[UPDATE 4/30/13: This article was subsequently published in Volume 65, Issues 2 of the Federal Communications Law Journal in April 2013. The links below now point to the final FCLJ version.]

The Mercatus Center at George Mason University has just released a new paper by Brent Skorup and me entitled, “Uncreative Destruction: The War on Vertical Integration in the Information Economy.”  Brent, who is the research director for the Information Economy Project at the George Mason University School of Law, and I have been working on this paper since the Spring and we are looking forward to getting it published in a law review shortly. The paper focuses on Tim Wu’s “separations principle” for the digital economy, something I’ve spent some time critiquing here in the past. Here’s the introduction from the 44-page paper that Brent and I just released:

Are information sectors sufficiently different from other sectors of the economy such that more stringent antitrust standards should be applied to them preemptively? Columbia Law School professor Tim Wu responds in the affirmative in his book The Master Switch: The Rise and Fall of Information Empires. Having successfully pushed net-neutrality regulation into the policy spotlight, Wu has turned his attention to what he regards as excessive market concentration and threats to free speech throughout the entire information economy.To support his call for increased antitrust intervention, Wu explains his view of competition in the information economy—a view that deviates substantially from current mainstream antitrust theory. First, Wu contends that “information monopolies” are pervasive in the information economy. Wu’s “monopolists” include Facebook, Apple, Google, and even Twitter. In The Master Switch and essays like “In the Grip of the New Monopolists,” Wu argues that these so-called monopolies are increasing their market power and require more aggressive oversight and regulation.Second, Wu argues that traditional antitrust analysis is not sufficient for information systems because they carry speech. He claims, “Information industries… can never be properly understood as ‘normal’ industries,”and traditional forms of regulation, including antitrust enforcement, “are clearly inadequate for the regulation of information industries.”Wu believes that because information industries “traffic in forms of individual expression” and are “fundamental to democracy,” they should be subject to greater regulatory treatment.Third, in contrast to current competition law’s focus on horizontal relationships, Wu desires a reinvigorated regulatory enforcement that addresses “the corrupting effects of vertically integrated power” in the information sectors.He is particularly concerned about private threats to free speech arising from such vertical integration.The solution, he says, is preventing vertical mergers in the information economy and the mandatory divestiture of vertically integrated companies. To implement this, Wu proposes a Separations Principle for the information economy, which would segregate information providers into three buckets, which we have labeled information creators, information distributors, and hardware makers.This article outlines Wu’s separations proposal, explains why his fears regarding vertical relationships should be rejected by regulatory and antitrust policymakers, and illustrates the legal and practical problems his Separations Principle poses. Wu justifies his Separations Principle by citing monopolies and market power in the information economy. He also advocates using U.S. antitrust authorities to enforce his Principle. We argue that the antitrust harms he fears are not present, and we highlight scholarship on the accepted benefits of vertically integrated firms. We show that Wu’s remedies are policy preferences wrapped in the language of competition law. In fact, the information economy is largely competitive and does not warrant interventionist regulatory enforcement. Since much of American economic vitality flows from the information economy and technology, policymakers should reject a radical antitrust remedy like Wu’s preemptive Separations Principle.

The paper can be downloaded from the Mercatus website, SSRN, or Scribd.

I’m pretty rough on all the Internet and info-tech policy books that I review. There are two reasons for that. First, the vast majority of tech policy books being written today should never have been books in the first place. Most of them would have worked just fine as long-form (magazine-length) essays. Too many authors stretch a promising thesis into a long-winded, highly repetitive narrative just to say they’ve written an entire book about a subject. Second, many info-tech policy books are poorly written or poorly argued. I’m not going to name names, but I am frequently unimpressed by the quality of many books being published today about digital technology and online policy issues.

The books of Harvard University cyberlaw scholars John Palfrey and Urs Gasser offer a welcome break from this mold. Their recent books, Born Digital: Understanding the First Generation of Digital Natives, and Interop: The Promise and Perils of Highly Interconnected Systems, are engaging and extremely well-written books that deserve to be books. There’s no wasted space or mindless filler. It’s all substantive and it’s all interesting. I encourage aspiring tech policy authors to examine their works for a model of how a book should be done.

In a 2008 review, I heaped praise on Born Digital and declared that this “fine early history of this generation serves as a starting point for any conversation about how to mentor the children of the Web.” I still recommend highly to others today. I’m going to be a bit more critical of their new book, Interop, but I assure you that it is a text you absolutely must have on your shelf if you follow digital policy debates. It’s a supremely balanced treatment of a complicated and sometimes quite contentious set of information policy issues.

In the end, however, I am concerned about the open-ended nature of the standard that Palfrey and Gasser develop to determine when government should intervene to manage or mandate interoperability between or among information systems. I’ll push back against their amorphous theory of “optimal interoperability” and offer an alternative framework that suggests patience, humility, and openness to ongoing marketplace experimentation as the primary public policy virtues that lawmakers should instead embrace.

Interop is Important, but Often Difficult & Filled with Trade-Offs

Palfrey and Gasser begin by noting that “there is no single, agreed-upon definition of interoperability” and that “there are even many views about what interop is and how it should be achieved” (p. 5). They set out to change that by developing “a normative theory identifying what we want out of all this interconnectivity” that the information age has brought us (p. 3).

Generally speaking, Palfrey and Gasser believe increased interoperability — especially among information networks and systems — is a good thing because it “provides consumers greater choice and autonomy” (p. 57), “is generally good for competition and innovation” (p. 90), and “can lead to systemic efficiencies” (p. 129).

But they wisely acknowledge that there are trade-offs, too, noting that “this growing level of interconnectedness comes at an increasingly high price” (p. 2). Whether we are talking about privacy, security, consumer choice, the state of competition, or anything else, Palfrey and Gasser argue that “the problems of too much interconnectivity present enormous challenges both for organizations and for society at large” (p. 2). Their chapter and privacy and security offers many examples, but one need only look around at their own digital existence to realize the truth of this paradox. The more interconnected our information systems become, and the more intertwined our social and economic lives become with those systems, the greater the possibility of spam, viruses, data breaches, and various types of privacy or reputational problems. Interoperability giveth and it taketh away.

When Does “the Public Interest” Demand Interoperability Regulation?

So, how do we know when increased interoperability is good for us or society? How do we strike a reasonable balance? And, most controversially, when should government intervene to tip the balance in one direction or another?

Palfrey and Gasser return to these questions repeatedly throughout the book but admit that their answers will be dissatisfying since “there is no single form or optimal amount of interoperability that will suit every circumstance” (p. 76). Thus, “most of the specifics of how to bring interop about [must] be determined on a case-by-case basis (p. 17). They elaborate:

That can feel unsatisfying. But it is an essential truth: the most interesting interop problems relate to society’s most complex and most fundamental systems. Their answers are never simple to come by, nor are they easy to implement. This characteristic of interop theory is a feature, not a bug. … The price to be paid for striving for a universal principle at the level of theory is that such a theory is full of nuances when it comes to application and practice (p. 17-18).

Fair enough. Yet, Palfrey and Gasser also make it clear they want government(s) to play an active role in ensuring optimal interoperability. They say they favor “blended approaches that draw upon the comparative advantages of the private and public sector” (p. 161), but they argue that government should feel free to tip or nudge interoperability determinations in superior directions. “If deployed with skill,” they argue, “the law can play a central role in ensuring that we get as close as possible to optimal levels of interoperability in complex systems” (p. 88).

That phrase — “optimal level of interoperability” — pops up repeatedly throughout the book. So, too, does the phrase “the public interest.” Palfrey and Gasser argue that governments must look out for “the public interest” and “optimal interoperability” since “market forces do not automatically lead to appropriate standards or to the adoption of the best available technology” (p. 167). Here they introduce two additional amorphous values that complicate the debate: “appropriate standards” and “best available technology.”

The fundamental problem this “public interest” approach to interoperability regulation is that it is no better than the “I-know-it-when-I-see-it” standard we sometimes at work in the realm of speech regulation. It’s an empty vessel, and if it is the lodestar by which policymakers make determinations about the optimal level of interoperability, then it leaves markets, innovators, and consumers subject to the arbitrary whims of what a handful of politicians or regulators think constitutes “optimal interoperability,” “appropriate standards,” and “best available technology.”

On the Limits of Knowledge

Palfrey and Gasser’s framework feels more than just “unsatisfying” in this regard; it feels downright insufficient. That’s because it is missing a major variable: the extent to which state actors are able to adequately define those terms or accurately forecast the future needs of markets or citizen-consumers.

Surprisingly, Palfrey and Gasser don’t really spend much time discussing the specific remedies the state might impose to achieve optimal interoperability. I would have liked to have seen them develop a matrix of interop options and then outline the strengths and weaknesses of each. But even absent a more detailed discussion of possible regulatory remedies, I would have settled for more concrete answers to the following questions: Why are we to assume that regulators possess the requisite knowledge needed to know when it makes sense to foreclose ongoing marketplace experimentation? And why should we trust that, by substituting their own will for that of countless other actors in the information technology marketplace, we will be left better off?

The closest Palfrey and Gasser get to defining a firm standard for when and why such state intervention is warranted comes on page 173 when they are discussing the need for the state to establish sound reasons for intervention. They argue:

The objective should not be interoperability per se but, rather, one or more public policy goal to which interoperability can lead. The goals that usually make sense are innovation and competition, but other objectives might include consumer choice, ease of use of a technology or system, diversity, and so forth (p. 173).

This is a bit better, but it still doesn’t fully grapple with the cost side of the cost-benefit calculus for intervention. Palfrey and Gasser are willing to at least acknowledge some of those problems when they remark that “the state is rarely in a position to call a winner among competing technologies” (p. 174). Moreover,

Lawmakers need to keep in view the limits of their own effectiveness when it comes to accomplishing optimal levels of interoperability. Case studies of government intervention, especially where complex information technologies are involved, show that states tend to be ill suited to determine on their own what specific technology will be the best option for the future (p. 175)

Quite right! Yet, that insight does not seem to influence their calls elsewhere in the book for regulatory activism. That’s a shame since the admonition about policymakers recognizing the “limits of their own effectiveness” should be able to help us devise some limiting principles regarding the state’s role.

Toward an Alternative Theory: Experimental, Evolutionary Interoperability

Allow me to offer a different theory of optimal interoperability that flows from these previous insights. It’s based on a more dynamic view of markets and the central importance of experimentation in the face of uncertainty. Let me just go ahead and articulate the core principles of what I will refer to as  “experimental, evolutionary interoperability theory.” Then I’ll explain it in more detail

• Experimental, evolutionary interoperability : The theory that ongoing marketplace experimentation with technical standards, modes of information production and dissemination, and interoperable information systems, is almost always preferable to the artificial foreclosure of this dynamic process through state action. The former allows for better learning and coping mechanisms to develop while also incentivizing the spontaneous, natural evolution of the market and market responses. The latter (regulatory foreclosure of experimentation) limits that potential.

Palfrey and Gasser would label this a “laissez-faire” theory of interoperability and oppose it since they believe “a pure laissez-faire approach to interop rarely works out well” (p. 160). But they are wrong, at least to the extent they include the sweeping modifier “rarely” to describe this model’s effectiveness. In reality, the vast majority of interoperability that occurs into today’s information economy happens in a completely natural, evolutionary fashion without any significant state intervention whatsoever. In countless small and big ways alike, interconnection and interoperability happens every day throughout society. Yes, it is true that interoperability often happens against the backdrop of a legal system that allows court action to enforce certain rights or address perceived harms, but I would not classify that as a significant direct state intervention to tip or nudge interconnection decisions in one direction or another. And when interoperability doesn’t happen naturally, there are often good reasons it doesn’t and, even if there aren’t, non-interop spawns beneficial marketplace reactions and innovations.

Experimental, evolutionary interoperability theory flows out of Schumpeterian competition theory and the related field of evolutionary economics, but it is also heavily influenced by public choice theory (which stresses the limitations of romanticized theories of politics, planning, and “public interest” regulation). This alternative theory begins by accepting the simple fact that, as Austrian economist F.A. Hayek taught us, “progress by its very nature cannot be planned.” The wiser man, Hayek noted, “is very much aware that we do not know all the answers and that he is not sure that the answers he has are certainly the right ones or even that we can find all the answers.”

Ongoing experimentation with varying business models and modalities of social and economic production allows us to see what consumer choice and trial and error experimentation yields naturally over time. Ongoing experiments with flexible, voluntary interop standards and negotiations also allows us to determine which technological standards seem to benefit consumers in the short-term while also encouraging innovators to leap-frog existing standards and platforms when they become locked-in for too long or seem sub-optimal.

In the short-term, it is entirely possible that such voluntary, evolutionary interop experiments “fail” in various ways. That is often a good thing. Failures are how individuals and a society learn to cope with change and devise systems and solutions to accommodate technological change. As Samuel Beckett once counseled: “Ever tried. Ever failed. No matter. Try Again. Fail again. Fail better.” Progress depends upon an embrace of this uncertainty and acceptance of a world of constant upheaval if we are to learn how to cope, adapt, and move forward.

In this model, technological innovation often springs from the quest for the prize of market power.  Palfrey and Gasser generally reject this Schumpeterian vision of dynamic competition, but they at least do a nice job of describing it:

firms may have a stronger incentive to be innovative when low levels of interoperability promise higher or even monopoly profits. This sort of competition… creates incentives for firms to come up with entirely new generations of technologies or business methods that are proprietary (p. 121).

They reject this approach based on (1) the mistaken notion that the quest of the prize of market power ends in the attainment and preservation of that market power; and (2) the belief that policymakers possess the ability to set us on a better course through wise interventions.

In a moment, I’ll prove why that is misguided by examining a few real-world cases studies. For now, however, let’s return to Palfrey & Gasser’s central operating principle and contrast it with the vision I’ve articulated here. Recall that they argue “it is important to maintain and facilitate diversity in the marketplace. We simply want systems to work together when we want them to and to not work together when we do not.” Again, there is no standard here if one is suggesting this as the principle by which to determine when state intervention is desirable . But if one is looking at that aspirational statement as a description of the natural order of things — namely, that we do indeed “want systems to work together when we want them to and to not work together when we do not” — then that is a perfectly sound principle for understanding why state intervention should be disfavored in all but the most extreme circumstances. To reiterate: We should not allow the state to foreclose interoperability experiments because (a) those experiments have value in and of themselves, and (b) state action is likely to have myriad unintended consequences and unforeseen costs that are not easily remedied or reversed.

There are moments in the book when Palfrey and Gasser appear somewhat sympathetic to the sort of alternative “evolutionary interop” theory I have articulated here. For example, they note that:

The web is a great equalizer for technology firms. As consumers, we have come to expect that everything will work together without incident or interruption. We think it bizarre when something in the digitally networked world does not mesh with something else, perceiving whatever it is to be broken, in need of repair. This high degree of expectation is a powerful driver of interoperability. Market players are increasingly responding to this consumer demand and making these invisible links work for their customers without any government intervention” (p. 28) [italics added]

You won’t be surprised to hear that I agree wholeheartedly! Moreover, what it really proves is that ongoing marketplace experimentation and the evolution of norms and standards generally solve interoperability problems as they develop. That doesn’t mean markets are perfectly competitive or always produce perfect interoperability. But, again, why should we believe state intervention will do a better job? And isn’t it possible that intervention could negatively counter those natural instincts that Palfrey and Gasser describe about how consumers and market actors interact to make those “invisible links” work out as nicely as they do today?

Interop, Competition & Innovation: Some Cases Studies of Evolutionary Interoperability in Action

To better explain experimental, evolutionary interop theory and how it plays out in the real-world, let’s examine the complex relationship between interoperability, competition, and innovation in the information economy through the prism of three case studies: AOL and instant messaging, video game consoles, and smartphones.

AOL

America Online’s (AOL) case study is probably the most profound example of Schumpeterian creative destruction rapidly eroding the market power of a once “dominant” digital giant. Not long ago, AOL was cast as the great villain of online openness and interoperability. In fact, when Lawrence Lessig penned his acclaimed book Code in the late 1990s, AOL was supposedly set to become the corporate enslaver of cyberspace.

For a time, it was easy to see why Lessig and others were worried. Twenty five million subscribers were willing to pay $20 per month to get a guided tour of AOL’s walled garden version of the Internet. Then AOL and media titan Time Warner announced a historic mega-merger that had some predicting the rise of “new totalitarianisms” and corporate “Big Brother.”

Fearing the worst, several conditions were placed on approval of the merger by both the Federal Trade Commission and the Federal Communication Commission. These included “open access” provisions that forced Time Warner to offer the competing ISP service from the second largest ISP at that time (Earthlink) before it made AOL’s service available across its largest cable divisions.  Another provision imposed by the FCC mandated interoperability of instant messaging systems based on the fear that AOL was poised to monopolize that emerging technology.

Palfrey and Gasser suggest this was a necessary and effective intervention. “The AOL IM case is another instance in which the role of government was key in establishing a more interoperable ecosystem” and they credit the FCC’s action with cutting AOL’s share of the IM (p. 68-9). That’s a huge stretch. The reality is that markets and technologies evolved around AOL’s walled garden and decimated whatever advantage the firm had in either the web portal business or instant messaging market.

First, despite all the hand-wringing and regulatory worry, AOL’s merger with Time Warner quickly went off the rails and AOL’s online “dominance” quickly evaporated. Looking back at the deal with TW, Fortune magazine senior editor Allan Sloan called it the “turkey of the decade” since it cost shareholders hundreds of billions. Second, AOL’s attempt to construct the largest walled garden ever also failed miserably as organic search and social networking flourished. Consumers showed they demanded more than the hand-held tour of cyberspace.

Finally, the hysteria about AOL’s threat to monopolize instant messaging and deny interoperability proved particularly unwarranted and also serves as a cautionary tale for those who argue regulation is needed to solve interoperability problems. At the time, well-heeled major competitors like Yahoo and Microsoft already had significant competing IM platforms, and others were rapidly developing. Interoperability among those systems was also spontaneously developing as consumers demanded greater flexibility among and within their communications systems. The development of Trillian, which allowed IM users to see all their various IM feeds at once, was an early precursor of what was to come. Today, anyone can download a free chat client like Digsby or Adium to manage multiple IM and email services from Yahoo!, Google, Facebook and just about anyone else, all within a single interface, essentially making it irrelevant which chat service friends use.

In a truly Schumpetrian sense, innovators came in and disrupted AOL’s plans to dominate instant messaging with innovative offerings that few critics or regulators would have believed possible just a decade ago. Progress happened, and nobody planned it from above. The FCC’s IM interoperability provision was quietly sunset less than three years after its inception since the evolution of technology and markets had rapidly eliminated the perceived problem. That mandate, as it turned out, wasn’t needed at all, and all it probably accomplished during its short life span was to hobble AOL’s ability to find a way to remain relevant in the increasingly competitive Web. 2.0 world.

Video game consoles

At first blush, the video game console wars might seem like the ideal case study for those who favor greater interoperability regulation. After all, in a static sense, why do we really need several competing video game platforms that prevent consumers from playing their games on more than one system? The lack of console interoperability also drives up development costs for game makers. Many of those developers would prefer to just code games for a single, universal gaming platform. Therefore, isn’t this the perfect excuse for state intervention to ensure “optimal interoperability”?

To the contrary, this is another example of why government should generally avoid intervening to try to achieve some sort of artificial optimal interoperability. This market has undergone continuous, turbulent change and witnessed remarkable pro-consumer innovation despite a lack of interoperability.

The video game console wars have raged since the late 1970s. The first generation of consoles was dominated Atari (2600), Mattel (Intellivision), and Coleco (ColecoVision). By the mid-1980s, the industry saw a new cast of characters displace the old players. Nintendo (NES), and Sega (Genesis) took the lead. Atari attempted a rebirth with its “Jaguar” console but failed miserably.

The demise of Atari’s 2600 console was particularly notable. When it debuted in 1977, the system revolutionized the home game market on its way to selling more than 30 million units.  For a few years, it utterly dominated the console market and the company “rushed out games, assuming that its customers would play whatever it released,” notes New York Times reporters Sam Grobart and Ian Austen. But demand rapidly dried up as other consoles and personal computers took the lead with more powerful, flexible platforms and games. In the end, “millions of unsold games and consoles were buried in a New Mexico landfill in 1983. Warner Communications, which bought Atari in 1976 for $28 million, sold it in 1984 for no cash.”

The next generation of machines was dominated by Nintendo and Sega. But by the turn of the century, more new faces appeared and disrupted the second generation of market leaders. Sony (PlayStation) and Microsoft (Xbox) introduced powerful new consoles that continue to evolve to this day. Both consoles have already cycled through three iterations, each increasingly powerful and more functional. Sega dropped out of the console business and refocused on game development. Nintendo managed to survive with its innovative “Wii” system, but has fallen from its perch as king of the console market. Many also forget Apple’s failed run at the console business with its “Pippin” system in the late 1990s. Steve Jobs killed off the console when he returned to once again lead Apple in 1997. Ironically, just a decade later, with the rise of the iPhone and the Apple App Store, the company would emerge as a major player in the gaming market as smartphone gaming exploded.

Of course, PC gaming existed across these generations and handheld gaming devices and now smartphones are also providing competition to traditional consoles. Arcade games also existed both then and now. Thus, the video game market has always been broader than just home gaming consoles.

