, through Google Translate if necessary. Hat tip goes to the Internet Society’s Scoop page for WCIT.
In my last update on WCIT, I noted that due to pressure generated by WCITLeaks, the Secretary-General of the ITU promised to make a recommendation to the ITU’s Council to open up access to WCIT preparatory documents. Here is what has happened since then:
- Secretary-General Touré indeed made his recommendation to the Council.
- The Council responded by releasing a single document, TD-64, which has already been on WCITLeaks for weeks. Indeed, it was the first document we posted.
- The ITU issued a press release declaring this to be a “landmark decision.”
As I told Talking Points Memo, I am not impressed by the ITU’s landmark decision. In fact, I am more convinced than ever that the ITU is too out of touch to be trusted with any role in Internet governance.
Consider these quotes from Secretary-General Touré at May’s WSIS Forum, highlighted by Bill Smith at CircleID:
- “The ITU is as transparent as organizations are.”
- “The transparency of the ITU is not something that you can question.”
- “We don’t really have too much to learn from anybody about multi-stakeholderism because we almost invented it.”
Troubling, no?
If you would like to see first-hand how transparent the ITU is, you can visit its site and download TD-64, the “draft of the future ITRs.” Then go to WCITLeaks.org to read all the other documents it wants to keep from you.
I’ve argued (here and here, for instance) against worrying too much about the monopolization of Internet access. Broadband is pretty clearly an industry in which there are increasing returns to scale, and when returns to scale are severe enough, that results in natural monopoly. There are not clear welfare gains from regulatory solutions to natural monopoly problems generally, and broadband in particular is a case where many of the problems associated with monopolization are ameliorated by price discrimination.
Nevertheless, I accept that most people are not persuaded by this logic. Let me try a different tack, explaining what I would expect to see if profit-centered monopolists were really as bad for consumers as their critics claim.
The answer can be summed up in one word: mutuals. Mutual companies are not especially common in today’s economy, but they are worth pondering at some length. Mutuals are firms in which customers, in virtue of their ongoing patronage of the firm, are also its owners. A mutual company generally has no other shareholders to please, and it does not typically distribute dividends. Instead, if it makes a profit it will distribute it to its customers in the form of lower prices in the future.
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This morning, the Secretary-General of the ITU, Hamadoun Touré, gave a speech at the WCIT Council Working Group meeting in Geneva in which he said,
It has come as a surprise — and I have to say as a great disappointment — to see that some of those who have had access to proposals presented to this working group have gone on to publicly mis-state or distort them in public forums, sometimes to the point of caricature.
These distortions and mis-statements could be found plausible by credulous members of the public, and could even be used to influence national parliaments, given that the documents themselves are not officially available — in spite of recent developments, including the leaking of Document TD 64.
As many of you surely know, a group of civil society organizations has written to me to request public access to the proposals under discussion.
I would therefore be grateful if you could consider this matter carefully, as I intend to make a recommendation to the forthcoming session of Council regarding open access to these documents, and in particular future versions of TD 64.
I would also be grateful if you would consider the opportunity of conducting an open consultation regarding the ITRs. I also intend to make a recommendation to Council in this regard as well.
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That is the title of my new working paper, out today from Mercatus. The abstract:
Lichtman and Posner argue that legal immunity for Internet service providers (ISPs) is inefficient on standard law and economics grounds. They advocate indirect liability for ISPs for malware transmitted on their networks. While their argument accurately applies the conventional law and economics toolkit, it ignores the informal institutions that have arisen among ISPs to mitigate the harm caused by malware and botnets. These informal institutions carry out the functions of a formal legal system—they establish and enforce rules for the prevention, punishment, and redress of cybersecurity-related harms.
In this paper, I document the informal institutions that enforce network security norms on the Internet. I discuss the enforcement mechanisms and monitoring tools that ISPs have at their disposal, as well as the fact that ISPs have borne significant costs to reduce malware, despite their lack of formal legal liability. I argue that these informal institutions perform much better than a regime of formal indirect liability. The paper concludes by discussing how the fact that legal polycentricity is more widespread than is often recognized should affect law and economics scholarship.