Nonetheless, at no time during the turbulent history of this sector have major consoles interoperated. The result has been a constant effort by major console developers to leap-frog the competition with increasingly innovative and powerful consoles and peripherals. Would Microsoft have developed the Kinect motion-sensing device if Nintendo had not previously developed their game-changing Wii motion controllers? It’s impossible to know but it would seem that non-interoperability had something to do with that beneficial development. Microsoft needed a game-changing peripheral of its own to meet the Nintendo challenge since Nintendo was not about to share its innovations with the competition. Meanwhile, Sony has developed its own motion-based “Move” system to compete Microsoft and Nintendo.

This is a highly dynamic marketplace at work. Could policymakers have determined that 3 major non-interoperable home consoles would have produced so much innovation? Would they have judged that to be too much or too little competition?  Would they have been able to foresee or help bring about the disruptive competition from portable gaming devices or smartphones? What sort of interop regulation would have made that happen?

As Palfrey and Gasser suggest in their book, there really “is no single form or optimal amount of interoperability that will suit every circumstance.” The video game case study seems to prove that. Yet, their framework leaves the door open a bit wider for state meddling to determine “optimal interop.” I have little faith that state planners could have given us a more innovative video game marketplace through interop nudging. And I also worry that if the door had been open for regulators at the FCC or elsewhere to influence interoperability decisions, it might have also opened to the door to content regulation since many lawmakers have long had an appetite for video game censorship.

Smartphones

The mobile phone handset and operating system marketplace has undergone continuous change over the past 15 years and is still evolving rapidly. There are some interoperable elements, such as the ability to make connecting calls and send texts and IMs. But other parts of the smartphone ecosystem are not interoperable, such as underlying operating systems or apps and app stores.

In the midst of this mixed system of interoperable and non-interoperable elements, innovation and cut-throat competition have flourished.

When cellular telephone service first started taking off in the mid-1990s, handsets and mobile operating systems were essentially one in the same, and Nokia and Motorola dominated the sector with fairly rudimentary devices. The era of personal digital assistants (PDAs) dawned during this period, but mostly saw a series of overhyped devices, including Apple’s “Newton,” that failed to catch on. In the early 2000s, however, a host of new players and devices entered the market, many of which are still on the scene today, including LG, Sony, Samsung, Siemens, and HTC. Importantly, the sector began splitting into handsets versus operating systems (OS). Leading mobile OS makers have included: Microsoft, Palm, Symbian, BlackBerry (RIM), Apple, and Android (Google).

The sector continues to undergo rapid change and interoperability norms have evolved at the same time. Looking back, it’s hard to know whether increased interoperability would have helped or hurt the state of competition and innovation.

Consider Palm, Blackberry, and Microsoft which all limited interoperability with other systems in various ways. Palm smartphones were wildly popular for a brief time and brought many innovations to the marketplace, for example. Palm underwent many ownership and management changes, however, and rapidly faded from the scene.  After buying Palm in 2010, HP announced it would use its webOS platform in a variety of new products.  That effort failed, however, and HP instead announced it would transition webOS to an open source software development mode.

Similarly, RIM’s BlackBerry was thought to be the dominant smartphone device for a time, but it has recently been decimated. BlackBerry’s rollercoaster ride has left it “trying to avoid the hall of fallen giants” in the words of an early 2012 New York Times headline.  The company once commanded more than half of the American smartphone market but now has under 10 percent, and that number continues to fall.

Microsoft also had a huge lead in licensing its Windows Mobile OS to high-end smartphone handset makers until Apple and Android disrupted its business. It’s hard to believe now, but just a few years ago the idea of Apple or Google being serious contenders in the smartphone business was greeted with suspicion, even scorn by popular handset makers such as Nokia and Motorola. This serves as another classic example of those with a static snapshot mentality disregarding the potential for new entry and technological disruption. Just a few years later, Nokia’s profits and market share have plummeted and a struggling Motorola was purchased by Google. Meanwhile, again, Palm seems dead, BlackBerry is dying, and Microsoft is struggling to win back market share it has lost to Apple and Google in this arena.

It would seem logical to conclude that the ebbs and flows of interoperable and non-interoperable elements of the smartphone world have created a turbulent but vibrantly innovative sector. Has the lack of interoperable operating systems or apps and apps stores hurt smartphone consumers? It’s hard to see how. Mandating interoperability at either level could lead to an OS or app store monopoly, most likely for Apple if such a policy were pursued today.

While Apple has had great success and earned endless kudos for their slick, user-friendly innovations from consumers and tech wonks alike, some critics decry their proprietary business model and more “controlled” user experience. Apple tightly controls almost every level of production of its iPhone smartphone and iPad tablet. Interoperability with competing systems, standards, or technologies is limited in many ways. Is that bad? Some critics think so, suggesting that greater “openness” — presumably in the form of greater device or program interoperability — is needed. But so what? Consumers seem extremely happy with Apple devices. Moreover, well-heeled rivals like Google (Android) and Microsoft continue to innovate at a healthy clip and offer consumers a decidedly different user experience. As with video games consoles, non-interop has had some important dynamic effects and advantages for consumers. It’s hard to know what “optimal interoperability” would even look like in the modern smartphone marketplace and how it would be achieved, but it’s equally hard to believe that consumers would be significantly better off if regulators were trying to achieve it through top-down mandates on such a dynamic, fast-moving market.  [For more on this topic, see my 2011 book chapter, “The Case for Internet Optimism, Part 2 – Saving the Net From Its Supporters,” from the book, The Next Digital Decade.]

Case Study Summary & Analysis

These case studies suggest that defining “optimal interoperability” is a pipe dream. In some cases, consumers demanded a certain amount interoperability and they got it. But it seems equally obvious that they did not demand perfect interoperability in every case. Few consumers are tripping over their own feet in a mad rush to toss out their XBoxs or iPhones just because they are not perfectly interoperable. On the other hand, since the days of the old “walled garden” hell of AOL, CompuServe, Prodigy, and so on, it would seem that information technology markets are growing more “open” in other ways. You can’t completely lock-down a user’s online experience and expect to win their business over the long haul.

Palfrey and Gasser make that point quite nicely in the book:

Increasingly, though, businesses are seeing the merits of strategies based on openness. A growing number of businesses are pursuing models that incorporate interoperability as a core principle. More and more firms, especially in the information business, are shedding their proprietary approaches in favor of interoperability at multiple levels. The goal is not to be charitable to competitors or customers, of course, but to maximize returns over time by building an ecosystem with others that holds greater promise than the go-it-alone approach (p. 149).

Quite right, but let’s not pretend that any mass market information platforms or systems will ever be perfectly “open” or interoperable. There will always be some limitations on how such systems are used or shared. And that’s just fine once you embrace a more flexible theory of evolutionary interoperability.  Ongoing experiments will get us to a better place.

Conclusion: Let Interop Experiments Continue!

So, let me wrap up by restating my alternative theory of optimal interoperability as succinctly as possible: When in doubt, ongoing, bottom-up, dynamic experimentation will almost always yield better answers than arbitrary intervention and top-down planning. Again, that is not to say that all interoperability experiments will leave society better off in the short-term. Some interoperability experiments and resulting market norms or outcomes can create challenging dilemmas for individuals and institutions. There may be short-term spells of “market power,” for example, and some standards may get locked in longer than some of us think makes sense. If, however, we have faith in humans to solve problems with information and technology, then still more experimentation — not state intervention — is the answer. And that is especially true once you accept the fact that those seeking to intervene have very limited knowledge of all the relevant facts needed to even make wise decisions about the future course of technology markets or information systems.

Some will find my alternative theory of optimal interoperability no more satisfying than Palfrey and Gasser’s since they may find the experimental interop framework too inflexible when it comes to state action. Whereas the frustration with Palfrey and Gasser’s theory will likely flow from their failure to define a coherent standard for when intervention is warranted, my approach solves that problem by suggesting we should largely abandon the endeavor and instead let ongoing market experiments solve interop problems over time. For me, we would need to find ourselves in a veritable whole-world-is-about-to-go-to-hell sort of moment before I could go along with state intervention to tip the interop scales in one direction or another. And, generally speaking, this is exactly the sort of thing that antitrust laws are supposed to address after a clear showing of harm to consumer welfare. Stated differently, to the extent any state intervention to address interoperability can be justified, ex post antitrust remedies should almost always trump ex ante regulatory meddling.

This alternative vision of evolutionary, experimental interoperability will be rejected by those who believe the state has the ability to wisely intervene and nudge markets to achieve “optimal interoperability” through some sort of Goldilocks principle that can supposedly get it just right. For those of us who have doubts about the likelihood of such sagacious state action — especially for fast-paced information sectors — the benefits of ongoing marketplace experimentation far outweigh the costs of letting those experiments run their course.

Regardless, we should be thankful that John Palfrey and Urs Gasser have provided us with a book that so perfectly frames what should be a very interesting ongoing debate over these issues. I encourage everyone to pick up a copy of Interop so you can join us in this important discussion.

Additional Reading:

• the official book site
• buy the book on Amazon or Barnes & Noble
• Follow the authors on Twitter: @JPalfrey & @UGasser
• a video of their Harvard book launch follows:

The Mercatus Center at George Mason University has just released my new white paper, “The Perils of Classifying Social Media Platforms as Public Utilities.” [PDF] I first presented a draft of this paper last November at a Michigan State University conference on “The Governance of Social Media.” [Video of my panel here.]

In this paper, I note that to the extent public utility-style regulation has been debated within the Internet policy arena over the past decade, the focus has been almost entirely on the physical layer of the Internet. The question has been whether Internet service providers should be considered “essential facilities” or “natural monopolies” and regulated as public utilities. The debate over “net neutrality” regulation has been animated by such concerns.

While that debate still rages, the rhetoric of public utilities and essential facilities is increasingly creeping into policy discussions about other layers of the Internet, such as the search layer. More recently, there have been rumblings within academic and public policy circles regarding whether social media platforms, especially social networking sites, might also possess public utility characteristics. Presumably, such a classification would entail greater regulation of those sites’ structures and business practices.

Proponents of treating social media platforms as public utilities offer a variety of justifications for regulation. Amorphous “fairness” concerns animate many of these calls, but privacy and reputational concerns are also frequently mentioned as rationales for regulation. Proponents of regulation also sometimes invoke “social utility” or “social commons” arguments in defense of increased government oversight, even though these notions lack clear definition.

Social media platforms do not resemble traditional public utilities, however, and there are good reasons why policymakers should avoid a rush to regulate them as such. Treating these nascent digital services as regulated utilities would harm consumer welfare because public utility regulation has traditionally been the archenemy of innovation and competition. Furthermore, treating today’s leading social media providers as digital essential facilities threatens to convert “natural monopoly” or “essential facility” claims into self-fulfilling prophecies. Related proposals to mandate “API neutrality” or enforce a “Separations Principle” on integrated information platforms would be particularly problematic. Such regulation also threatens innovation and investment. Marketplace experimentation in search of sustainable business models should not be made illegal.

Remedies less onerous than regulation are available. Transparency and data-portability policies would solve many of the problems that concern critics, and numerous private empowerment solutions exist for those users concerned about their privacy on social media sites.

Finally, because social media are fundamentally tied up with the production and dissemination of speech and expression, First Amendment values are at stake, warranting heightened constitutional scrutiny of proposals for regulation. Social media providers should possess the editorial discretion to determine how their platforms are configured and what can appear on them.

This 63-page paper can be found on the Mercatus site here, on SSRN, or on Scribd.  I’ve also embedded it below in a Scribd reader. Eventually, a shorter version of this paper will appear as a chapter in a MIT Press book.

Social Networks as Public Utilities [Adam Thierer]

In my work critiquing the Lessig-Zittrain-Wu school of thinking–which fears the decline and fall of online “openness” and digital  “generativity”–I have argued that, while there is no such thing as perfect “openness,” things are actually getting more open and generative all the time. All that really counts from my perspective is that we are witnessing healthy innovation across the generativity continuum.

Will some devices and platforms continue to be “closed”? Sure. Think Apple and cable set-top boxes. But (a) there’s a ton of innovation taking place on top of those supposedly “closed” platforms and (b) there are other options consumers can exercise if they don’t like those content /information delivery methods. [See this chapter from the Next Digital Decade book for my fuller critique.]

And, even if one adopts a rigid Zittrainian view of openness and generativity, each day seems to bring more good news. From that perspective it’s hard to find a better headline than this one: ” Smartphone Makers Bow to Demands for More Openness.” That’s from ArsTechnica today and it refers to the fact that smartphone giant HTC just announced it would no longer attempt to lock the bootloader on its smartphones, meaning geeks like me can root and hack their devices to their heart’s content. As the Ars story notes:

HTC has long been seen as a relatively modder-friendly phone manufacturer. Although many of their phones have had locked bootloaders, workarounds were easy enough for software developers to spot in order to gain superuser access to their phones. That changed recently, however, when modders discovered that two new Android phones—the HTC Sensation and Evo 3D—would come with software that prohibited bypassing locked bootloaders. “The system was locked but exploitable before,” Android enthusiast Irwin Proud told Wired.com in an interview. “Suddenly they required signature checks,” or digital verification of software that allows it to load. An Android activist, Proud has organized online campaigns to fight against locked-down phone releases. After hearing this, the modding community wasn’t happy. Users launched WakeUpHTC.com, a website which gave upset modders all of HTC’s contact info, encouraging them to bombard the company with requests for a change in its bootloader policy. On Thursday, the company relented.

Here’s specifically what HTC’s CEO Peter Chou had to say in a Facebook post:

“There has been overwhelmingly customer feedback that people want access to open bootloaders on HTC phones. I want you to know that we’ve listened. Today, I’m confirming we will no longer be locking the bootloaders on our devices. Thanks for your passion, support and patience.”

Now that’s what I call a Zittrainian success story! Markets and public pressure prevailed and led to more openness and generativity in the purest sense of the terms.

I suppose that some will still worry and retort that “well, the carriers might still try to lock down the devices.” That story might have been more believable five years ago but the new reality of the smartphone world today is that the OS and app makers now hold most of the cards. Carriers are practically giving away the store (literally!) as they rush to get the latest and greatest phones and operating systems from the likes of Apple, Google, Microsoft, HTC, Motorola, LG, and so on.  This is amazingly dynamic ecosystem with multiple layers of innovation and competition.

I don’t think there’s any way the generativity genie could be put back in the bottle at this point. Too many people want tinker-friendly devices and more “open” platforms.  Of course, it’s also true that some devices will remain somewhat more locked-down to ensure “stability” or simplicity for those users who desire it. But what’s wrong with that? Shouldn’t they have that choice? Again, it’s the innovation across the full range of devices and platforms that is so important and impressive in this case. That’s all we should really care about. Finally, if goes without saying that even the most heavily fortified security can be broken when determined people try hard enough.

I hope Zittrain, Wu, and Lessig appreciate this and that they and others acknowledge these beneficial developments so that we can avoid foolish calls to regulate this healthy information ecosystem. These guys should declare victory and pop the champagne. The vision they favor is prevailing.

Hanno F. Kaiser, a U.S. and EU antitrust lawyer and partner with Latham & Watkins LLP, has just released an important essay on a topic I have devoted much time to here over the years: the debate over the relative advantages of “open” vs. “closed” technological systems and the Lessig-Zittrain-Wu school of thinking about these issues.

Kaiser’s essay is entitled, ” Are Closed Systems an Antitrust Problem?” and it appears in the latest edition of Competition Policy International.  This essay is not to be missed. Kaiser’s terrific paper helps us better understand and debunk many of the myths and misperceptions that continue to riddle this debate. Here’s Kaiser’s key insight:

At bottom, the bad reputation of closed systems or walled gardens in the “open versus closed” debate is quite undeserved. Walled gardens generally benefit their environments—both in the real world and the digital realm. The primary purpose of a garden wall, after all, is to shelter plants from wind and frost, not to keep intruders out. In the protected space of the garden, flowers can grow that would not otherwise survive in the wild. Walled gardens thus deliberately create a microcosm that is different from the surrounding ecosystem. Therefore, as long as the garden does not take over the entire ecosystem, walled gardens increase, not reduce, overall diversity. From a competition policy perspective, enjoying the fruits of a walled garden is generally not a guilty pleasure.

Therefore, “as a policy matter, ‘open’ is not necessarily better than ‘closed’,” Kaiser argues, and elaborates as follows:

Our initial question whether “closed” systems are inherently anticompetitive can be restated as follows: “Is there a reason to believe that intra-platform restraints imposed by the platform sponsor on various contributors are commonly exclusionary?” To that question, the answer is no. Is it possible that such restraints can lead to anticompetitive exclusion? Yes, but not unless the platform has significant market power vis-à-vis rival platforms.

In other words, it is foolish to over-simplify the debate as many scholars do when they imply that “open”=good and “closed=bad. (For a recent example, see my essay here earlier this month about Cory Doctorow’s misguided effort to equate open systems with “techno-optimism.”)

In my work, I’ve tried to focus on the happy balance and healthy competition that exists today between such systems. Shouldn’t that be what counts most? Scholars like Lessig, Zittrain, Wu, and Doctorow sometimes seem to want to force a false ‘open-or-nothing-else’ choice upon us. Such thinking is troubling from a policy perspective since it means law might force many consumers to use systems that may not be to their liking.  Moreover, such thinking reveals an ironic insecurity among these “Openness Evangelicals,” as I have called them: they seem to have very little faith in the open systems and technologies they trumpet. If such systems really are superior, shouldn’t they win out in the end?

Importantly, however, Kaiser also debunks the simplistic notion that “open” and “closed” systems are easily defined:

As an analytical tool the labels “open” and “closed” are of limited utility, because they cannot adequately capture the complexity of selective openness at various layers of a system within their single binary distinction.  Addressing the central antitrust issue requires that we move past the “ready labels” and focus on whether specific vertical restraints at all levels result in anticompetitive exclusion and foreclosure.

Quite right. I also appreciated Kaiser’s thought’s on Tim Wu’s “Separations Principle,” which would rigidly segregate all information services into three buckets–content, conduit, and devices–and keep them there. Kaiser says:

The Separations Principle amounts to a general rule against vertical integration in the information sector irrespective of market power, foreclosure, and efficiencies. Such a sweeping rule requires extraordinarily strong justifications, which Wu fails to provide. In fact, our analysis of the competitive effects of open and closed systems does not suggest that closed systems pose anywhere near the level of concern that would justify such a radical expansion of antitrust market regulation.

Kaiser is actually being too generous. Wu’s radical prescription for the information sectors flies in the face of decades of antitrust scholarship and would have devastating ramifications for the Digital Economy in practice, as I noted in part 6 of my multi-part review of his book The Master Switch.

Anyway, read Hanno Kaiser’s terrific paper. It’s a major contribution to the literature in this arena and a real breath of fresh air compared to what I regard as the hopelessly pessimistic (and usually overly-simplistic) literature on “open” vs. “closed” technological systems.

P.S … I put together a separate page here at the TLF to house my 30 or so essays addressing “Problems with the Lessig-Zittrain-Wu Thesis.”  Also, this chapter from the Next Digital Decade book on the case for Internet optimism ties together all my various critiques into one essay.

I’ve spent a great deal of time here defending “techno-optimism” or “Internet optimism” against various attacks through the years, so I was interested to see Cory Doctorow, a novelist and Net activist, take on the issue in a new essay at Locus Online.  I summarized my own views on this issue in two recent book chapters. Both chapters appear in The Next Digital Decade and are labeled “The Case for Internet Optimism.” Part 1 is sub-titled “Saving the Net From Its Detractors” and Part 2 is called “Saving the Net From Its Supporters.” More on my own thoughts in a moment. But let’s begin with Doctorow’s conception of the term.

Doctorow defines “techno-optimism” as follows:

In order to be an activist, you have to be… pessimistic enough to believe that things will get worse if left unchecked, optimistic enough to believe that if you take action, the worst can be prevented. […] Techno-optimism is an ideology that embodies the pessimism and the optimism above: the concern that technology could be used to make the world worse, the hope that it can be steered to make the world better.

What this definition suggests is that Doctorow has a very clear vision of what constitutes “good” vs. “bad” technology or technological developments. He turns to that dichotomy next as he seeks to essentially marry “techno-optimism” to a devotion to the free/open software movement and a rejection of “proprietary technology”:

There are many motivations for contributing to free/open software, but the movement’s roots are in this two-sided optimism/pessimism: pessimistic enough to believe that closed, proprietary technology will win the approval of users who don’t appreciate the dangers down the line (such as lock-in, loss of privacy, and losing work when proprietary technologies are orphaned); optimistic enough to believe that a core of programmers and users can both create polished alternatives and win over support for them by demonstrating their superiority and by helping people understand the risks of closed systems.

In other words, recalling his definition of techno-optimism, Doctorow is basically saying that the way we “steer” technology to “make the world better” is by taking steps to foster or favor “open” technologies over “closed” ones:

It falls to techno-optimists to do two things: first, improve the alternatives and; second, to better articulate the risks of using unsuitable tools in hostile environments. … Herein lies the difference between a ‘‘technology activist’’ and ‘‘an activist who uses technology’’ — the former prioritizes tools that are safe for their users; the latter prioritizes tools that accomplish some activist goal. The trick for technology activists is to help activists who use technology to appreciate the hidden risks and help them find or make better tools. That is, to be pessimists and optimists: without expert collaboration, activists might put themselves at risk with poor technology choices; with collaboration, activists can use technology to outmaneuver autocrats, totalitarians, and thugs.

I have no problem with Doctorow issuing a clarion call to programmers to “find or make better tools.” Power to him and the developers who take him up on the request. But I do have a problem with the sort of ‘you’re-either-with-us-or-against-us’ sort of attitude Doctorow adopts here and in much of his past writing, which attempts to force a false choice upon us regarding “open” vs. “closed” digital technologies.

The irony of Doctorow’s definition of “techno-optimism” is that, as he notes, it’s actually rooted in the fairly pessimistic belief that unless we do something to affect the balance between “open vs. closed” technology then “technology could be used to make the world worse,” he says. I think that view is myopic and misguided for several reasons.

First, I think it’s a mistake to tether “techno-optimism” to overly binary conceptions of “good vs. bad” / “open vs. closed” technology. I spent a great deal of time in the second of my two “Case for Internet Optimism” chapters addressing the group of thinkers that I refer to as “Openness Evangelicals,” or those who believe that “Openness” is almost always The Good; anything “closed” (restricted or proprietary) in nature is The Bad. In a sense, it’s tantamount to picking (or at least favoring) technological winners and losers regardless of what others prefer and voluntarily choose to use because it gives them greater satisfaction.

Second, there are no clear definitions of “openness” or “closedness” (if that’s even a word); both are matters of degree. You can call Apple and Facebook “closed” — and they certainly are in many senses of the term — but they are not nearly as “closed” or “proprietary” as the communications devices or platforms of the past. To put it in Zittrainian parlance, “generativity” continues to thrive even in environments or on platforms that are “closed” is some ways. Almost all modern digital devices and networks feature some generative and “non-generative” attributes. “No one has ever created, and no one will ever create, a system that allows any user to create anything he or she wants.  Instead, every system designer makes innumerable tradeoffs and imposes countless constraints,” note James Grimmelmann and Paul Ohm.“Every generative technology faces … tradeoffs.  Good system designers always restrict generativity of some kinds in order to encourage generativity of other kinds.  The trick is in striking the balance,” they argue.

And most companies now have stronger incentives to strike a better balance between “open” vs. “closed.” Attempting to completely lock-down digital innovation or “generativity” on any platform these days would be a kiss of death. Netizens have come to expect a fair degree of freedom to tinker with and to configure digital technologies in unique ways. That’s why the general progression of things is increasingly toward more “openness,” even if it’s not the perfect openness that Doctorow and others seem to demand.

In this regard, I find it interesting that Doctorow never mentions Twitter in his essay. After all, it’s a somewhat closed system, and seems to be growing more closed in some ways as it searches for a sustainable business model. And yet Twitter — which Doctorow uses aggressively himself — allows for an amazingly “open” channel of constant, instantaneous human communication. By most accounts, it has been a true “technology of freedom” and helped advance importance causes of various sorts.

Will Twitter’s proprietary API make it easier for the company to eventuate manipulate users, or for governments to co-opt for their own nefarious ends?  That seems to be the horror story the Openness Evangelicals want us to believe when they protest proprietary code or private systems. But such manipulation is much easier said than done. And when it is attempted, it is usually unearthed and made visible to us in fairly short order, which spawns the search for, and use of, alternative systems. People and platforms don’t sit still long. Evolution continues at a breakneck pace in the digital arena.

Moreover, say what you will about “proprietary” or “closed” devices and platforms like Twitter, Facebook, Apple, Microsoft, and others, but the reality is this: Part of the reason they have been able to “scale up” and become major communications platforms in the first place is because they are focused on developing a sustainable business model.  Yes, I know this will be absolutely heresy to some of the Openness Evangelicals (how dare these companies seek to make money!), but the reality is that the reach of many platforms like these is fundamentally tied up with their success as good old fashion capitalist entrepreneurs. By contrast, the perfectly “free” and “open” technologies and platforms that Doctorow clearly favors have not been able to achieve similar scale.  I suppose he would claim that’s because proprietary technologies have crowded-out his favored systems and platforms, or that consumers have been duped into making bad choices.

But this raises a third issue: Just how far should we go to advance Doctorow’s vision and “steer” technology in a better direction? Again, I wholeheartedly applaud Doctorow’s call to programmers to “find or make better tools” and I should make it clear that my strong preference is for many of the same tools that he tends to favor. I bet I hate Apple and Facebook even more than Doctorow, for example. I don’t own a single Apple device and I only have a Facebook account as a cyber-traffic sign to direct people to find me elsewhere online. Meanwhile, I love hacking and cracking my devices until I have tweaked them to death — usually quite literally since I end up “bricking” a lot of my devices. (My Dad is still pretty angry about the Commodore 128 computer that my brother and I hacked and destroyed in the early 1980s!) So, at heart, I’m with Doctorow and the “openness-is-better” crowd.

But these are my personal choices. I don’t attempt to impress my values upon others or suggest that there is only One True Way when it comes to digital technology. And I would never be so arrogant as to suggest that my preferred technologies were the “good” ones and those chosen by the cyber-hoi polloi were “bad,” even if they were more “closed” or “proprietary.”

Which raises my ultimate concern with the mindset of Openness Evangelicals: If one is so wedded to bringing about the results they desire, ironically, it becomes significantly more likely that the “openness” they advocate will inevitably devolve into expanded government control of cyberspace and digital systems. If you run around all day lamenting that proprietary, unregulated systems will — as the Openness Evangelicals fear — become subject to “perfect control” by the private sector (as Lawrence Lessig claimed) or lead to a diminution of cyber-freedom (as Jonathan Zittrain and Tim Wu claim), then you shouldn’t be at all surprised when the code cops come knocking and insisting that they’re just there to help.

In closing, I remain perplexed that Doctorow and the Openness Evangelicals have so little faith in the “open” systems and technologies they trumpet. If such systems really are superior, shouldn’t they win out in the end? Regardless, what separates them from me is that I’m far more willing to allow things to run their course within digital markets, even if that means some “closed” devices and platforms remain or even thrive at times.

Thus, when it comes to “techno-optimism,” the better disposition is technological agnosticism and a real “openness” to technological evolution. Here’s how I summarized it in my recent book chapter:

History counsels patience and humility in the face of radical uncertainty and unprecedented change. More generally, it counsels what we might call “technological agnosticism.” We should avoid declaring “openness” a sacrosanct principle and making everything else subservient to it without regard to cost or consumer desires. As Chris Anderson has noted, “there are many Web triumphalists who still believe that there is only One True Way, and will fight to the death to preserve the open, searchable common platform that the Web represented for most of its first two decades (before Apple and Facebook, to name two, decided that there were Other Ways).” The better position is one based on a general agnosticism regarding the nature of technological platforms and change.  In this view, the spontaneous evolution of markets has value in its own right, and continued experimentation with new models—be they “open” or “closed,” “generative” or “tethered”—should be permitted.

Moreover, the real “techno-optimist” doesn’t express the sort of fear and loathing we see in Doctorow’s essay or the work of other digital doomsayers like Wu, Lessig, or Zittrain. [See my critiques of all their works here.] Instead, the real “techno-optimist” embraces change, uncertainty, experimentation, evolution, and does not automatic reject alternative conceptions of “good” technologies or platforms as determined by others who may not share our own preferences.

Writing over at Forbes, Bret Swanson notes that the progression of information technology history isn’t going so well for those Net pessimists who, not so long ago, predicted that the sky was set to fall on consumers and that digital innovation was dying. Specifically, Swanson addresses the theories set forth by cyberlaw professors Lessig, Zittrain, and Wu (among others), whose theories about “perfect control,” the death of “generativity,” and the rise of the “master switch,” I have addressed here many time before.  [See this compendium of TLF essays discussing “Problems with the Lessig-Zittrain-Wu Thesis.”] Swanson summarizes what went wrong with their gloomy Chicken Little theories and their predictions of the coming cyber end-times:

As the cloud wars roar, the cyber lawyers simmer. This wasn’t how it was supposed to be. The technology law triad of Harvard’s Lawrence Lessig and Jonathan Zittrain and Columbia’s Tim Wu had a vision. They saw an arts and crafts commune of cyber-togetherness. Homemade Web pages with flashing sirens and tacky text were more authentic. “Generativity” was Zittrain’s watchword, a vague aesthetic whose only definition came from its opposition to the ominous “perfect control” imposed by corporations dictating “code” and throwing the “master switch.” In their straw world of “open” heros and “closed” monsters, AOL’s “walled garden” of the 1990s was the first sign of trouble. Microsoft was an obvious villain. The broadband service providers were  of course dangerous gatekeepers, the iPhone was too sleek and integrated, and now even Facebook threatens their ideal of uncurated chaos. These were just a few of the many companies that were supposed to kill the Internet. The triad’s perfect world would be mostly broke organic farmers and struggling artists. Instead, we got Apple’s beautifully beveled apps and Google’s intergalactic ubiquity. Worst of all, the Web started making money.

Swanson goes on to argue that, despite all the hang-wringing we’re heard from this triumvirate and their many, many disciples in the academic and regulatory activist world, things just keep getting more innovative, more generative, and yes, even more “open.”  As I noted in my book chapter on “The Case for Internet Optimism, Part 2 – Saving the Net From Its Supporters” as well as my recent Reason magazine essay on “The Rise of Cybercollectivism,” scholars like Lessig, Zittrain, and Wu:

seem trapped in what Virginia Postrel labeled the “stasis mentality” in her 1998 book The Future and Its Enemies. They want an engineered world that promises certain outcomes. They are prone to taking snapshots of market activity and suggesting that those temporary patterns are permanent disasters requiring immediate correction. (Recall Lessig’s fear of AOL, which once had 25 million subscribers who were willing to pay $20 a month to get a guided tour of the Internet, but which ignored the rise of search and social networks at its own peril. It didn’t help that the company’s disastrous merger with Time Warner ended with over $100 billion in shareholders losses and an eventual divorce.) The better approach is what Postrel termed dynamism: “a world of constant creation, discovery, and competition.” Dynamism places heavy stress on the heuristic and believes there is inherent value in an experimental, evolutionary process, no matter how messy it can be in practice.

Moreover, I think these scholars fail to appreciate a point I tried to make in my essay earlier this week on “Techno-Panic Cycles“:

many people overlook the importance of human adaptability and resiliency.  The amazing thing about humans is that we adapt so much better than other creatures. When it comes to technological change, resiliency is hard-wired into our genes.  … We learn how to use the new tools given to us and make them part of our lives and culture.

Just as that is true for social or speech-related technology developments, so too for economic developments. People don’t sit still — consumers, coders, new companies, etc. — they respond to marketplace developments and incentives. They seek out new ways of doing things.  They hack. They crack. They code. They are always looking to build or buy a better mousetrap. And when they find them, they don’t just settle for the state-of-the-art ; they expect everything to be reworked and re-launched constantly with revisions and improvements at every level. For example, the original Verizon Droid 1 that I got just 15 months ago now feels like an antique compared to the latest devices on the market. I am dying to upgrade to a new model, which will give me more processing power, more storage, more high-speed access, more apps, more of everything. I am so pampered by the pace of progress that expect and demand it!

No doubt, the ivory tower worrywarts will continue to grumble about how their techno-cratic philosopher king approach would supposedly make the world even more innovative and consumer-friendly, if only we adopted a healthy dose of top-down planning and centralized direction. But we need to ask ourselves whether their prescription for planning can really beat the track record that is unfolding on a daily basis right before our eyes.

The folks at Reason magazine were kind enough to invite me to submit a review of Tim Wu’s new book, The Master Switch: The Rise and Fall of Information Empires based on my 6-part series on the book that I posted here on the TLF late last year. (Parts 1, 2, 3, 4, 5, 6)  My new essay, which is entitled “The Rise of Cybercollectivism,” has now been posted on the Reason website.

I realize that title will give some readers heartburn, even those who are inclined to agree with me much the time.  After all, “collectivism” is a term that packs some rhetorical punch and leads to quick accusations of red-baiting. I addressed that concern in a Cato Unbound debate with Lawrence Lessig a couple of years ago after he strenuously objected to my use of that term to describe his worldview (and that of Tim Wu, Jonathan Zittrain, and their many colleagues and followers). As I noted then, however, the “collectivism” of which I speak is a more generic type, not the hard-edged Marxist brand of collectivism of modern times. For example, I do not believe that Professors Lessig, Zittrain, or Wu are out to socialize all the information means of production and send us all to digital gulags or anything silly like that. Rather, their “collectivism” is rooted in a more general desire to have–as Declan McCullagh eloquently stated in a critique of Lessig’s Code–rule by “technocratic philosopher kings.” Here’s a passage from my Reason review of Wu’s Master Switch in which I expand upon that notion:

What’s perhaps most troubling about The Master Switch is something it shares with Lessig’s book: a concerted effort to redefine “Internet freedom.” In the Lessig-Zittrain-Wu construction of Internet freedom, technocrats liberate us from the supposed tyranny of the marketplace and what Lessig calls “code failure.” High-tech entrepreneurs are cast as villains; their innovations are viewed as threats to our liberties. When challenged, Wu, Lessig, and Zittrain all vehemently reject the notion that their outlook is pessimistic. They occasionally insist that they are actually libertarians at heart. But a plain reading of Lessig, Zittrain, and Wu provides little cause for optimism. Unless someone or something—usually the state—intervenes, they warn, the Net and all things digital are doomed. “Not only can the government take these steps to reassert its power to regulate, but…it should,” argues Lessig. “Government should push the architecture of the Net to facilitate its regulation, or else it will suffer what can only be described as a loss of sovereignty.”

Wu’s book has a very concrete regulatory vision in this regard (even though, strangely, he insists it really isn’t regulation at all). As I noted in my essay last week following his appointment as a senior advisor to the Federal Trade Commission, Wu wants a so-called “Separations Principle” to govern our modern information economy. It would require that all information providers be segregated into three buckets–creators, distributors, and hardware makers–and then kept strictly compartmentalized. He proposes this in the name of keeping private power in check, which he regards as the primary threat to the information economy, not the government. This is very much in line with the thinking we see in Lessig and Zittrain’s work.  Here’s how I summarize this thinking in my Reason piece:

Wu and other progressives don’t always come right out and say it, but they often suggest that private power, however defined, is so persistently insidious that the only way to counteract it is by greatly amplifying state power. We see that yearning for a stronger state in Wu’s suggestion that “the disposition of firms and industries is, if anything, more critical than the actions of the state in controlling who gets heard” and in his audacious regulatory solutions, which would greatly enhance the government’s power over the information economy.

For these reasons, I believe the “cyber-collectivism” label is appropriate. They want to collectivize (or politicize) decisions that some of us believe are ultimately better addressed by voluntary, spontaneous, bottom-up, marketplace responses and evolving social norms.

At this point, some might ask: Do we need such labels at all? As a philosophy junkie, I think such labels and classifications play a useful didactic role. After all, something quite profound separates these different camps and leads to endless squabbles about nearly every aspect of technology policy. Consequently, my attempt to identify leading schools of thinking about Internet policy issues is not an effort to disparage but, rather, simply an exercise in philosophical classification to help us frame ongoing investigations of these issues in a more rational manner.

I am certainly open to other classification suggestions.”Cyber-progressive” might be one option that packs less of a perceived punch than “cyber-collectivist.” I’ve also used the term “cyber social Democrat” and “openness evangelicals” to describe this movement, although both labels have serious shortcomings.

As for myself, I have made no bones about my affiliation with what might be labeled the “cyber-libertarian” school of thought. Clearly, we’re a small band of brothers, and we are currently being utterly crushed in these intellectual debates by the cyber-progressives, who dominate almost all major university cyberlaw and Internet policy programs. Nonetheless, despite having so few adherents, I still think it is fair to identify cyber-libertarianism as a distinct school of thinking.

I think we’re also seeing the emergence of a clear school of thinking that we’ll eventually label “cyber-conservative,” as Jerry Brito alluded to in his post about “What Cablegate Tells Us about Cyber-Conservatism.” I think the defining characteristics for the cyber-conservative, as with conservatism more generally, can be boiled down to security, stability, moderation, and a healthy respect for tradition.  Conservatives occasionally place a high value on liberty in certain economic contexts, but when it conflicts too violently with those other principles, liberty typically gives way to planning. We see this in debates over many national security matters, some privacy discussions, and certain “faith and family” issues. Interestingly, however, conservative principles have never really taken hold in a unified or coherent way within the realm of technology policy, and it’s difficult to point to many scholars who would clearly fit under the “cyber-conservative” banner.  But I think that is changing today because of rising concerns about state secrets, cyber war, the ubiquity of content considered morally objectionable by many, fears about declining  “social order,” and so on. [See my comments on Rob Atkinson’s Who’s Who in Internet Politics for more discussion about cyber-conservatism.]

Do you have better labels for these philosophical schools of thinking about Internet policy matters? If so, I’m all ears.

Additional Reading:

• Cyber-Libertarianism: The Case for Real Internet Freedom
• The Case for Internet Optimism, Part 2 – Saving the Net From Its Supporters
• Thoughts on Wu, Part 5: What Ultimately Separates the Cyber-Libertarian & Cyber-Collectivist
• Cato Unbound debate with Lessig, Part 1: Code, Pessimism, and the Illusion of “Perfect Control” & Part 2: “Our Conflict of Visions.”

This is the second of two essays making “The Case for Internet Optimism.” This essay was included in the book, The Next Digital Decade: Essays on the Future of the Internet (2011), which was edited by Berin Szoka and Adam Marcus of TechFreedom. In my previous essay, which I discussed here yesterday, I examined the first variant of Internet pessimism: “Net Skeptics,” who are pessimistic about the Internet improving the lot of mankind. In this second essay, I take on a very different breed of Net pessimists:  “Net Lovers” who, though they embrace the Net and digital technologies, argue that they are “dying” due to a lack of sufficient care or collective oversight.  In particular, they fear that the “open” Internet and “generative” digital systems are giving way to closed, proprietary systems, typically run by villainous corporations out to erect walled gardens and quash our digital liberties.  Thus, they are pessimistic about the long-term survival of the Internet that we currently know and love.

Leading exponents of this theory include noted cyberlaw scholars Lawrence Lessig, Jonathan Zittrain, and Tim Wu.  I argue that these scholars tend to significantly overstate the severity of this problem (the supposed decline of openness or generativity, that is) and seem to have very little faith in the ability of such systems to win out in a free market. Moreover, there’s nothing wrong with a hybrid world in which some “closed” devices and platforms remain (or even thrive) alongside “open” ones. Importantly, “openness” is a highly subjective term, and a constantly evolving one.  And many “open” systems or devices are as perfectly open as these advocates suggest.

Finally, I argue that it’s likely that the “openness” advocated by these advocates will devolve into expanded government control of cyberspace and digital systems than that unregulated systems will become subject to “perfect control” by the private sector, as they fear.  Indeed, the implicit message in the work of all these hyper-pessimistic critics is that markets must be steered in a more sensible direction by those technocratic philosopher kings (although the details of their blueprint for digital salvation are often scarce).   Thus, I conclude that the dour, depressing “the-Net-is-about-to-die” fear that seems to fuel this worldview is almost completely unfounded and should be rejected before serious damage is done to the evolutionary Internet through misguided government action.

I’ve embedded the entire essay down below in Scribd reader, but it can also be found on TechFreedom’s Next Digital Decade book website and SSRN.

The Case for Internet Optimism Part 2 – Saving the Net From Its Supporters (Adam Thierer) http://d1.scribdassets.com/ScribdViewer.swf

[Note: This post is updated regularly as I discover relevant old or new material.]

“Regulatory capture” occurs when special interests co-opt policymakers or political bodies — regulatory agencies, in particular — to further their own ends.  Capture theory is closely related to the “rent-seeking” and “political failure” theories developed by the public choice school of economics.  Another term for regulatory capture is “client politics,” which according to James Q. Wilson, “occurs when most or all of the benefits of a program go to some single, reasonably small interest (and industry, profession, or locality) but most or all of the costs will be borne by a large number of people (for example, all taxpayers).”  (James Q. Wilson, Bureaucracy, 1989, at 76).

While capture theory cannot explain all regulatory policies or developments, it does provide an explanation for the actions of political actors with dismaying regularity.  Because regulatory capture theory conflicts mightily with romanticized notions of “independent” regulatory agencies or “scientific” bureaucracy, it often evokes a visceral reaction and a fair bit of denialism.  (See, for example, the reaction of New Republic’s Jonathan Chait to Will Wilkinson’s recent Economist column about the prevalence of corporatism in our modern political system.)  Yet, countless studies have shown that regulatory capture has been at work in various arenas: transportation and telecommunications; energy and environmental policy; farming and financial services; and many others.

I thought it might be useful to build a compendium of quotes from various economists and political scientists who have studied the regulatory process throughout history and identified regulatory capture or client politics as a major problem.  I would greatly appreciate having others suggest additional quotes and studies to add to this list since I plan to update it frequently and eventually work all of this into a future paper or book. [ Note: I have updated this compendium over a dozen times since the original post, so please check back for updates.]