While I frame the paper as a reply to Lichtman and Posner, I think it also conveys information that is relevant to the debate over CISPA and related Internet security bills. Most politicians and commentators do not understand the extent to which Internet security is peer-produced, or why security institutions have developed in the way they have. I hope that my paper will lead to a greater appreciation of the role of bottom-up governance institutions on the Internet and beyond.
Comments on the paper are welcome!
As Jerry noted ten days ago, our little side project got some good press right after we launched it. I am delighted to report that the media love continues. On Saturday, WCITLeaks was covered by Talking Points Memo, and a Wall Street Journal article appeared online last night and in print this morning.
I think it’s great that both left- and right-of-center publications are covering WCIT and the threat to our online freedoms posed by international bureaucracy. But I worry that people will infer that since this is not a left vs. right issue, it must be a USA vs. the world issue. This is an unhelpful way to look at it.
This is an Internet users vs. their governments issue. Who benefits from increased ITU oversight of the Internet? Certainly not ordinary users in foreign countries, who would then be censored and spied upon by their governments with full international approval. The winners would be autocratic regimes, not their subjects. And let’s not pretend the US government is innocent on this score; it intercepts and records international Internet traffic all the time, and the SOPA/PIPA kerfuffle shows how much some interests, especially Big Content, want to use the government to censor the web.
The bottom line is that yes, the US should walk away from WCIT, but not because the Internet is our toy and we want to make the rules for the rest of the world. The US should walk away from WCIT as part of a repentant rejection of Internet policy under Bush and Obama, which has consistently carved out a greater role for the government online. I hope that the awareness we raise through WCITLeaks will not only highlight how foolish the US government is for playing the lose-lose game with the ITU, but how hypocritical it is for preaching net freedom while spying on, censoring, and regulating its own citizens online.
Today, WCITLeaks.org posted a new document called TD-62. It is a compilation of all the proposals for modification of the International Telecommunication Regulations (ITRs), which will be renegotiated at WCIT in Dubai this December. Some of the most troubling proposals include:
- The modification of section 1.4 and addition of section 3.5, which would make some or all ITU-T “Recommendations” mandatory. ITU-T “Recommendations” compete with standards bodies like the Internet Engineering Task Force (IETF), which proposes new standards for protocols and best practices on a completely voluntary and transparent basis.
- The modification of section 2.2 to explicitly include Internet traffic termination as a regulated telecommunication service. Under the status quo, Internet traffic is completely exempt from regulation under the ITRs because it is a “private arrangement” under article 9. If this proposal—supported by Russia and Iran—were adopted, Internet traffic would be metered along national boundaries and billed to the originator of the traffic, as is currently done with international telephone calls. This would create a new revenue stream for corrupt, autocratic regimes and raise the cost of accessing international websites and information on the Internet.
- The addition of a new section 2.13 to define spam in the ITRs. This would create an international legal excuse for governments to inspect our emails. This provision is supported by Russia, several Arab states, and Rwanda.
- The addition of a new section 3.8, the text of which is still undefined, that would give the ITU a role in allocating Internet addresses. The Internet Society points out in a comment that this “would be disruptive to the existing, successful mechanism for allocating/distributing IPv6 addresses.”
- The modification of section 4.3, subsection a) to introduce content regulation, starting with spam and malware, in the ITRs for the first time. The ITRs have always been about the pipes, not the content that flows through them. As the US delegation comments, “this text suggests that the ITU has a role in content related issues. We do not believe it does.” This is dangerous because many UN members do not have the same appreciation for freedom of speech that many of us do.
- The addition of a new section 8.2 to regulate online crime. Again, this would introduce content regulation into the ITRs.
- The addition of a new section 8.5, proposed by China, that would give member states what the Internet Society describes as a “a very active and inappropriate role in patrolling and enforcing newly defined standards of behaviour on telecommunication and Internet networks and in services.”
These proposals show that many ITU member states want to use international agreements to regulate the Internet by crowding out bottom-up institutions, imposing charges for international communication, and controlling the content that consumers can access online.
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