The following list is chronological and begins, surprisingly, with the thoughts of progressive hero Woodrow Wilson…

Woodrow Wilson, The New Freedom: A Call For the Emancipation of the Generous Energies of a People (1913) at 201-202:

“If the government is to tell big business men how to run their business, then don’t you see that big business men have to get closer to the government even than they are now? Don’t you see that they must capture the government, in order not to be restrained too much by it? Must capture the government? They have already captured it. Are you going to invite those inside to stay? They don’t have to get there. They are there.”

A. C. Pigou, Economics of Welfare, (1920), Ch. 20, Para. #4

“It is not sufficient to contrast the imperfect adjustments of unfettered private enterprise with the best adjustment that economists in their studies can imagine. For we cannot expect that any public authority will attain, or will even whole-heartedly seek, that ideal. Such authorities are liable alike to ignorance, to sectional pressure and to personal corruption by private interest. A loud-voiced part of their constituents, if organised for votes, may easily outweigh the whole.”

Anthony Downs, “An Economic Theory of Political Action in a Democracy,” 65 Journal of Political Economy 2 (1957), 135-150, at 136:

“…even if social welfare could be defined, and methods of maximizing it could be agreed upon, what reason is there to believe that the men who run the government would be motivated to maximize it? To state that “they should do so does not mean that they will.”

Ronald Coase, “The Federal Communications Commission” 2 Journal of Law and Economics (1959), 1-40, at 37. In commenting on the fact that many lawmakers bemoaned “the extent to which pressure is brought to bear on the [FCC] by politicians and businessmen,” Coase said “that this should be happening is hardly surprising.”  He continued on:

“When rights, worth millions of dollars, are awarded to one businessman and denied to others, it is no wonder if some applicants become overanxious and attempt to use whatever influence they have (political and otherwise), particularly as they can never be sure what pressure the other applicants may be exerting.”

Milton Friedman, Capitalism & Freedom (1962) at 140:

“the pressure on the legislature to license an occupation rarely comes from the members of the public . . . On the contrary, the pressure invariably comes from the occupation itself.”

Harold Demsetz, “Why Regulate Utilities?,” 11(1) Journal of Law and Economics (Apr., 1968), at 61.

“…in utility industries, regulation has often been sought because of the inconvenience of competition.”

Richard Posner, “Natural Monopoly and Its Regulation,” 21(3) Stanford Law Review 548 (Feb., 1969):

“Because regulatory commissions are of necessity intimately involved in the affairs of a particular industry, the regulators and their staffs are exposed to strong interest group pressures.  Their susceptibility to pressures that may distort economically sound judgments is enhanced by the tradition of regarding regulatory commissions as ‘arms of the legislature,’ where interest-group pressures naturally play a vitally important role.”

George Stigler, “The Theory of Economic Regulation,” 2(1) Bell Journal of Economics and Management Science, (1971), 3-21 at 3:

“…as a rule, regulation is acquired by the industry and is designed and operated primarily for its benefits.”

George Stigler, “Can Regulatory Agencies Protect the Consumer?” in The Citizen and the State: Essays on Regulation (1975), at 183:

“Regulation and competition are rhetorical friends and deadly enemies: over the doorway of every regulatory agency save two should be carved: ‘Competition Not Admitted.’ The Federal Trade Commission’s doorway should announce , “Competition Admitted in Rear,” and that of the Antitrust Division, ‘Monopoly Only by Appointment.’”

Theodore J. Lowi, The End of Liberalism: The Second Republic of the United States (2nd Ed., 1969, 1979) at 280:

“a considerable proportion of federal regulation, regardless of its own claim to consumer protection, has the systematic effect of constituting and maintaining a sector of the economy or the society. These are the policies of receivership by regulation.”

Alfred Kahn, The Economics of Regulation: Principles and Institutions (1971):

“When a commission is responsible for the performance of an industry, it is under never completely escapable pressure to protect the health of the companies it regulates, to assure a desirable performance by relying on those monopolistic chosen instruments and its own controls rather than on the unplanned and unplannable forces of competition.” (p. 12) “Responsible for the continued provision and improvement of service, [the regulatory commission] comes increasingly and understandably to identify the interest of the public with that of the existing companies on whom it must rely to deliver goods.” (p. 46)

Mark Green and Ralph Nader, “Economic Regulation vs. Competition: Uncle Sam the Monopoly Man,” Yale Law Journal 82, no. 5 (April 1973), 876

“a kind of regular personnel interchange between agency and industry blurs what should be a sharp line between regulator and regulatee, and can compromise independent regulatory judgment. In short, the regulated industries are often in clear control of the regulatory process.”

Richard B. McKenzie and Gordon Tullock, Modern Political Economy: An Introduction to Economics (1978) at 220:

“although regulation is begun with the good intentions of those who promote and pass the laws, somewhere along the line regulators may become pawns of the regulated firms.”

Milton and Rose Friedman, Free to Choose (1980) at 193:

“Every act of intervention establishes positions of power.  How that power will be used and for what purposes depends far more on the people who are in the best position to get control of that power and what their purposes are than on the aims and objectives of the initial sponsors of the intervention.”

Barry M. Mitnick, The Political Economy of Regulation: Creating, Designing, and Removing Regulatory Forms (New York: Columbia University Press, 1980), at 38:

“Much relatively recent research has argued that regulation was often sought by industries for their own protection, rather than being imposed in some ‘public interest.’ Although the distinction is not always made clear in this recent literature, we may add that regulation which is not directly sought at the outset is generally ‘captured’ later on so it behaves with consistency to the industry’s major interests, or at least has been observed to behave in this manner.”

Barry Weingast, “Regulation, Reregulation and Deregulation: The Foundation of Agency-Clientele Relationships,”44 Law and Contemporary Problems, (1981) pp. 147-77, at 151:

“Often, agencies are the vehicle for this endeavor. Agency heads and commission members, anxious to further their careers and goals (including large budgets) as well as completing their own of power and prestige pet projects and policy initiatives, depend upon service to interest their success groups and key committee members for their success.”

George Gilder, Wealth & Poverty (New York: Bantam Books, 1981), pp. 283:

“One reason for government resistance to change is that the process of creative destruction can attack not only an existing industry, but also the regulatory apparatus that subsists on it; and it is much more difficult to retrench a bureaucracy than it is to bankrupt a company. A regulatory apparatus is a parasite that can grow larger than its host industry and become in turn a host itself, with the industry reduced to parasitism, dependent on the subsidies and protections of the very government body that initially sapped its strength.”

Bruce Yandle,”Bootleggers and Baptists — The Education of a Regulatory Economist,” Regulation, Vol. 3, No. 3, (May/June 1983) p. 13:

“what do industry and labor want from the regulators? They want protection from competition, from technological change, and from losses that threaten profits and jobs. A carefully constructed regulation can accomplish all kinds of anticompetitive goals of this sort, while giving the citizenry the impression that the only goal is to serve the public interest.”

Thomas K. McCraw, Prophets of Regulation, (Cambridge, MA: Harvard University Press, 1984), p. 263 [recounting the history of the Civil Aeronautics Board up until the time of Alfred Kahn ascendency to chairman and its eventual deregulation and abolition.]

“Clearly, in passing the Civil Aeronautics Act [of 1938], Congress intended to bring stability to airlines. What is not clear is whether the legislature intended to cartelize the industry. Yet this did happen. During the forty years between passage of the act of 1938 and the appointment of [Alfred] Kahn to the CAB chairmanship, the overall effect of board policies tended to freeze the industry more or less in its configuration of 1938. One policy, for example, forbade price competition. Instead the CAB ordinarily required that all carriers flying a certain route charge the same rates for the same class of customer. […] A second policy had to do with the CAB’s stance toward the entry of new companies into the business. Charged by Congress with the duty of ascertaining whether or not ‘the public interest, convenience, and necessity’ mandated that new carriers should receive a certificate to operate, the board often ruled simply that no applicant met these tests. In fact, over the entire history of the CAB, no new trunkline carrier had been permitted to join the sixteen that existed in 1938. And those sixteen, later reduced to ten by a series of mergers, still dominated the industry in the 1970s. All these companies… developed into large companies under the protective wing of the CAB. None wanted deregulation.”

Robert Higgs, Crisis and Leviathan: Critical Episodes in the Growth of American Government (1987) p. 8:

“The government’s regulatory agencies have created or sustained private monopoly power more often than they have precluded or reduced it.  This result was exactly what  many interested parties desired from government regulation, though they would have been impolitic to have said so in public.”

Jeffrey M. Berry, The Interest Group Society (1989) p. 151:

“The ties between interest groups and [regulatory] agencies can become too close. A persistent criticism by political scientists is that agencies that regulate businesses are overly sympathetic to the industries they are responsible for regulating.  Critics charge that regulators often come from the businesses they regulate and thus naturally see things from an industry point of view.  Even if regulators weren’t previously involved in the industry, they have been seen as eager to please powerful clientele groups rather than have them complain to the White House or to the agency’s overseeing committees in Congress.”

Jonathan Emord, “The Electronic Press and the Industry Capture Movement,” Chapter 11 from: Freedom Technology and the First Amendment (1991), p. 146 (discussing the early history of radio licensing):

“The minutes of the First National Radio Conference in 1922 reveal that even at this early date, industry leader clamored for government limits on the number of licenses issued; they sought protection against entry by new licenses. For its part, the government desired control over the industry’s structure and programming content. Certain members of Congress, joined by [Secretary of Commerce Herbert] Hoover, agreed with broadcast industry leaders that the system of broadcasting in the United States would be brought within the federal government’s control. The classic rent/content control quid pro quo soon developed: in exchange for regulatory controls on industry structure and programming content, industry leaders would be granted restrictions on market entry that they wanted. These restrictions would ensure monopoly rents for licensees and would provide the government with assurance that the broadcast industry would not oppose regulatory controls.”

David Schoenbrod, Power Without Responsibility: How Congress Abuses the People Through Delegation (New Haven, CT: Yale University Press, 1993), p. 13:

“Agency heads are usually not apolitical and, indeed, concentrated interests often prevail more easily in an agency than they can in Congress. Effective participation in agency lawmaking usually requires expensive legal representation as well as close connections to members of Congress who will pressure the agency on one’s behalf. The agency itself is often closely linked with the industry it regulates. Not only large corporations, but also labor unions, cause-based groups, and other cohesive minority interests sometimes can use delegation to triumph over the interests of the larger part of the general public, which lacks the organization, finances, and know-how to participate as effectively in the administrative process.”

Douglass North, “Economic Performance through Time,” 84 American Economic Review 3, (1994), 359-363, at p. 360:

“Institutions are not necessarily or even usually created to be socially efficient; rather they, or at least the formal rules, are created to serve the interests of those with the bargaining power to create new rules.”

P.A. McNutt, The Economics of Public Choice (1996), p. 105-6:

“The more successful the interest group becomes the greater the probability that it will be in a position to impact on the policy making process of successive governments. … Aspiring monopolists will retain lobbyists to assure a favourable outcome and devote resources to the acquisition of the monopoly right.  A government will more than likely grant monopoly privileges to various groups of politically influential people.  Cartels and anti-competitive behaviour will be maintained and politicians will react to the demands of the more vociferous and well organised interest groups.”

Andrew Odlyzko, “Privacy, Economics, and Price Discrimination on the Internet,” July 27, 2003, p. 12:

“It is now widely accepted that the passage of the Interstate Commerce Act of 1887 was not a pure triumph of the populist movement and its allies in the anti-railroad camp. The railway industry largely decided that regulation was in its best interests and acquiesced in and even encouraged government involvement. This is often portrayed as the insidious capture of the regulators by the industry they regulate. There is certainly much evidence to support this view.”

Lawrence Lessig,”Reboot the FCC,” Newsweek, December 23, 2008

“Economic growth requires innovation. Trouble is, Washington is practically designed to resist it. Built into the DNA of the most important agencies created to protect innovation, is an almost irresistible urge to protect the most powerful instead. The FCC is a perfect example. … With so much in its reach, the FCC has become the target of enormous campaigns for influence. Its commissioners are meant to be “expert” and “independent,” but they’ve never really been expert, and are now openly embracing the political role they play. Commissioners issue press releases touting their own personal policies. And lobbyists spend years getting close to members of this junior varsity Congress.”

Thomas Frank, “Obama and Regulatory Capture,” Wall Street Journal, June 24, 2009:

“There are powerful institutions that don’t like being regulated. Regulation sometimes cuts into their profits and interferes with their business. So they have used the political process to sabotage, redirect, defund, undo or hijack the regulatory state since the regulatory state was first invented. The first federal regulatory agency, the Interstate Commerce Commission, was set up to regulate railroad freight rates in the 1880s. Soon thereafter, Richard Olney, a prominent railroad lawyer, came to Washington to serve as Grover Cleveland’s attorney general. Olney’s former boss asked him if he would help kill off the hated ICC. Olney’s reply, handed down at the very dawn of Big Government, should be regarded as an urtext of the regulatory state: ‘The Commission… is, or can be made, of great use to the railroads. It satisfies the popular clamor for a government supervision of the railroads, at the same time that that supervision is almost entirely nominal. Further, the older such a commission gets to be, the more inclined it will be found to take the business and railroad view of things. … The part of wisdom is not to destroy the Commission, but to utilize it.'”

Tim Wu, The Master Switch: The Rise and Fall of Information Empires (2010), p. 308:

“Again and again in the histories I have recounted, the state has shown itself an inferior arbiter of what is good for the information industries. The federal government’s role in radio and television from the 1920s through the 1960s, for instance, was nothing short of a disgrace…. Government’s tendency to protect large market players amounts to an illegitimate complicity … [particularly its] sense of obligation to protect big industries irrespective of their having become uncompetitive.”

David J. Farber & Gerald R. Faulhaber, “Net Neutrality: No One Will Be Satisfied, Everyone Will Complain,” The Atlantic, December 21, 2010:

“When the FCC asserts regulatory jurisdiction over an area of telecommunications, the dynamic of the industry changes. No longer are customer needs and desires at the forefront of firms’ competitive strategies; rather firms take their competitive battles to the FCC, hoping for a favorable ruling that will translate into a marketplace advantage. Customer needs take second place; regulatory “rent-seeking” becomes the rule of the day, and a previously innovative and vibrant industry becomes a creature of government rule-making.”

Holman Jenkins, “Let’s Restart the Green Revolution,” Wall Street Journal, February 2, 2011, (regarding how misguided agricultural & environmental policies are hurting consumers):

“When some hear the word ‘regulation,’ they imagine government rushing to the defense of consumers. In the real world, government serves up regulation to those who ask for it, which usually means organized interests seeking to block a competitive threat. This insight, by the way, originated with the left, with historians who went back and reconstructed how railroads in the U.S. concocted federal regulation to protect themselves from price competition. We should also notice that an astonishingly large part of the world has experienced an astonishing degree of stagnation for an astonishingly long time for exactly such reasons.”

Bruce Schneier, Liars & Outliers: Enabling the Trust that Society Needs to Thrive (New York: John Wiley & Sons, Inc., 2012), p. 204.

“There’s one competing interest that’s unique to enforcing institutions, and that’s the interest of the group the institution is supposed to watch over. If a government agency exists only because of the industry, then it is in its self-preservation interest to keep that industry flourishing. And unless there’s some other career path, pretty much everyone with the expertise necessary to become a regulator will be either a former or future employee of the industry with the obvious implicit and explicit conflicts. As a result, there is a tendency for institutions delegated with regulating a particular industry to start advocating the commercial and special interests of that industry. This is known as regulatory capture, and there are many examples both in the U.S. and in other countries.”

Bruce Owen, “Communication Policy Reform, Interest Groups, and Legislative Capture” (Stanford, CA: Stanford Institute for Economic Policy Research, January 19, 2012), SIEPR Discussion Paper No. 11-006, p. 2. Owen argues that it is the legislative branch, not the regulatory agencies themselves, where regulatory capture takes root:

“It is rather legislative oversight and budget committees and their chairs that are (willingly) captured by special interests in the first instance. One could equally say that legislators capture the special interests, seeking campaign funding The behavior of regulatory agencies simply reflect the preferences of their congressional masters. Regulators generally seek to please their committees, not to defy them.”

Mark Zachary Taylor, The Politics of Innovation: Why Some Countries Are Better Than Others at Science and Technology (Oxford University Press, 2016), p. 213:

“political resistance to technological change can obstruct or warp otherwise ‘good’ S&T [science and technology] policy. Time and again, the losing interest groups created by scientific progress or technological change have been able to convince politicians to block, slow, or alter government support for scientific and technological progress. They support taxes, regulations, subsidies, procurement policies, spending, and so forth that obstruct progress in new S&T, and favor the status quo S&T. The losers and their political representatives have interfered with markets, public institutions and policies, and even the scientific debate itself–whatever they can to protect their interests.”

Additional readings:

• RegBlog – “A Resource List on Regulatory Capture and Reform” (2016)
• Frédéric Boehm, “Regulatory Capture Revisited – Lessons from Economics of Corruption” (2007)
• Ernesto Dal Bo, “Regulatory Capture: A Review,” Oxford Review of Economic Policy (2006)
• William W. Bratton & Joseph A. McCahery, “Regulatory Competition, Regulatory Capture, and Corporate Self-Regulation,” North Carolina Law Review 73 (1995), 1861.
• Slavisa Tasic, “Are Regulators Rational?” Instituto Bruno Leoni (October 2010)
• Michael E. Levine and Jennifer L. Forrence, “Regulatory Capture, Public Interest, and the Public Agenda: Toward a Synthesis” 6 Journal of Law, Economics, and Organization (1990), 167-198.
• William A. Jordan, “Producer Protection, Prior Market Structure and the Effects of Government Regulation,” Journal of Law and Economics 15, no. 1, (April 1972), 151-176.
• David Martimort, “The Life Cycle of Regulatory Agencies: Dynamic Capture and Transaction Costs,” Review of Economic Studies 66, no. 4 (October 1999), 929-947,
• J.J. Lafont & Jean Tirole, “The Politics of Government Decision-Making: A Theory of Regulatory Capture” 106 Quarterly Journal of Economics 4 (Nov. 1991) 1089-1127.
• Fred S. McChesney, “Rent Extraction and Rent Creation in the Economic Theory of Regulation,” Journal of Legal Studies 16 (1987) 101-118.
• Horace M. Gray, “The Passing  of the Public Utility Concept,” Journal of Land & Public Utility Economics 16, no. 1 (February 1940), 8-20.
• Jeffrey T. Macher, John W. Mayo, and Mirjam Schiffer, “The Influence of Firms on Government,” The B.E. Journal of Economic Analysis & Policy, 11, no. 1 (2011).
• Gabriel Kolko, The Triumph of Conservatism: A Reinterpretation of American History, 1900-1916 (1963)
• Lawrence G. Baxter, “Understanding Regulatory Capture: An Academic Perspective from the United States, in Stefano Pagliari, ed., The Making of Good Financial Regulation (2012), p. 31-39.
• an essay of mine from Jan. 2015 highlighting a particularly vivid example of capture at the FAA
• Ambrose Bierce’s satirical Devil’s Dictionary definitions of… Politics: “A strife of interests masquerading as a contest of principles. The conduct of public affairs for private advantage.” Legislator: “A person who goes to the capital of his country to increase his own; one who makes laws and money.”
• Finally, down below I’ve embedded a funny Tom Toles cartoon about regulatory capture that appeared in the Washington Post on January 20, 2011:

I want to thank Tim Wu for continuing to engage in a discussion here about his book, The Master Switch, with his various comments to my ongoing rants.  After pouring out about 15,000 words over the past 4 days, I suspect I’m beginning to sound a bit like his cyber-stalker!  I feel a bit bad about this because I really do like Tim a lot and find him to be one of the all-around coolest and most laid-back guys in the Net policy business.  But, as I’ve noted in my ongoing series [see parts 1, 2, 3, & 4], we have profoundly different worldviews when it comes to information history and policy. And some of the recent comments he made to my 3^rd post deserve a serious response.

In one of those comments he asks, “The question, then, is how you get, essentially, limited, controlled government in regulatory affairs; how you duplicate, in some sense, the limits imposed on other dangerous gov’t functions like the army. I don’t think this is having things both ways; I think this is trying to learn from what has gone wrong in the past.”  In the other, he says: “The question I’m asking in the end of the book is whether we can do better; try to have rules against the worse forms abuse without a creeping regulation that turns into capture. I suspect you think that’s impossible, but I don’t.”

So, here’s my response (and I’m making it a new, dedicated post here instead of just a comment in an old thread because I feel we are getting to the heart of the difference between cyber-libertarians (like myself) and cyber-collectivists (or whatever Tim would call himself).

To be clear, I don’t think corporations are angels or that there is never a time when a market can’t be naturally subject to a great deal of control by one company or a handful of companies.  The difference between us comes down to two things primarily.

First, as I have already noted in a couple of these essays (especially this one), I believe regulatory capture, mismanagement, or other shenanigans have more to do with creating and / or maintaining “monopoly” or lasting / harmful “market power” than natural market forces.   By definition, a “purely economic laissez-faire approach” does not exist in markets characterized by regulatory capture and bureaucratic mismanagement.  And you won’t ever get less regulatory capture and bureaucratic mismanagement by increasing the scope of government control over a market.

Second, to the extent that any company or set of companies is able to achieve “market power” is a largely natural fashion (think IBM in 70s or Microsoft in late 90s), I believe that markets can and do act to evolve around those situations quite rapidly, even more rapidly when the market is built on code.

I spent time developing these points in detail in this two-part debate [1, 2] with Lawrence Lessig, which I hope Prof. Wu will take the time to read since I went to great pains to clearly delineate the differences that separate our worldviews.  Ultimately, as I said there in response to Prof. Lessig, what really separates the cyber-libertarian and cyber-collectivist schools of thinking comes down to a belief that “market failures” or “code failures” are ultimately better addressed by voluntary, spontaneous, bottom-up, marketplace responses than by coerced, top-down, governmental solutions. Moreover, the decisive advantage of the market-driven approach to correcting code failure comes down to the rapidity and nimbleness of those response(s).

Does that mean cyber-libertarians believe everything will be all wine and roses in a truly free marketplace?  Absolutely not.  There will be short term spells of what many of us would regard as excessive market power.  The difference between us comes down to the amount of faith we would place in government actors versus market forces / evolution to better solve that problem.  We cyber-libertarians would obviously have a lot more patience with markets and technological change, and would be willing to wait and see how things work out.  We believe, as I have noted in my previous responses to Wu, that it is during what some regard as a market’s darkest hour when some of the most exciting disruptive technologies and innovation are developing.   We are bullish on what I have called experimental, evolutionary dynamism.  People don’t sit still; they respond to incentives, including short-term spells of “market power.”

Is this blind faith in the market?  I suspect Prof. Wu and others would accuse us of that.  But I would argue it isn’t blind faith but informed fact.  It’s interesting, for example, that one of the “information empires” Wu doesn’t spend much time on in his book is IBM.  Back in the 60s and 70s, (as I have documented here before) IBM was the big, bad dog of the computing world, with significant “market power” in mainframes — the only computers that really counted at the time.  Big Blue’s market power was achieved in a fairly natural way, however.  Importantly, there isn’t much regulatory capture or interference I could point to that helped cause or maintain the power IBM had. So, it’s certainly a better case study than others Wu uses in his book, most of which were subject to early meddling by government that tipped the balance in unnatural directions.

Anyway, back in the 1960’s, some folks at the time feared IBM might “leverage” their significant market power into new fields. As a result, the Department of Justice opened an antitrust case against Big Blue in 1969 that would become a 13-year quagmire, with little to show for all the legal wrangling by the time the case was abandoned in 1982.  Here’s how CNet staff writer Rachel Konrad summarized the fiasco back in 2000:

In January 1969, the government began a sweeping antitrust investigation into IBM’s dominance and attempted to break it into smaller companies that would compete against one another. During the six most critical years of the trial, from 1975 to 1980, the parties called 974 witnesses and read 104,400 pages of transcripts, according to Emerson Pugh’s 1995 book “Building IBM: Shaping an Industry and Its Technology.” The 13-year investigation, which required IBM to retain 200 attorneys at one point, fizzled in the early ’80s as the computing landscape shifted from mainframes to personal computers. The government abandoned the tainted effort entirely in 1982, as clones of the IBM PC eroded Big Blue’s dominance. But the company, still fearful of the watchful eye of the Justice Department, took pains to avoid the appearance of a monopoly long after it relinquished its hold on the market. People who worked for IBM in the ’80s and early ’90s said the company routinely fell victim to “pricing death strategy”–a reluctance to lower prices below cost, even on products that weren’t selling–to avoid what the government would call predatory pricing. By the mid-’80s, the company was in bad shape. The antitrust troubles, combined with ill-timed product failures such as the Future System, pinched revenues. The company began a nearly decade-long financial slide. In retrospect, the antitrust case against IBM seemed laughable.

IBM had become the victim of a classic “disruptive technology” paradigm shift that few could have foreseen in 1969.  As Peter Pitsch noted in his 1996 PFF book The Innovation Age, “In 1981 the Department of Justice was still pressing their case against IBM while market forces were about to lay waste to the company.” Pitsch continued:

IBM certainly did not expect to see PCs erode the market share and profitability of its venerable mainframe computers, but the fall of the old “big iron” machines was rapid and spectacular. The revenue of IBM’s mainframe unit fell from roughly $9 billion in 1990 to an estimated $4.5 billion in 1994… [T]he parties destined to become players in the PC revolution were unknown when the PC was introduced, and the experts’ predictions of a much-ballyhooed computer face-off between IBM and AT&T never materialized. Innovative companies that did not exist at the beginning of the revolution rose rapidly. Few people had ever heard of a small company named Microsoft. Nor had they heard of Intel, Novell, Compaq, Dell, or Netscape.

Pitsch went on to summarize how IBM’s manufacturing capacity was slashed in the years that followed and also notes that, astonishingly, “in the space of five years after 1987, IBM lost two thirds of its market value — more than $70 billion.”  In sum, new marketplace innovation and competition handled the short-term market power concern that antitrust regulators had about Big Blue.  Pitsch goes on to explain what the antitrust regulators missed:

A dominant firm can lose its “King of the Hill” status in two ways. First, if it does not continually improve, it will lose market share and profits to low-cost imitators. For example, the ability of low-end PC manufacturers to make IBM clones fostered robust price competition in the PC market. Second, today’s market leaders must worry that some established and well-financed competitor or possibly an upstart produce a technical breakthrough that will displace them. This situation reflects [the] fact that gains from innovation are so powerful and beneficial to consumers that they outweigh the higher prices dominant firms can charge. Indeed, attempts to eliminate these high profits by regulating prices would almost certainly disserve consumers even if the regulations dampened the incentives for innovation only slightly.

What Pitsch is talking about here is dynamic competition, not the static competition. And what the history of IBM shows is the power of evolutionary dynamism in action.  Markets are a learning experience; a “discovery process” as Austrian economists have taught us. Those of us who believe in dynamic competition and evolutionary dynamism see markets in a constant state of flux and expect that sub-optimal market developments or configurations are exactly the spark that incentivizes new form of market entry, innovation, price competition, and so on. Experimentation and evolution happen if you let them happen.

Others, however – and I suspect this includes Prof. Wu – would argue that’s not good enough. They want action, and they want it now!  Every short-term hiccup deserves a policy response in the name of protecting “the public interest,” however they define it through regulation.  But what about the costs and trade-offs associated with early, preemptive, or prescriptive regulation?  What of the danger of regulation steering markets in unnatural or inefficient directions? The possibility of picking technological winners and losers, or technological lock-in?  The possibility of regulatory capture and the creation of a special interest, lobbying hell inside the Beltway?

Somehow these factors often go out the window for those who subscribe to the more static, snapshot-oriented view of markets and competition that is so prevalent in cyber-collectivist circles.  But the cyber-libertarian can’t let those go.  Those factors lie at the core of the problem, we would argue. Actions have consequences. Regulations have costs. And those costs typically outweigh the benefits of preemptive strikes by the State.

And that, at root, is what separates the cyber-libertarian and cyber-collectivist worldviews when it comes to concerns about “market power” and what to do about it.

[Jump to Part 6 in the series.]

Tim Wu was kind enough to comment on my general overview and critique of his new book, The Master Switch: The Rise and Fall of Information Empires.  That essay will be the first of many I plan to pen about Wu’s important book.  I appreciate Prof. Wu being willing to engage me in a debate over some of these issues since I’m sure he has better things to do with his time. Some of the points he raised in his comment will be addressed in subsequent posts.

In this post, I want to respond briefly to his assertion that I was “missing the point of the book” which is “to describe the world we live in.” He says that his book, “suggests that we tend to go through open and closed cycles in the Information Industries, and that, roughly, both have their strengths and weaknesses, and both become popular at different times for various reasons.”  But he fears there are “greater risks in the closed periods.”

Contrary to what he suggests, I certainly understand that’s the point of his book, it’s just that I don’t fully agree with his analysis or conclusions. Let me be clear about a crucial point, however: I accept that almost every industry goes through “cycles” of some sort and that, typically, after a “Wild West” period of greater “openness” and more atomistic competition, some degree of “consolidation” or more “closed” (or proprietary) models often sets in.  (A somewhat different and far more descriptive interpretation of such cycles can be found in Deborah Spar’s 2001 book, Ruling the Waves: Cycles of Discovery, Chaos, and Wealth from Compass to the Internet. She outlines a more refined 4-part cycle of: Innovation, Commercialization, Creative Anarchy, and Rules.)

My primary beef with Prof. Wu is that, contrary to his assertion yesterday in commenting on my post, his book seems to regard the progression of “the Cycle” as mostly linear and one-directional: straight down toward a perfectly closed, corporate-controlled, anti-consumer Hell.  By my reading of his book – much like Lessig and Zittrain’s work – Wu is painting an overly pessimistic portrait of technologies being subjected to the “perfect control” of largely unfettered markets.

I believe history – especially recent history — teaches us something very different.  While information technology markets certainly go through cycles, they tend to oscillate between open and closed more fluidly than Wu suggests – and that dynamic is accelerating today.  Moreover, during periods which Wu regards as more “closed,” things aren’t always as closed as he suggests.  Or, more importantly, the “closed” models typically spawn more innovation than Wu and others bother acknowledging. It’s during what some regard as a market’s darkest hour when some of the most exciting forms of disruptive technologies and innovation are developing.  Finally, to the extent some markets are completely locked-down for a time, it’s more often than not due to public policies that facilitate that lockdown or the “closing” of systems.

I spent a great deal of time making these points in the second essay I submitted to the recent Concurring Opinions symposium about Jonathan Zittrain’s The Future of the Internet. In my essay, “On Defining Generativity, Openness, and Code Failure,” I argued that what separates our worldviews primarily comes down to the more static (or “stasis”) mindset that Lessig, Zittrain, and Wu adopt in their work.  They take static snapshots of markets at what seems to be their darkest hour and then suggest there’s little chance of escaping that Hell.

Of course, how one defines Hell is important. What Wu does in his book, following the lead set by Lessig and Zittrain, is to “define-down” market failure.  If you regard proprietary business models, property rights, or the success of a small handful of companies as the enemy of “openness” and innovation, then it’s easy to see why you might buy into the notion that market failure is ubiquitous and that “steps must be taken” to correct it.   If, on the other hand, you understand that markets are in a constant state of flux, and that those other variables listed above are not necessarily at odds with openness and innovation, then, like me, you’re more cautious about calling in the Code Cops to steer markets and outcomes in other directions.

But the really important point here is that markets evolve. Moreover, that evolution takes place at a much faster clip in the digital arena than it does in other markets. Innovators don’t sit still. People innovate around “failure.” Indeed, “market failure” is really just the glass-is-half-empty view of a golden opportunity for innovation. Markets evolve. New ideas, innovations, and companies are born.  And things generally change for the better—and do so rapidly.

Consider my two favorite case studies from recent times: the AOL-Time Warner merger and the supposed Microsoft monopoly.

The AOL Case Study

When Lessig penned Code a decade ago, it was AOL that was set to become the corporate enslaver of cyberspace. For a time, it was easy to see why Lessig and others might have been worried.  25 million subscribers were willing to pay $20 per month to get a guided tour of AOL’s walled garden version of the Internet.  Then AOL and Time Warner announced a historic mega-merger that had some predicting the rise of “new totalitarianisms” and corporate “Big Brother.”

But the deal quickly went off the rails. By April 2002, just two years after the deal was struck, AOL-Time Warner had already reported a staggering $54 billion loss. By January 2003, losses had grown to $99 billion. By September 2003, Time Warner decided to drop AOL from its name altogether and the deal continued to slowly unravel from there.  In a 2006 interview with the Wall Street Journal, Time Warner President Jeffrey Bewkes famously declared the death of “synergy” and went so far as to call synergy “bullsh*t”!  In early 2008, Time Warner decided to shed AOL’s dial-up service and then to spin off AOL entirely.  Looking back at the deal, Fortune magazine senior editor at large Allan Sloan called it the “turkey of the decade.” The formal divorce between the two firms took place in 2008. Further deconsolidation followed for Time Warner, which spun off its cable TV unit and various other properties.

(The hysteria about AOL’s looming monopolization of instant messaging—and with it, the rest of the web—seems particularly silly: Today, anyone can download a free chat client like Digsby or Adium to manage multiple IM services from AOL, Yahoo!, Google, Facebook and just about anyone else, all within a single interface, essentially making it irrelevant which chat service your friends use.)

In the larger scheme of things, AOL’s story has already become an afterthought in our chaotic cyber-history. But we shouldn’t let those old critics forget about their lugubrious lamentations.  To recap: the big, bad corporate villain of Lessig’s Code attempted to construct the largest walled garden ever, and partner with a titan of the media sector in doing so—and this dastardly plot failed miserably.

To Wu’s credit, he acknowledges that AOL-Time Warner was “a surprising wreck” and that “AOL was [a] dinosaur limping into the new age” before the mass Internet. (p. 262-3) [Of course, there’s no mention in the book of the dire prognostications some of his academic compatriots made a decade ago about AOL or its deal with Time Warner.]  Surprisingly, however, Wu suggests that what ultimately undermined the deal was Net neutrality! He argues that, in order for the merger to achieve the perfect Hell of a giant corporate walled garden, AOL Time Warner would have needed to “subdue Google, Yahoo! and their many cousins. In short, to be viable, the firm would have needed to overturn the net neutrality principles at the core of the Internet’s design.” (p. 267)

Now, isn’t that interesting since, quite obviously, there have been no Net neutrality laws on the books despite the fact that critics like Wu have been hollering for their supposed need!  In a similar vein, Wu recently told Forbes magazine “If there were no net neutrality, Skype would have already been suppressed.”  Again, there is no formal Net neutrality law in place today, so what Wu is essentially saying is that market norms, not regulatory edicts, ensured that new applications came online and that market power was checked.

Even more interesting is the fact that Wu continues on to essentially make the libertarian case against formal Net neutrality regulation when he argues:

The only entity that has so far really succeeded in such a mission [of overturning the net neutrality principles at the core of the Internet’s design] is the government of mainland China, as we saw in 2010, when it drove an exasperated Google out of its sovereign territory by demanding extensive control over what Google let users find.  Indeed, the feat requires such power and resources as belong uniquely to the state: access to the very choke points of a nation’s communications infrastructure, its Master Switch. AOL Time Warner, however vast, did not have police power—it could not imprison Google’s executives for failing to block Wikipedia or Disney content. (p. 267)

Exactly right; it really does come down to that profound difference between who has coercive police power (the State) and who does not (corporations).  It’s not just a difference of degree but a difference of kind.   So, welcome to libertarian movement, Tim Wu!  I plan on citing that block quote in every paper I write from now on regarding why we don’t need preemptive Net neutrality regulation!

The Microsoft Case Study

I want to also briefly mention the Microsoft case study since it is quite instructive in this regard.

It’s suddenly quite easy to forget just how much hand-wringing took place in the late 1990s and early 2000s over Microsoft’s dominance of the web browser market.  Dour predictions of perpetual Internet Explorer lock-in followed.  For a short time, there was some truth to this.  But, yet again, innovators weren’t just sitting still; exciting things were happening.  In particular, the seeds were being planted for the rise of Firefox and Chrome as robust challengers to IE’s dominance—not to mention mobile browsers.

Of course, it’s true that roughly half of all websurfers still use a version of IE today.  But IE’s share of the market is falling rapidly as viable, impressive alternatives now exist and innovation among these competitors is more vibrant than ever.  That’s all that counts. The world changed, and for the better, despite all the doomsday predictions we heard less than a decade ago about Microsoft’s potential dominance of cyberspace.  Moreover, all the innovation taking place at the browser layer today certainly undercuts the gloomy “death of the Net” or “death of openness” thesis set forth by Zittrain and Wu.

Indeed, as Tim O’Reilly argues, this case study illustrates the power of markets to evolve and “route around” market failure or excessively closed systems even during what appears to be a certain sector’s darkest hour:

Just as Microsoft appeared to have everything locked down in the PC industry, the open Internet restarted the game, away from what everyone thought was the main action. I guarantee that if anyone gets a lock on the mobile Internet, the same thing will happen. We’ll be surprised by the innovation that starts happening somewhere else, out on the free edges. And that free edge will eventually become the new center, because open is where innovation happens. […] it’s far too early to call the open web dead, just because some big media companies are excited about the app ecosystem. I predict that those same big media companies are going to get their clocks cleaned by small innovators, just as they did on the web.

Lessons Learned – Or Ignored?

From these case studies, one would hope that the Openness Evangelicals would have gained a newfound appreciation for the evolutionary and dynamic nature of markets and come to understand that, especially in markets built upon information and digital code, the pace and nature of change is unrelenting and utterly unpredictable.  Indeed, contra Lessig’s lament in Code that “Left to itself, cyberspace will become a perfect tool of control,” cyberspace has proven far more difficult to “control” or regulate than any of us ever imagined.  The volume and pace of technological innovation we have witnessed in information sectors over the past decade has been nothing short of stunning.

Critics like Zittrain and Wu, however, wants to keep beating the cyber-sourpuss drum.  So, the face of corporate evil has to change. Today, Steve Jobs has become the supposed apotheosis of all this closed-system evil instead of AOL.  Jobs serves as a prime villain in the books of Zittrain and Wu and in many of the essays they and other Openness Evangelicals pen. But their enemies list is growing longer.  Today, according to the narratives in Zittrain and Wu’s books, it’s not just one of two corporate titans we need to worry about, but just about every major player in the high-tech ecosystem—telcos, cable companies, wireless operators, entertainment providers, Facebook, and others.

Even Google — Silicon Valley’s supposed savior of Internet openness — is not spared their scorn.  “Google is the Internet’s switch,” Wu argues. “In fact, it’s the world’s most popular Internet switch, and as such, it might even be described as the current custodian of the Master Switch.” More ominously, he warns, “it is the switch that transformed mere communications into networking—that ultimately decides who reached what or whom.” (p. 280)

It seems, then, that the face of “closed” evil is constantly morphing.  But shouldn’t that tell us something about how dynamic these markets are?!  I look forward to reading the next edition of Tim’s book to see who the new villains are and whether he’s drawn any lessons from the constantly changing cast of characters.

Conclusion

In sum, history counsels patience and humility instead of Chicken Little-ism and incessant calls for preemptive regulation to serve some amorphous, politically-defined “public interest.”  More generally, history counsels what we might call “technological agnosticism.” In particular, we should avoid declaring “openness” – especially of the mandated variety — a sacrosanct principle and making everything else subservient to it without regard to cost or consumer desires.  As Wired’s Chris Anderson notes, “there are many Web triumphalists who still believe that there is only One True Way, and will fight to the death to preserve the open, searchable common platform that the Web represented for most of its first two decades (before Apple and Facebook, to name two, decided that there were Other Ways).”  The better position is one based on a general agnosticism regarding the nature of technological platforms and change.  In this view, the spontaneous evolution of markets has value in its own right, and continued experimentation with new models—be they “open” or “closed,” “generative” or “tethered”—should be permitted.

Importantly, one need not believe that the markets are “perfectly competitive” to accept that they are “competitive enough” compared to the alternatives—especially those re-shaped by the sort of regulation Wu and others advocate.  “Market failures” or “code failures” are ultimately better addressed by voluntary, spontaneous, bottom-up, marketplace responses than by coerced, top-down, governmental solutions.  Moreover, the decisive advantage of the market-driven, evolutionary approach lies in the rapidity and nimbleness of those responses compared to regulatory alternatives.

Thus, in closing, Tim Wu’s assertion yesterday that I was “missing the point of the book… [which is] to describe the world we live in,” is based on his belief that he has accurately described our world, its history, and the forces that move it.  As I’ve suggested here, there’s a very different way of looking at things.  In my opinion, Wu’s Master Switch is just too hung up on the static snapshot mindset and a bit too obsessed with the supposed One True Way of doing things.

[ Note: In the next installment, I will address Wu’s mistaken claim that purely free markets have guided America’s communications and media sectors over the past century and his assertion that “the purely economic laissez-faire approach… is no longer feasible.”]

Tim Wu’s new book, The Master Switch: The Rise and Fall of Information Empires, will be released next week and it promises to make quite a splash in cyberlaw circles.  It will almost certainly go down as one of the most important info-tech policy books of 2010 and will probably win the top slot in my next end-of-year list.

Of course, that doesn’t mean I agree with everything in it.  In fact, I disagree vehemently with Wu’s general worldview and recommendations, and even much of his retelling of the history of information sectors and policy.  Nonetheless, for reasons I will discuss in this first of many critiques, the book’s impact will be significant because Wu is a rock star in this academic arena as well as a committed activist in his role as chair of the radical regulatory activist group, Free Press. Through his work at Free Press as well as the New America Foundation, Professor Wu is attempting to craft a plan of action to reshape the Internet and cyberspace.

I stand in opposition to almost everything that Wu and those groups stand for, thus, I will be spending quite a bit of time addressing his perspectives and proposals here in coming months, just as I did when Jonathan Zittrain’s hugely important The Future of the Internet & How to Stop It was released two years ago (my first review is here and my latest critique is here).  In today’s essay, I’ll provide a general overview and foreshadow my critiques to come.  (Note: Tim was kind enough to have his publisher send me an advance uncorrected proof of the book a few months ago, so I’ll be using that version to construct these critiques. Please consult the final version for cited material and page numbers.)

The Master Switch & the Cyber-Collectivist Trilogy of Terror

As I noted in my essay on “Two Schools of Internet Pessimism,” what I find most lamentable about the state of cyberlaw and high-tech policy debates today is the foreboding sense of gloom and doom that haunts so many narratives.  To crack open most Net policy books these days is to step into a world of corporate conspiracies, nefarious industry schemers, closed systems, “kill switches,” squashed consumer rights, and so on.  Let’s face it, Chicken Little doesn’t need an agent; pessimism sells. The world loves a good tale of villainy and misery, and that’s exactly what Columbia Law School professor Tim Wu delivers in his new book, The Master Switch: The Rise and Fall of Information Empires.

Wu’s book is important if for no other reason than he is considered one of the intellectual godfathers of modern cyberlaw and The Master Switch is best understood as the final installment in an important trilogy that began with the publication of Lawrence Lessig’s seminal 1999 book, Code and Other Laws of Cyberspace and then was continued on in Jonathan Zittrain’s much-discussed 2008 book, The Future of the Internet & How to Stop It.

To better understand where Wu wants to take us in The Master Switch, we must first return to the central tenant of Lessig’s Code:  “Left to itself,” Lessig predicted, “cyberspace will become a perfect tool of control.” (pg 5-6)  Code quickly became a sort of cyber-collectivist Bible and today Lessig’s many disciples in academia and a wide variety of public policy regulatory advocacy organizations continue to preach this gloomy gospel of impending digital doom and “perfect control.”  Zittrain and Wu are Lessig’s most notable intellectual descendants; the Peter and Paul of the Church of Cyber-Doom that he founded.  And despite their insistence that they really aren’t all that pessimistic—or, more humorously, that they are actually libertarians in disguise—this crew persists with frightful tales and lugubrious warnings that unless someone or something—quite often, the State—intervenes to set us on a better course or protect those things that they regard as sacred.

Zittrain’s Future of the Internet, for example, brought Lessig’s Code up date by giving us a fresh set of villains.  Gone was Lessig’s old foil AOL and its worrisome walled gardens. Instead, the new face of evil became Apple, Facebook, and TiVo.  Zittrain worries about “sterile and tethered” digital “appliances” that foreclose digital generativity and the rise of “a handful of gated cloud communities whose proprietors control the availability of new code.”

Wu simply extends this narrative in The Master Switch when he ominously warns that there are “forces threatening the Internet as we know it” (p. 7) and then goes on to craft an enemies list that reads like a “Who’s Who” of high-tech corporate America. No one, it seems, can be trusted—at least not if that someone has a “.com” behind their name.  Wu hopes to convince us that history proves that concentrations of private power in information industries are inevitably follow a period of openness and competition.  He refers to this as “The Cycle.” Thus, he trots out the old collectivist saw that freedom is really slavery — slavery to The Man:

If the stories in this book tell us anything… it is that the free market can also lead to situations of reduced freedom. Markets are born free, yet no sooner are they born than some would-be emperor is forging chains.  Paradoxically, it sometimes happens that the only way to preserve freedom is through judicious controls on the exercise of private power.  If we believe in liberty, it must be freedom from both private and public coercion. (p. 310)

This is the heart of Wu’s critique in The Master Switch: The real threat is not Big Brother but Big Corporate Brother. It’s certainly not a new critique. Wu is simply steering the Lessig-ite, cyber-collectivism school of cyberlaw in line with traditional “progressive” perspectives and recommendations.  Indeed, although he and other so-called progressives don’t always come right out and say it, they often suggest that private power – however defined – is so insidious and threatening that greatly amplified State power to counter it becomes essential, even a good.

The cyber-collectivist movement that Lessig began with Code and Zittrain and Wu continue in their books, is fueled by that dour, depressing “the-Net-is-about-to-die” fear. Again and again their message comes down to this: “Enjoy the good old days of the open Internet while you can, because any minute now it will be crushed and closed-off by corporate marauders!”  This crowd want us to believe that the corporate big boys are — someday very soon — going to toss the proverbial “master switch,” suffocating Internet innovation and digital freedom, and making us all cyber-slaves within their commercialized walled gardens.

We might think of this fear as “The Great Closing,” or the notion that, unless radical interventions are pursued — usually of a regulatory nature – a veritable Digital Dark Age of Closed Systems will soon unfold, complete with myriad AOL-like walled gardens, “sterile and tethered devices,” corporate censorship, and consumer gouging. Again, it’s really just a restatement of the old Lessig vision of an unfettered cyberspace leading to “perfect (corporate) control.”  In other words, most information systems, networks and devices will be bottled up by corporate “gatekeepers” if markets aren’t steered in a better direction by wise philosopher-regulators.  And these “Openness Evangelicals,” as I will call them, believe they are the sagacious chosen few who will serve as the self-appointed janissary of the supposed dying order of openness.

My critique of this cyber-collectivist thinking and “Great Closing” thesis was more fully developed in these two essays [1, 2] and will be more robustly developed in a chapter for an upcoming book that will be published shortly.  Much of what I’ll have to say in response to Wu’s new book will be drawn from those essays as well as my two-part exchange [1, 2] with Lessig upon the 10^th anniversary of the publication of Code. Basically, I do not buy – not for one minute – the notion that “the Internet is dying” or that “openness” is evaporating.  The Internet has never been more vibrant or open.  Again, please read those previous essays for my completely response.  I’ll be teasing out some of those themes in future essays here.

More specifically, my response to Wu’s new book comes down to this:

1. Rarely is there any discussion of the nature of the respective forms of “power” or the coercive nature of State power, in particular.  The fact that the State has a monopoly on force in society and, thus, can penalize or even imprison, is either ignored or treated as irrelevant compared to the supposed “power” of private actors.
2. Rarely in their analysis — and never in Wu’s book — is there a serious cost-benefit analysis of the trade-off associated with an aggrandizement of State power in the name of countering the supposed evils of private power.  The solutions offered – to the extent they rise above amorphous calls to “do something” – are presented as cost-free options.
3. There isn’t enough focus on the dangers of “regulatory capture” or the massive inefficiencies associated with the sort of regulatory regimes that progressives and modern cyber-collectivists like Wu would substitute for market mechanisms.

In my next installment, I’ll take on Wu’s critique of the fictional “purely economic laissez-faire approach” he derides – an approach that has never existed in American communications or media markets.  In a forthcoming installment, I’ll also be challenging Tim to a Simon-Ehrlich wager on this front and ask him to put his money where his mouth is to see just how serious he is about his dour worldview and extreme technological pessimism!  So, stay tuned.

[Jump to Part 2 in the series.]

TLF readers will definitely want to check out the online symposium underway over at the Concurring Opinions blog debating the thesis set forth in Jonathan Zittrain’s important 2008 book, The Future of the Internet and How to Stop It. The symposium will feature a terrific cast of thinkers, including: Steven Bellovin, Ryan Calo, Laura DeNardis, James Grimmelmann, Orin Kerr, Lawrence Lessig, Harry Lewis,Daithí Mac Síthigh, Betsy Masiello, Salil Mehra, Quinn Norton, Alejandro Pisanty, Joel Reidenberg, Barbara van Schewick and me!  Regular contributors to the Concurring Opinions blog, such as Frank Pasquale, are also taking part.

Faithful readers will recall that I named Zittrain’s book the most important Internet policy book of 2008 and one of the most important books of the past decade.  It’s impact has already been enormous. But I’ve also been unrelenting in my criticism of the book and Zittrain’s dour forecast for the future of Internet “openness” and digital “generativity.” Down below I have reproduced my contribution to the Concurring Opinions symposium, but I encourage you to hop over there to check out all the essays that are pouring in on this topic.

In his opening essay in this symposium, Jonathan Zittrain ensures us that he is “not exactly a pessimist.” “I recognize, and celebrate,” he says, “the fact that the digital environment of 2010 is the coolest, most interesting, most option-filled it’s ever been.” Terrific! I am glad to hear that because the crux of my repeated critiques of his book, The Future of the Internet, over the past two years has been focused on its unrelenting – and largely unwarranted – pessimism about our possible cyber-futures. Alas, his essay on these pages still displays much of that underlying techno-pessimism and begs me to ask: Will the real Jonathan Zittrain please stand up?

Regardless of whether Zittrain is more optimistic now than when he penned his book two years ago, others are seemingly taking its pessimist message to heart. Indeed, “the Death of the Internet” is a hot meme in the Internet policy world these days. Much as a famous 1966 cover of Time magazine asked “Is God Dead?” Wired magazine, the magazine for the modern digerati, proclaimed in a recent cover story that “The Web is Dead.” And just this past week, The Economist magazine ran a cover story fretting about “The Web’s New Walls,” wondering “how the threats to the Internet’s openness can be averted.” Like Zittrain’s book, the primary fear expressed in both essays was that the wide-open Internet experience of the past decade is giving way to a new regime of corporate control and walled gardens.

Before addressing this concern in more detail, let’s consider the origins of Zittrain’s pessimism. Zittrain’s Future of the Internet, as well as Tim Wu’s soon-to-be-released The Master Switch: The Rise and Fall of Information Empires, might best be understood as the second and third installments in a trilogy that began with the publication of Lawrence Lessig’s seminal 1999 book, Code and Other Laws of Cyberspace.

Lessig’s book gave birth to cyberlaw and the study of Internet policy as we all know and discuss it today. More important, from my perspective, is that Code spawned a bona fide philosophical movement within those circles. Code was both a polemic against both cyber-libertarianism and Internet exceptionalism as well as a sort of call-to-arms for a new Net activist movement. The book gave this movement its central operating principle: Code and cyberspace can be bent to the will of the collective, and it often must be if we are to avoid any number of impending disasters brought on by nefarious-minded (or just plain incompetent) folks in corporate America.

It’s hard to know what to label this school of thinking, and Prof. Lessig has taken offense at my calling it “cyber-collectivism.” But the collectivism of which I speak is a more generic type, not the hard-edged Marxist brand of collectivism of modern times. Instead, it’s the belief that markets, property rights, and private decision-making about the future course of the Net must yield to supposedly more enlightened top-down actors and mechanisms. Their central rallying cry – to the extent it can be boiled down to a single term – is “openness!” “Openness” is almost always treated as The Good; anything that is “closed” (or proprietary) in nature is treated as The Bad.

My primary beef with these “Openness Evangelicals” is not that openness isn’t a fine generic principle around which to organize cyberspace. It’s that (a) I‘m more willing to allow evolutionary dynamism to run its course within digital markets, even if that means some “closed” devices and platforms remain (or even thrive); and, (b) the “openness” they advocate inevitably devolves into expanded government control of cyberspace.

My other problem with this movement, and Zittrain’s book in particular, comes down to that dour, depressing “the-Net-is-about-to-die” fear that seems to fuel this worldview. The message seems to be: “Enjoy the good old days of the open Internet while you can, because any minute now it will be crushed and closed-off by corporate marauders!” The Openness Evangelicals want us to believe that the corporate big boys are — someday very soon — going to toss the proverbial “master switch,” suffocating Internet innovation and digital freedom, and making us all cyber-slaves within their commercialized walled gardens.

We might think of this fear as “The Great Closing,” or the notion that, unless radical interventions are pursued – usually of a regulatory nature – a Digital Dark Age of Closed Systems will soon unfold, complete with myriad AOL-like walled gardens, “sterile and tethered devices,” corporate censorship, and consumer gouging. Again, it’s really just a restatement of the old Lessig view that “Left to itself, cyberspace will become a perfect tool of control.” In other words, most information systems, networks and devices will be bottled up by corporate “gatekeepers” if markets aren’t steered in a better direction by wise philosopher-regulators.

But there are serious problems with “The Great Closing” thesis as set forth in the work of Lessig, Zittrain, and Wu:

1)
There isn’t a clear definition of “open” vs. “closed” systems, and there never will be, and supposedly “closed” networks or “sterile” devices aren’t nearly as closed or sterile as critics claim. Zittrain praises the supposedly more “open” nature of PCs and praises the openness to innovation that Microsoft’s Windows operating system offers in particular, but others have blasted Windows for years as the Great Satan of closed code. Meanwhile, Zittrain makes Steve Jobs and Apple’s iPhone and iPad out to be “sterile,” closed appliances, but the company’s App Store has offered millions of innovators the opportunity to produce almost every conceivable type of mobile application the human mind could imagine. Moreover, those Apple devices don’t block completely “open” communications applications or interfaces, such as web browsers, email and SMS clients, or Twitter. And certainly no one is forced to spend hundreds of dollars on these Apple products. There are many alternatives. It’s never been easier to create or find information or applications on multiple platforms – not just via your PC as Zittrain seems to suggest.

2)
There are powerful counter-incentives that discourage companies from “closing” their systems in ways that would negatively impact consumer welfare. Social and economic influences help ensure the scales won’t be tipped completely in the closed direction. The Web is built on powerful feedback mechanisms and possesses an extraordinary level of transparency in terms of its operations. Moreover, the breaking news cycle for tech developments can be measured in milliseconds. Every boneheaded move is subjected to immediate and intense scrutiny by bloggers, tech press, pundits, gadget sites, etc. Never has the white-hot spotlight of public attention been so intense in terms of helping to shine light on corporate missteps. Reputation is perhaps the greatest asset possessed by any tech company, and they work hard to safeguard it.

3)
Most evidence suggests everything is getting increasingly “open” all the time regardless of what any corporation might want. Most corporate attempts to bottle up information or close-off their systems end badly. The walled gardens of the past failed miserably, for example. In critiquing Zittrain’s book, Ann Bartow has noted that “if Zittrain is correct that CompuServe and AOL exemplify the evils of tethering, it’s pretty clear the market punished those entities pretty harshly without Internet governance-style interventions.” Indeed, let’s not forget that AOL was the big, bad corporate boogeyman of Lessig’s Code and yet, just a decade later, it has been relegated to an also-ran. (Has everyone forgotten the hysteria over AOL-Time Warner merger? Or the fear that AOL would dominate the Instant Messaging world? Someone will need to remind AOL-TW shareholders, who lost hundreds of billions on the deal, what all the fuss was about.) There are few reasons to believe that modern efforts to impose “corporate control” or create walled gardens will end any differently.

4)
The critics greatly overstate the case regarding the supposed evils of closed systems, anyway. They fail to appreciate how there was a need/demand for some closed or “sterile” devices. Why shouldn’t people who want a simpler or more secure digital experience have such options? Zittrain seems to fear that the devices of the hoi polloi will drive out those favored by tinker-happy tech geeks (of which I count myself a proud member). But we need not fear such foreclosure for the reasons I discuss next.

5)
Innovation continues rapidly in both directions along the “open” vs. “closed” continuum. The presence of “closed” systems or devices on the market doesn’t mean innovation has been foreclosed among more “open” systems or platforms. In other words, a hybrid future is both desirable and possible. We can have the best of both worlds: a world full of some closed systems or even “tethered appliances,” but also plenty of generativity and openness. Think iPhone vs. Android vs. Windows Mobile vs. the many other mobile operating systems. Some are more closed, others are quite open. Zittrain says Android, which is open source, is “a sort of canary in the coal mine” but ignores the fact that it is growing at a frantic pace, now accounting for one-quarter of mobile web traffic just three years after its inception. Not only does he ignore that fact, but Zittrain then reverts to the “kill switch” boogeyman and warns us that any day now Google could change its mind, close the platform, and “kill an app, or the entire phone” remotely. But where’s the business sense in that? What’s the incentive for companies to pursue such a diabolical course of action? Is Google going to start making all those millions of apps on their own which independents developers produce today? It seems unlikely and unpopular, and can you imagine the lawsuits that would fly if they did try it! Meanwhile, how many times has Apple thrown the dreaded “kill switch” on apps? There are tens of millions of apps in the App Store and hundreds of billions of downloads. If Steve Jobs is supposed to be the great villain of independent innovation, he seems to be doing a pretty bad job at it! Again, today’s supposed “walled gardens” are less “walled” than ever before.

6) And oh, by the way… the old Internet that Zittrain and others like to wax nostalgic about was never quite as open and generative as they suggest. Let’s face it, the good ol’ days weren’t really so glorious. Seriously, were you online back in 1994? Did you enjoy Trumpet Winsock, noisy 14.4 baud modems, and narrowband dial-up? Did you like loading up multiple 5 ¼ floppy disks to get an OS running so that you could even use your machine? Yeah, me neither.

But here’s the other forgotten factor: Until the Net was commercialized during that period, it had been an extremely closed system. As Geert Lovink reminds us, “The first decades the Internet was a closed world, only accessible to (Western) academics and the U.S. military. In order to access the Internet one had to be an academic computer scientist or a physicist. Until the early nineties it was not possible for ordinary citizens, artists, business or activists, in the USA or elsewhere, to obtain an email address and make use of the rudimentary UNIX-based applications. [..] It was a network of networks — but still a closed one.” Moreover, it was only because Lessig and Zittrain’s much-dreaded AOL and CompuServe came along that many folks were even able to experience and enjoy this strange new place called cyber-space. “The fact that millions of Americans for the first time experienced the Internet through services like AOL (and continue to do so) is a reality that Zittrain simply overlooks,” notes Lovink. Could it be that those glorious “good ol’ days” Zittrain longs for were really due to the way closed “walled gardens” like AOL and CompuServe held our hands to some extent and gave many folks (not me!) a guided tour of cyberspace? Regardless, we need not revisit that ancient history. Again, those walled gardens came crumbling down.

7) Finally, there’s remarkably little said about possible solutions or an acknowledgment that alternative approaches can have costs or entail significant trade-offs. At the end of the day, when you peel away all the techno-talk and worry-wart hand-wringing, what Zittrain doesn’t seem to like is that some people are making choices that he doesn’t approve of. To be generous, perhaps it’s because he feels that they don’t fully understand the supposed dangers of the choices they are making. But what, exactly, is it that Zittrain wants done, and who or what should make it happen? Remarkably, he doesn’t offer many specifics in his book or in his essay. Should consumers be discouraged from purchasing iPads, video game consoles, or TiVos because they are “too closed”? Or should the creators of such gadgets be forced to “open them up,” even if it means that might discourage their development in the first place? Zittrain really never makes it clear, although he hints that once developers do open their previously closed systems a bit, they should not be allowed to close them back up. But wouldn’t that discourage the developer from opening things up more in the first place? Again, no answer from him.

Regardless, to reiterate and close, my contention here and elsewhere has been: (a) that things just aren’t as bad as Zittrain makes them out to be; (b) that the evolutionary “open vs. closed” process itself has value; and, (c) who is he to say those choices are irrational or that this spontaneous, experimental process should be interrupted? If some mere mortals choose more “closed” devices or platforms, then so what? It isn’t the end of the world. Again, those devices or platforms aren’t really as closed as he suggests – in fact, they are far more open in some ways than the earlier technologies and platforms he glorifies. In sum: We can have the best of both worlds — a world full of plenty of “tethered” appliances, but also plenty of generativity and openness. We need not make a choice between the two, and we certainly shouldn’t be demanding someone else make it for us.

One final point that didn’t really fit anywhere above.. Zittrain worries about “The famously ungovernable Internet suddenly becom[ing] much more governable, an outcome most libertarian types would be concerned about.” He’s referring to a concern addressed in more detail in his book (and Lessig’s Code) that the Net could become more “regulable” because of changes in code and architecture over time. To the extent this is a problem at all – and I have my doubts for the reasons noted above – this is a problem we should handle by putting more constraints on our government(s), not by imposing more regulations on code or coders. Consider privacy and data collection concerns. While, as a general principle, I think it wise for companies to minimize the amount of data they collect about consumers or websurfers, we need not, and ought not, force that by law, given the huge benefits of data collection and use for innovation and, yes, the openness if the Internet ecosystem! We should certainly hold companies to high standards when it comes to data security and breach (including by FTC enforcement). But, again, the way to deal with the “regulability” threat that Lessig and Zittrain raise is to tightly limit the powers of government to access private information through intermediaries in the first place.

[I am currently helping Berin Szoka edit a collection of essays from various Internet policy scholars for a new PFF book called “The Next Digital Decade: Essays about the Internet’s Future.”  I plan on including two chapters of my own in the book responding to the two distinct flavors of Internet pessimism that I increasingly find are dominating discussions about Internet policy. Below you will see how the first of these two chapters begins. I welcome input as I refine this draft. ]

Surveying the prevailing mood surrounding cyberlaw and Internet policy circa 2010, one is struck by the overwhelming sense of pessimism about our long-term prospects for a better future.   “Internet pessimism,” however, comes in two very distinct flavors:

1. Net Skeptics, Pessimistic about the Internet Improving the Lot of Mankind: The first variant of Internet pessimism is rooted in general skepticism regarding the supposed benefits of cyberspace, digital technologies, and information abundance. The proponents of this pessimistic view often wax nostalgic about some supposed “good ‘ol days” when life was much better (although they can’t seem to agree when those were). At a minimum, they want us to slow down and think twice about life in the Information Age and how it is personally affecting each of us.  Other times, however, their pessimism borders on neo-Ludditism, with proponents recommending steps be taken to curtail what they feel is the destructive impact of the Net or digital technologies on culture or the economy. Leading proponents of this variant of Internet pessimism include:  Neil Postman (Technopoly: The Surrender of Culture to Technology), Andrew Keen, (The Cult of the Amateur: How Today’s Internet is Killing our Culture), Lee Siegel, (Against the Machine: Being Human in the Age of the Electronic Mob), Mark Helprin, (Digital Barbarism) and, to a lesser degree, Jaron Lanier (You Are Not a Gadget) and Nicholas Carr (The Big Switch and The Shallows).
2. Net Lovers, Pessimistic about the Future of Openness: A different type of Internet pessimism is on display in the work of many leading cyberlaw scholars today.  Noted academics such as Lawrence Lessig, (Code and Other Laws of Cyberspace), Jonathan Zittrain (The Future of the Internet & How to Stop It), and Tim Wu (The Master Switch The Rise and Fall of Information Empires), embrace the Internet and digital technologies, but argue that they are “dying” due to a lack of sufficient care or collective oversight.  In particular, they fear that the “open” Internet and “generative” digital systems are giving way to closed, proprietary systems, typically run by villainous corporations out to erect walled gardens and quash our digital liberties.  Thus, they are pessimistic about the long-term survival of the wondrous Internet that we currently know and love.

Despite their different concerns, two things unite these two schools of techno-pessimism.  First, there is an elitist air to their pronouncements; a veritable “the-rest-of-you-just-don’t-get-it” attitude pervades their work.  In the case of the Net Skeptics, it’s the supposed decline of culture, tradition, and economy that the rest of us are supposedly blind to, but which they see perfectly—and know how to rectify.  For the Net Loving Pessimists, by contrast, we see this attitude on display when they imply that a Digital Dark Age of Closed Systems is unfolding since nefarious schemers in high-tech corporate America are out to suffocate Internet innovation and digital freedom more generally.  The Net Loving Pessimists apparently see this plot unfolding, but paint the rest of us out to be robotic sheep being led to the cyber-slaughter since we are unwittingly using services (AOL in the old days; Facebook today) or devices (the iPhone and iPad) that play right into the hands of those corporate schemers who are out to erect high and tight walled gardens all around us.

Unsurprisingly, this elitist attitude leads to the second thing uniting these two variants of Net pessimism: An underlying belief that someone or something—most often, the State—must intervene to set us on a better course or protect those things that they regard as sacred.  They either fancy themselves as the philosopher kings who can set things back on a better course, or they imagine that such creatures exist in government today and can be tapped to save us from our impending digital doom—whatever it may be.

In both cases, I will argue that today’s Internet pessimists have over-stated the severity of the respective problems they have identified.  In doing so, I will argue that they both have failed to appreciate the benefits of evolutionary dynamism.  I borrow the term dynamism from Virginia Postrel, who contrasted the conflicting worldviews of dynamism and stasis so eloquently in her 1998 masterpiece, The Future and Its Enemies.  Postrel argued that:

The future we face at the dawn of the twenty-first century is, like all futures left to themselves, “emergent, complex messiness.” Its “messiness” lies not in disorder, but in an order that is unpredictable, spontaneous, and ever shifting, a pattern created by millions of uncoordinated, independent decisions.

However, because “these actions shape a future no one can see, a future that is dynamic and inherently unstable,” Postrel noted.  But that inherent instability and the uncomfortable realization that the future is, by its very nature, unknowable, leads to exactly the sort of anxieties we see on display in the works of both varieties of Internet pessimists today.  Postrel contrasts the two visions of stasis and dynamism and makes the case for embracing dynamism as follows:

How we feel about the evolving future tells us who we are as individuals and as a civilization: Do we search for stasis—a regulated, engineered world? Or do we embrace dynamism—a world of constant creation, discovery, and competition? Do we value stability and control, or evolution and learning? Do we declare with [Tim] Appelo that “we’re scared of the future” and join [Judith ] Adams in decrying technology as “a killing thing”? Or do we see technology as an expression of human creativity and the future as inviting? Do we think that progress requires a central blueprint, or do we see it as a decentralized, evolutionary process? Do we consider mistakes permanent disasters, or the correctable by-products of experimentation? Do we crave predictability, or relish surprise?  These two poles, stasis and dynamism, increasingly define our political, intellectual, and cultural landscape. The central question of our time is what to do about the future.  And that question creates a deep divide.

Indeed it does, and that divide is growing deeper as the two schools of Internet pessimism—unwittingly, of course—work together to concoct a lugubrious narrative of impending techno-apocalypse.  It makes little difference whether the two schools agree on the root cause(s) of all our problems; in the end, it’s their unified call for a more “regulated, engineered world” that makes them both suffer from the same stasis sickness.

In this chapter, I will take on the first variant of Internet pessimism (the Net Skeptics) and make the dynamist case for what I call “pragmatic optimism.”  I will argue that the Internet and digital technologies are reshaping our culture, economy and society in most ways for the better, but not without some serious heartburn along the way.  My bottom line comes down to a simple cost-benefit analysis: Were we really better off in the scarcity era when we were collectively suffering from information poverty? Generally speaking, I’ll take information overload over information poverty any day.  But we should not underestimate or belittle the disruptive impacts associated with the Information Revolution.  We need to find ways to better cope with those changes in a dynamist fashion instead of embracing the stasis notion that we can roll back the clock on progress and recapture “the good ‘ol days”—which actually weren’t all that good.

In another chapter in the book, I will address the second variant of Internet pessimism (the Net Loving Pessimists) and show how reports of the Internet’s death have been greatly exaggerated.  Although the Net Loving Pessimists will likely recoil at the suggestion that they are not dynamists, the reality is that their attitudes and recommendations are decided stasisist in nature. They fret about a cyber-future in which the Internet might not as closely resemble its opening epoch.  Worse yet, many of them agree with what Lawrence Lessig said in his seminal—by highly pessimistic—1999 book, Code and Other Laws of Cyberspace, that “Left to itself, cyberspace will become a perfect tool of control.”  Lessig and his intellectual disciples—especially Zittrain and Wu—have continued to forecast a gloomy digital future unless something is done to address the Great Digital Closing we are supposedly experiencing.  I will argue that while many of us share their appreciation of the Internet’s current nature and its early history, their embrace of the stasis mentality is unfortunate since it forecloses the spontaneous evolution of cyberspace and invites government intervention to create a more “regulated, engineered world” that will, ironically, undermine much of what they hope to preserve about the current Internet.

[ I’ll then go on to finish this chapter, basically by finally completing my essay, “ Are You An Internet Optimist or Pessimist? The Great Debate over Technology’s Impact on Society.” In the second chapter addressing the pessimism of the “Net Lovers,” I will build on my review of Zittrain’s “Future of the Internet,” my two–part debate with Lawrence Lessig on the occasion of the 10th anniversary of “ Code and Other Laws of Cyberspace,” and my forthcoming review of Tim Wu’s soon-to-be-released book, “The Master Switch The Rise and Fall of Information Empires.”  I will then eagerly await the hate mail from all the affected parties.]

Over at Convergences I consider the writings of Polk Wagner, beginning thus:

Polk Wagner has written some worthwhile papers on law and technology. I heartily recommend those that support points on which we agree, such as T he Perfect Storm: Intellectual Property and Public Values, 73 Fordham L. Rev. 1107. 2005. This paper notes how the de facto balance between copyright and fair use has shifted over the years, and that in key respects copyright has lost, not gained, ground, and also noting that fair use is far from being the only key conceptual or practical limit on copyright. But his paper “On Software Regulation,” is a bit muddled.  It may not be Professor Wagner’s fault, for the article was written following up on the “code is law” meme, which is at bottom a rather unhelpful observation. If “code is law” then so is everything else—the laws of physics, architecture, road design, engineering, biology, the laws of physics, religion, education, insect swarming patterns, families, and so on. All of these things affect human behavior and shape and regularize society. My complaint with “code is law” is not that is not true, in a sense—but that it is very unhelpful in understanding any real problem. Many institutions and systems affect human behavior, but they do so in different ways. It is understanding the differences that will be the key to resolving any serious human problems. Consistent with this, Professor Wagner begins by noting that “code is law” tells us nothing about how code and law relate. But he restates the view that software code constitutes regulation. Software “regulates” in the sense that it makes human conduct more regular and affects the public. But is it really much like “regulation” enacted through a legal process by Congress or the FCC, or even like law described by courts? Certainly not. But the paper’s description of the differences is oddly incomplete.

For the remainder, visit Convergences here.

Harvard Berkman Center professor Jonathan Zittrain has published another pessimistic, Steve-Jobs-is-Taking-Us-Straight-To-Cyber-Hell editorial building on the gloomy thesis he set forth in his 2008 book, The Future of the Internet and How to Stop It. His latest piece appears in the Financial Times and it’s entitled, “A Fight over Freedom at Apple’s Core. Concerning the recent Apple iPad announcement, Zittrain warns: “Mr Jobs ushered in the personal computer era and now he is trying to usher it out.”

I’m not going to go into yet another lengthy dissertation about what it so misguided about his thesis that cyberspace is becoming more “regulable” and that digital “generativity” is dying because of the rise of devices like the iPhone & iPad, or sites like Facebook.  Instead, I will just point you to the many things I’ve written before explaining just how far off the mark Prof. Zittrain is on this point. [See the complete list down below + video of our debate.]

But let me just say this… Ignoring that fact that he is an iPhone user himself — which makes no sense considering that he thinks of Apple as the font of all cyber-evil — he can’t muster any substantive empirical evidence proving that the Net and digital devices are being more “closed, sterile, and tethered,” as he repeatedly claims in his book and editorials.  And that’s not surprising because the reality is that the digital world is more open and generative than ever, and even if there are some “closed” devices and systems out there, they are actually quite innovative and not perfectly closed as Zittrain suggests. The spectrum of “open vs. closed” systems and devices is incredible diverse and nothing is perfectly “open” or “closed.”  We can have the best of both worlds: many open systems with some partial “walled gardens” here and there (or hybrid systems combining both). Regardless, we are witnessing greater digital “generativity” and innovation with each passing year. Until Zittrain can prove the opposite, his thesis must be considered a failure.

Finally, I want to associate myself with this excellent critique of the Zittrain thesis by Prof. Ed Felten, who points out that Zittrain’s argument doesn’t even work for the iPad, which I would agree is a fairly “closed appliance” in the Zittrainian scheme of the things:

For the iPad to become a Zittrain-type appliance, two things must happen. First, Apple must remain picky about which apps are available in the App Store. Second, Apple must limit the device’s browser so that it lacks the features that make today’s browsers viable application platforms. Will Apple be able to limit their product in this way, despite competition from other, more general-purpose tablets? I doubt it. But even this — even an appliance-style iPad — would not be enough to prove Zittrain’s thesis. Zittrain argued not just that appliances would exist, but that they would replace general purpose computers. Amazon’s kindle is an appliance, but it doesn’t prove Zittrain’s thesis because nobody is ditching their laptop in favor of a Kindle. Instead, the Kindle is an extra device which is used for its purpose, while the general-purpose device is used for everything else. If the iPad ends up like the Kindle — a complement to the laptop or netbook, rather than a replacement for it — this will not prove Zittrain’s thesis. It seems unlikely, then, that the iPad, even if it succeeds, will provide strong support for Zittrain’s thesis. General-purpose computers are so useful that we’re not likely to abandon them.

Exactly right. And here’s a few more things you might want to read to see why Zittrain’s thesis doesn’t add up (the first and the last one probably provide the best overview):

• Review of Zittrain’s “Future of the Internet” (3/23/08)
• Apple, Openness, and the Zittrain Thesis (3/30/08)
• Another Problem for the Zittrain Thesis — Old People! (4/12/08)
• [AUDIO] NPR “On Point” Debate over The Future of the Internet (5/13/08)
• iPhone 2.0 Cracked in Hours… What Was that Zittrain Thesis Again? (7/10/08)
• Enough anti-iPhone rants… just get another phone! (8/11/08)
• Another Review of Zittrain’s “Future of the Internet” (9/20/08)
• [VIDEO] My Debate with Jonathan Zittrain at New America Foundation (11/6/08)
• Zittrain’s Pessimistic Predictions and Problematic Prescriptions for the Net (7/20/09)
• Code, Pessimism, and the Illusion of “Perfect Control” (5/8/09)[1st part of Cato Unbound Debate “Ten Years of Code“ (featuring Lessig, Zittrain, Declan McCullagh, and me]
• Our Conflict of Cyber-Visions (5/14/09) [part 2 of the Cato Unbound debate]
• Cyber-Libertarianism: The Case for Real Internet Freedom (8/12/09)
• You’d Have to Be Smoking Dope to Believe the Zittrain-Lessig Thesis (9/15/09)
• Oh Farts! The Droid, the iPhone & the Lessig-Zittrain Thesis (11/12/09)

Arik Hesseldahl has an interesting piece in Business Week about Apple’s control of the iPhone App approval process in which he asks: “Is a smartphone gatekeeper needed?” Plenty of people don’t think so and have raised a stink about Apple trying to play that role for the iPhone. It certainly could be true, as some critics suggest, that Apple is being too heavy-handed on occasion when rejecting apps, but it’s always easy for those of us on the outside of the process to think that.  Hesseldahl notes that:

it’s tempting to consider the implications of a less hands-on approach, as is the case with Macs, Microsoft (MSFT) Windows PCs, or other smartphones, including those running the Google (GOOG)-backed Android operating system. The software market for personal computing has existed in this way for nearly three decades, and while there have certainly been some problems along the way, I’d argue that overall we’re better off without Microsoft or Apple or some other organization approving software applications before they’re released to the market. PC users have learned to be careful about what they put on their computers through unhappy trial and error.

But he also notes that there is another side to the story:

My hunch is that greater vigilance is needed with smartphones, in part because they’re a relatively recent phenomenon. The iPhone has been on the market only 28 months. Users take them everywhere and are quickly inserting them into daily life in ways the personal computer never could have fit. Malware on smartphones could do significantly more damage than malware on a PC. Imagine a nasty application that records every word you speak—both on and off the phone—without your knowledge, and then e-mails the audio to a stranger. Or picture one that surreptitiously tracks your movements and sends them to a stalker.

Hesseldahl interviewed Phil Schiller, Apple’s senior vice-president for worldwide product marketing, for his piece and Schiller confirmed that malware [think iPhone worms] and and other safety & security concerns topped the list of problems that Apple was trying to head-off by managing the applications process. There’s also various types of illegal content that Apple has to contend with.

Anyway, my only interest in bringing this to everyone’s attention is because I have spent the last few years debating a growing crop of academics (Zittrain, Lessig, Wu) and policy shops (Public Knowledge, Free Press, etc) who suggest that proprietary devices and app stores constitute the revival of online “walled gardens” from the early Internet era (like AOL, Prodigy & CompuServe).  Personally, I don’t see any solid evidence that Apple’s model is indicative of a mass trend toward online “gatekeepers.” As Hesseldahl points out, there’s still plenty of other devices and stores out there from which to choose.  Moreover, as I pointed out in my first review of Zittrain’s book The Future of the Internet and How to Stop It, we should be thankful that we have a range of device and store options to choose from.  That’s a great thing. If you don’t like Apple’s style, then don’t get an iPhone.  It’s one of the reasons I didn’t.  Vote with your pocketbooks, people!

In a week in which neutrality regulation is making a lot of news, I hope that Robert Hahn and Hal Singer’s terrific new study, “Why the iPhone Won’t Last Forever and What the Government Should Do to Promote its Successor” gets some attention. It provides a wonderful overview of how dynamically competitive the mobile marketplace has been over the past two decades and why critics are wrong to get worked up about the short-term “dominance” of Apple’s iPhone. Here’s the abstract of their paper:

Because of the overwhelming, positive response to the iPhone as compared to other smart phones, exclusive agreements between handset makers and wireless carriers have come under increasing scrutiny by regulators and lawmakers. In this paper, we document the myriad revolutions that have occurred in the mobile handset market over the past twenty years. Although casual observers have often claimed that a particular innovation was here to stay, they commonly are proven wrong by unforeseen developments in this fast-changing marketplace. We argue that exclusive agreements can play an important role in helping to ensure that another must-have device will soon come along that will supplant the iPhone, and generate large benefits for consumers. These agreements, which encourage risk taking, increase choice, and frequently lower prices, should be applauded by the government. In contrast, government regulation that would require forced sharing of a successful break-through technology is likely to stifle innovation and hurt consumer welfare.

“New technologies often seemingly emerge from nowhere, but also frequently lose their luster quickly,” Hahn and Singer go on to argue. As evidence they cite the recent examples of Second Life and MySpace, which were hyped as potentially become dominant providers in their respective areas just a few years ago, but now are subjected to intense competition. “[T]he the mobile handset market is subject to these same disruptive forces,” they argue:

an iconic handset emerges, is quickly crowned the “winner,” and soon thereafter is replaced by another technology that was not even conceived of at the time the “winner” was launched. Many iPhone-inspired smartphones, including the Blackberry Storm and the HTC G1, could unseat the iPhone in the smartphone segment. We argue that heavy-handed regulation of such dynamic markets is likely to reduce welfare on net. The cost of erring through regulatory intervention—for example, by restricting voluntary private agreements that promote risk taking—can be significant. Delaying the benefits associated with innovation in mobile handsets could cost consumers dearly. In sum, exclusive contracts between handset makers and wireless carriers benefit consumers by encouraging innovation by both handset makers and wireless service providers that are vying for market share, and by enabling some handset makers to remain viable. These benefits take the form of greater variety of choices in handsets, greatly enhanced capabilities, and a more affordable range of device options. Banning exclusive contracts could have the unintended consequence of reducing innovation, reducing options, raising prices, and potentially establishing market dominance for an incumbent handset maker.

The End of Innovation?

In their excellent history of handset innovation over the past two decades, Hahn and Singer point out that there were many other “iconic” phones that some felt represented the end of the road in terms of innovation. I just love this quote they unearthed from a 1989 Fortune article about how the release of Motorola’s MicroTAC flip phone represented the apparent pinnacle of handset innovation: “Portable phones won’t get a lot smaller than this one. After all, they have to reach from your ear to your mouth.”

This highlights the myopia that sometimes accompanies technological forecasting and public policymaking.  We sometimes just can’t think “outside the box” and comprehend the ways in which technological devices or services might come along and leapfrog today’s market leaders. It gets back to the point I made in my recent book review of Gary Reback’s over-the-top ode to antitrust regulation, Free the Market:  Those who view markets through the lens of the a static competition, fixed-pie mentality always seem to live in fear of short term “market power” while those of us who believe in dynamic competition see markets in a constant state of flux and expect that sub-optimal market developments or configurations are exactly the spark that incentivizes new form of market entry, innovation, price competition, and so on.  And the real problem with that static competition mentality is that it often leads to knee-jerk regulatory responses.  Here’s how I put it in my recent debate with Larry Lessig:

What concerns me about the way Prof. Lessig approaches these issues in Code and in his subsequent work is that he is far too quick to declare the debate over by labeling short-term.. hiccups as sky-is-falling market failures. The end result of such myopic techno-pessimism is the inevitable call for governments to intervene and “do something” to correct supposed [market] failures.

In other words, have a little faith and some patience.  Apple’s iPhone is today’s hottest handset, but it’s hardly the end of innovation in this marketplace.  And we certainly don’t need handset regulation or “device neutrality” as a solution to this non-problem.  Read Hahn and Singer’s dynamite new paper for a better understanding of why that’s the case.

Forbes.com has just published an editorial that Berin Szoka and I penned about yesterday’s net neutrality announcement from the FCC.

The Day Internet Freedom Died

by Adam Thierer & Berin Szoka

There was a time, not so long ago, when the term “Internet Freedom” actually meant what it implied: a cyberspace free from over-zealous legislators and bureaucrats. For a few brief, beautiful moments in the Internet’s history (from the mid-90s to the early 2000s), a majority of Netizens and cyber-policy pundits alike all rallied around the flag of “Hands Off the Net!” From censorship efforts, encryption controls, online taxes, privacy mandates and infrastructure regulations, there was a general consensus as to how much authority government should have over cyber-life and our cyber-liberties. Simply put, there was a “presumption of liberty” in all cyber-matters.

Those days are now gone; the presumption of online liberty is giving way to a presumption of regulation. A massive assault on real Internet freedom has been gathering steam for years and has finally come to a head. Ironically, victory for those who carry the banner of “Internet Freedom” would mean nothing less than the death of that freedom.

We refer to the gradual but certain movement to have the federal government impose “neutrality” regulation for all Internet actors and activities—and in particular, to yesterday’s announcement by Federal Communications Commission (FCC) Chairman Julius Genachowski that new rules will be floated shortly. “But wait,” you say, “You’re mixing things up! All that’s being talked about right now is the application of ‘simple net neutrality,’ regulations for the infrastructure layer of the net.” You might even claim regulations are not really regulation but pro-freedom principles to keep the net “free and open.”

Such thinking is terribly short-sighted. Here is the reality: Because of the steps being taken in Washington right now, real Internet Freedom—for all Internet operators and consumers, and for economic and speech rights alike—is about to start dying a death by a thousand regulatory cuts. Policymakers and activists groups are ramping up the FCC’s regulatory machine for a massive assault on cyber-liberty. This assault rests on the supposed superiority of common carriage regulation and “public interest” mandates over not just free markets and property rights, but over general individual liberties and freedom of speech in particular. Stated differently, cyber-collectivism is back in vogue—and it’s coming very soon to a computer near you!

“Net Neutrality” proponents insist, however, that only regulation can save us from nefarious corporate schemers out to quash our rights and destroy all innovation. Over the last decade, a cabal of activist-minded cyber-law professors have successfully turned the world of Internet policy upside down by persuading an entire generation of law students, policymakers, and a number of large Internet companies that “Internet Freedom” means the very opposite of what it used to mean. Borrowing tactics that would have made Orwell proud, they have convinced many in the public and the policymaking community that the old Internet Freedom is slavery, in that we are all just tools of Corporate Big Brother. Thus, they offer us a new Internet Freedom: Neutrality über alles! Their freedom, as in Orwell’s Oceania, is not a freedom from the State, but a gleaming utopia that can only be created by the State.

We see the triumph of this thinking with Chairman Genachowski’s proclamation that, “This is not about government regulation of the Internet. It’s about fair rules of the road for companies that control access to the Internet. We will do as much as we need to do, and no more, to ensure that the Internet remains an unfettered platform for competition, creativity and entrepreneurial activity.”

Yet, no matter how vociferously the proponents of FCC-enforced “neutrality” insist that it is not regulation they seek, the reality is that the steps they counsel would put the FCC in the driver’s seat for a host of Internet economic and social issues. Internet companies and technologies will come to be regulated like crusty old “common carriers” and broadcast stations that must serve some amorphous “public interest.”

But as the FCC’s long history of meddling in media and communications markets makes clear, micro-management of dynamic markets is a recipe for economic stagnation, strangled innovation, and speech controls. And the path to regulation does not end with infrastructure providers. The specter of neutrality haunts not just today’s Internet service providers but also all high-tech innovators, like Google, Apple, Facebook, Microsoft and their descendents. Although the FCC’s original mandate was mostly to deal with spectrum “interference”—something that could have been, and actually was being, dealt with using property rights—the agency quickly expanded its mission: Broadcast regulation metastasized into government control over speech, innovation, campaign advertising and a “fairness doctrine” for news coverage. Likewise, Net Neutrality mandates will give rise to neutrality mandates for other areas.

The slope is slippery and we’re already heading down it: The push for “Wireless Neutrality” is already well under way and the FCC is currently investigating Apple’s rejection of the Google Voice application for the iPhone. Thus, “Net Neutrality” leads to “Device Neutrality” and “Application Neutrality,” but the same rationale would apply equally to any circumstance in which access to a communications platform is supposedly limited to a few “gatekeepers.” Some academics have already proposed a “Federal Search Commission” to deal with accusations of “search bias.” At the end of the day, we’ll need a full-blown Federal Information Commission with a Search Bureau, a Cloud Computing Division and several other ministries to micro-manage the many flavors of neutrality regulation.

The path back toward real Internet freedom lies in restoring the presumption of liberty enshrined in the First Amendment, which is not a sword with which the government can ensure fairness, diversity or openness, but a shield against government meddling in media, communications and online markets.

I recently finished reading Free the Market: Why Only Government Can Keep the Marketplace Competitive, a new book by noted antitrust agitator Gary L. Reback. Unsurprisingly, Reback, who led the antitrust jihad against Microsoft during the 1990s, has written a book that reads like an extended love letter to antitrust law. This man loves antitrust the way teenage girls love the Jonas Brothers — gushing, teary-eyed, ‘I-would-just-die-for-you’ sort of love.  In Reback’s world, antitrust seemingly has no costs, no downsides, no trade-offs.  It is our salvation and he serves as its high prophet. Everything good that happened in the world of high-tech over the past few decades?  Oh, you can thank Almighty Antitrust for that.  Anything bad that happened?  Well, then, clearly there just wasn’t enough antitrust enforcement!  That’s this book in a nutshell.

Think I’m kidding?  How about this gem of quote from pg. 247: “Antitrust enforcement spawned Silicon Valley’s software industry as well.”  Wow, who knew!  Of course, that’s utter poppycock and should be somewhat insulting to the many entrepreneurial men and women in the high-tech world who risked everything in an attempt to build a better mousetrap. In Reback’s view of things, however, none of those mousetraps would have ever gotten built without antitrust there to supposedly shelter them from wicked “monopolists” (read: any large company) already operating in the marketplace.   I’m sure many in Silicon Valley will also be surprised to hear Reback’s assertion that, “On closer examination, the Valley looks like one big public welfare project.” (p. 54)  Ah yes, the old myth that government gave us the Net we know and love today. Please. Like many others, Reback spins a revisionist history of how early ARPANET involvement and seed money somehow made the Internet great when, in reality, the Net was stuck in the digital dark ages until it was finally allowed to be commercialized in 1992.

What irks me most about this book, however, is Reback’s perpetuation of the myth that antitrust is somehow not a form of economic regulation.  I hear this tired old argument trotted out time and time again, even by many conservatives. Reback says, for example, that “Antitrust sets the rules of the road, so to speak, but doesn’t tell people where to drive.” By contrast, he argues, “Advocates of regulation want[] continuing government oversight and rule making to produce what would be the beneficial results of a free market… Neither approach works all the time, and decided between them remains difficult.” (p. 19)  Again, this “choice” is largely a fiction since, for many industries, we end up getting both!

But the even bigger fiction here is the suggestion that antitrust law doesn’t “tell people where to drive.”  It most certainly does. Hell, it practically redraws the entire map of where you can drive!  And it massively distorts markets in the process, just as regulation does.  As Wayne Crews noted in the opening lines of  his excellent 2001 Cato Institute white paper,”The Antitrust Terrible 10: Why the Most Reviled “Anti-competitive” Business Practices Can Benefit Consumers in the New Economy“:

Antitrust law is a form of economic regulation.  And like all economic regulation, it transfers wealth, often in response to special-interest urging… [I]n antitrust cases, the targeted companies’ rivals have a direct financial, as opposed to ethical, interest in the outcome. Assertions that antitrust law is in the public interest do not change the fact that the private motives of rivals, and even ambitious enforcers, are always lurking in the background.

Moreover, in his important 2001 study on “The Failure of Structural Remedies in Sherman Act Monopolization Cases,” economist Robert W. Crandall of the Brookings Institution noted:

An antitrust decree may be even counterproductive by establishing an inefficient market structure… A decree may also be ineffective because the government and the court fail to anticipate changes in technology or customer demand. ..

The ongoing costs of enforcing antitrust decrees can be very large. If an industry is changing rapidly, structural remedies may be difficult to enforce…  Most of the antitrust decrees in the leading cases analyzed below continued in effect for many years, even decades. In many cases, these decrees required the continual supervision by the lower court and often led to appeals to the higher courts.

So much for antitrust supposedly not being a form of economic regulation and not having substantial costs. Moreover, after surveying 95 major Section 2 Sherman Act cases won by the government or ending in consent decrees, Crandall concluded that there was “remarkably little evidence that these cases and the relief that emanated from them had a positive effect on competition and consumer welfare.”  Gary Reback is unmoved by such evidence, however. Instead, he just builds his narrative on the old myth of the robber barons that so many antitrust crusaders rely on, and which has long-since been discredited by serious economic historians.

Perhaps worst of all, in Reback’s world, there’s no such thing as too much litigation when it comes to antitrust enforcement:

“Just keep on suing them” is a time-honored American antitrust strategy of choice for dealing with dominant firms that choke vast sectors of the economy. The magnitude of the potential gain to society from opening multiple markets to competition more than offsets the somewhat uncertain likelihood of producing the right results by bold antitrust enforcement. (p. 246)

Again, no mention here of the deadweight loss to society associated with years and years of legal wrangling that accompanies such lawsuits.  Reback just sweeps all that under the rug — and why wouldn’t he as an antitrust lawyer!  But those costs on the economy and innovation are real.  There’s also no serious mention of how antitrust law has all too often been used as weapon by disgruntled marketplace competitors to hobble rivals using such legal tactics.  Reback gives the same lip service to antitrust being about “protecting consumers” as many other defenders do, but all too often his book — like antitrust law itself — sounds more like a defense of certain companies, industry sectors, or old ways of doing business.

Oh, and the earlier antitrust intervention and litigation comes the better!  That’s another favorite of Reback and the antitrust bar. Referring specifically to the Microsoft case, Reback argues that, “government intervention at an early stage of market development was less intrusive and more beneficial than waiting for a bad problem to get worse.”  (p. 185)  Where does one draw the line in terms of how early might be too early to intervene?  Reback never makes it clear because, as with so much else in the world of antitrust, it’s all an arbitrary guessing game.  We’ll let unelected bureaucrats and judges make those judgment calls and engage in a preemptive strike to establish a sensible industrial policy competition policy for high-tech markets.  After all, it’s not like these markets are fast-moving and prone to sudden disruptive change or anything!

Let’s be clear about something here.  What separates Mr. Reback from those of us here who are antitrust skeptics is not the question of whether “market power” sometimes exists within certain industry sectors.  There certainly are times when it does, but we differ over how to best deal with those problems.  To borrow from some remarks I made during a recent debate with Larry Lessig, what separates us is that those of us who are antitrust skeptics believe that market power concerns:

are ultimately better addressed by voluntary, spontaneous, bottom-up, marketplace responses than by coerced, top-down, governmental solutions. Moreover, the decisive advantage of the market-driven approach to correcting [market] failure comes down to the rapidity and nimbleness of those response(s).

Of course, this assumes we can agree on a definition of “market failure.” What concerns me about the way antitrust proponents come at things is that they are typically far too quick to declare short-term market fluctuations as sky-is-falling market failures.  The end result of such myopic thinking is the inevitable call for governments to intervene and “do something” to correct supposed market failures that will likely adjust in time.  Thus, we antitrust skeptics counsel patience over preemptive strikes.  Again, here’s how I put it in that debate with Prof. Lessig:

Let’s give those other forces — alternative platforms, new innovators, social norms, public pressure, etc. — a chance to work some magic. Evolution happens, if you let it. Moreover, if you are always running around crying “market failure!” and calling in the code cops, it creates perverse marketplace incentives by discouraging efforts to innovate or “route around” bad code or code failure. We don’t want the whole world sitting around waiting for government to regulate the mousetrap to improve it or even give everyone better access to it; we should want the world to be innovating to create better mousetraps! [But] one need not believe that the markets… are “perfectly competitive” to accept that they are “competitive enough” — or at least, better than regulatory alternatives.

I can think of no better example of this than the case of IBM in the 1970s and early 80s.  Back then, IBM was the big, bad dog of the computing world, with significant “market power” in mainframes — the only computers that really counted at the time.  And some folks at the time feared IBM might “leverage” that power into new fields. As a result, the Department of Justice opened an antitrust case against Big Blue in 1969 that would become a 13-year quagmire, with little to show for all the legal wrangling by the time the case was abandoned in 1982.  Here’s how CNet staff writer Rachel Konrad summarized the fiasco back in 2000:

In January 1969, the government began a sweeping antitrust investigation into IBM’s dominance and attempted to break it into smaller companies that would compete against one another. During the six most critical years of the trial, from 1975 to 1980, the parties called 974 witnesses and read 104,400 pages of transcripts, according to Emerson Pugh’s 1995 book “Building IBM: Shaping an Industry and Its Technology.”

The 13-year investigation, which required IBM to retain 200 attorneys at one point, fizzled in the early ’80s as the computing landscape shifted from mainframes to personal computers. The government abandoned the tainted effort entirely in 1982, as clones of the IBM PC eroded Big Blue’s dominance. But the company, still fearful of the watchful eye of the Justice Department, took pains to avoid the appearance of a monopoly long after it relinquished its hold on the market. People who worked for IBM in the ’80s and early ’90s said the company routinely fell victim to “pricing death strategy”–a reluctance to lower prices below cost, even on products that weren’t selling–to avoid what the government would call predatory pricing. By the mid-’80s, the company was in bad shape. The antitrust troubles, combined with ill-timed product failures such as the Future System, pinched revenues. The company began a nearly decade-long financial slide. In retrospect, the antitrust case against IBM seemed laughable.

IBM had become the victim of a classic “disruptive technology” paradigm shift that few could have foreseen in 1969.  As Peter Pitsch noted in his 1996 PFF book The  Innovation Age, “In 1981 the Department of Justice was still pressing their case against IBM while market forces were about to lay waste to the company.” Pitsch continued:

IBM certainly did not expect to see PCs erode the market share and profitability of its venerable mainframe computers, but the fall of the old “big iron” machines was rapid and spectacular. The revenue of IBM’s mainframe unit fell from roughly $9 billion in 1990 to an estimated $4.5 billion in 1994… [T]he parties destined to become players in the PC revolution were unknown when the PC was introduced, and the experts’ predictions of a much-ballyhooed computer face-off between IBM and AT&T never materialized. Innovative companies that did not exist at the beginning of the revolution rose rapidly. Few people had ever heard of a small company named Microsoft. Nor had they heard of Intel, Novell, Compaq, Dell, or Netscape.

Pitsch went on to summarize how IBM’s manufacturing capacity was slashed in the years that followed and also notes that, astonishingly, “ in the space of five years after 1987, IBM lost two thirds of its market value — more than $70 billion.”  In sum, new marketplace innovation and competition handled the short-term market power concern that antitrust regulators had about Big Blue.  Pitsch goes on to explain what the antitrust regulators missed:

A dominant firm can lose its “King of the Hill” status in two ways. First, if it does not continually improve, it will lose market share and profits to low-cost imitators. For example, the ability of low-end PC manufacturers to make IBM clones fostered robust price competition in the PC market. Second, today’s market leaders must worry that some established and well-financed competitor or possibly an upstart produce a technical breakthrough that will displace them. This situation reflects [the] fact that gains from innovation are so powerful and beneficial to consumers that they outweigh the higher prices dominant firms can charge. Indeed, attempts to eliminate these high profits by regulating prices would almost certainly disserve consumers even if the regulations dampened the incentives for innovation only slightly.

What Pitsch is talking about here is dynamic competition, not the static competition, fixed-pie mentality that Gary Reback and so many antitrust defenders espouse.  Those of us who believe in dynamic competition see markets in a constant state of flux and expect that sub-optimal market developments or configurations are exactly the spark that incentivizes new form of market entry, innovation, price competition, and so on. But the static competition crowd looks at the same situation outlined above and imagines that the only hope is to wheel in the wrecking ball of antitrust regulation.  Indeed, such dynamic thinking is completely alien — even outlandish — to passionate antitrust supporters like Reback.  Nonetheless, the last 30 or 40 years of economic literature on antitrust — and the work of “Chicago School” economists in particular — has illustrated that antitrust is not the pro-consumer nirvana that Reback makes it out to be.

But Reback considers just about everything the Chicago School taught us to be antitrust apostasy and he would like to erase four decades worth of economic literature and evidence that suggests antitrust law is a form of economic regulation and does have unintended consequences that often hurt consumer welfare.  His fairy tale narrative of antitrust as the savior of capitalism is utter rubbish, and his recommendations to expand antitrust enforcement wouldn’t “Free the Market” as he argues in his book’s shameful title, but would instead wrap it in chains.

In closing, I would just like to encourage everyone to go out right now and read R.W. Grant’s classic story about the madness of antitrust, “Tom Smith and His Incredible Bread Machine.”  Or, if you want a more serious treatment of the issue, then I highly recommend Dominick T. Armentano’s, Antitrust and Monopoly: Anatomy of a Policy Failure.  Oh, and just for kicks, you might want to read this Wall Street Journal story from earlier this week about how antitrust officials are being pressed by dairy farmers to open an antitrust investigation because some of them believe consolidation is responsible for the fact that milk prices have dropped 36% recently, the lowest level in three decades.  Only deep in the story do you read that: “Consumers are benefiting. The federal Bureau of Labor Statistics said in its monthly Consumer Price Index report released Wednesday that retail dairy prices in August were 10.4% lower than they were a year ago.”  Of course, once you realize that antitrust is more about protecting companies than protecting consumers you are not surprised that such information becomes an afterthought.

Over the past couple of years here, I have relentlessly hammered Harvard’s dynamic duo of digital doom, Jonathan Zittrain (see 1, 2, 3, 4, 5, 6) and Lawrence Lessig (see 1, 2, 3), for their extraordinarily gloomy predictions about the Internet creating a world of “perfect control.”  In the hyper-pessimistic Lessig-Zittrain view of things, cyberspace is perpetually haunted by the specter of nefarious corporate schemers out to suffocate innovation, screw consumers, and quash dissent.  In the 1990s, Lessig’s big-bad-bogeyman was AOL.  Today, Zittrain casts Apple in the lead role of Cyber-Big Brother.  The problem with their thesis? In a word: Reality.  As Tim Lee has pointed out before, “Lessig’s specific predictions in Code turned out to be… spectacularly wrong”:

Lessig was absolutely convinced that a system of robust user authentication would put an end to the Internet’s free-wheeling, decentralized nature. Not only has that not happened, but I suspect that few would seriously defend Lessig’s specific prediction will come to pass.

Absolutely correct, and the same is true of the fears and predictions Zittrain tosses around in The Future of the Internet.  And yet, as we saw most recently during my debate with Lessig and Zittrain over at Cato Unbound upon the occasion of the 10th anniversary of the publication Code, neither of them have relented one bit. Indeed, they have actually been escalating their morose rhetoric recently.

The fact that Zittrain casts Apple as the central villain in his drama is particularly interesting because millions upon millions of people absolutely love the company and its amazingly innovative products — even if I’m not one of them.  And there is absolutely no way Zittrain can continue to sell us this story of Apple quashing innovation when, in just one year’s time, there were 1.5 Billion iPhone Store downloads of over 65,000 free and paid apps by consumers in 77 countries.  I mean, seriously, is there any application you cannot get for the iPhone these days?

Apparently not, because over at the Wall Street Journal “Digits” blog,  Andrew LaVallee writes of the latest innovative application to pop up in the Apple iPhone Store, iPot — a tool to help you find dope shops in California!!

Seeing an untapped opportunity in the growing number of legal California dispensaries and limited advertising outlets, app developer NexStudios launched iPot, an application for Apple’s iPhone that lists nearby stores. .. The free version of the app provides basic location information for nearby stores, while the $2 upgrade adds reviews and ratings and does away with advertising. The two apps have been downloaded nearly 100,000 times since their July launch, with about 80% opting for the free one.

Holy smokes, pot on your iPhone!  Geo-located in real time!  With reviews!  Am I living in a “Cheech & Chong” movie?

OK, seriously, let’s get back to that Zittrain-Lessig thesis.  My point here is that, contrary to their belief that the whole digital world is going to hell in a handbasket because of excessive “control” by corporate actors, in reality, things are getting better all the time.  Does Apple exercise some “control” over the iPhone store? Yes. Do they use that control to bock innovation at every juncture, restrict choice, and screw consumers?  Show me the evidence.

And when I say I want to see evidence, it has to be something more than a random anecdote like this “gem” I have heard Zittrain use many times:

Recently Apple got rid of the “I Am Rich” app, which cost the maximum $999.99, and simply featured a glowing red gem on buyers’ screens. Eight people apparently bought it, with several receiving refunds.  (”Category: Lifestyle.”  Heh.)  The app’s author doesn’t yet know whether he’ll get the money from the rest, minus Apple’s 30% vig.

Come on, seriously?  Is that the best you got? Moreover, Jonathan is willing to acknowledge that at least a certain amount of “gatekeeping might help keep malicious or poor quality apps away.”  Indeed, that’s about all the gatekeeping Apple does.  For God’s sake they are apparently not even trying to keep out the potheads anymore!  And finally, it goes without saying that Apple can’t even keep people from jailbreaking their phones in a matter of hours after release when users want to do even more with them.

How all this adds up to the specter of “perfect control” is beyond me.

by Adam Thierer & Berin Szoka — (Ver. 1.0 — Summer 2009)

We are attempting to articulate the core principles of cyber-libertarianism to provide the public and policymakers with a better understanding of this alternative vision for ordering the affairs of cyberspace. We invite comments and suggestions regarding how we should refine and build-out this outline. We hope this outline serves as the foundation of a book we eventually want to pen defending what we regard as “Real Internet Freedom.” [Note:  Here’s a printer-friendly version, which we also have embedded down below as a Scribd document.]

I. What is Cyber-Libertarianism?

Cyber-libertarianism refers to the belief that individuals—acting in whatever capacity they choose (as citizens, consumers, companies, or collectives)—should be at liberty to pursue their own tastes and interests online.

Generally speaking, the cyber-libertarian’s motto is “Live & Let Live” and “Hands Off the Internet!”  The cyber-libertarian aims to minimize the scope of state coercion in solving social and economic problems and looks instead to voluntary solutions and mutual consent-based arrangements.

Cyber-libertarians believe true “Internet freedom” is freedom from state action; not freedom for the State to reorder our affairs to supposedly make certain people or groups better off or to improve some amorphous “public interest”—an all-to convenient facade behind which unaccountable elites can impose their will on the rest of us.

B.  Application in Social & Economic Contexts

The cyber-libertarian draws no distinction between social and economic freedom when applying this vision:

• Social Freedom: Individuals should be granted liberty of conscience, thought, opinion, speech, and expression in online environments.
• Economic Freedom: Individuals should be granted liberty of contract, innovation, and exchange in online environments.

Cyber-libertarians also argue that social and economic freedoms are inextricably intertwined:  It is not enough to support liberty of action in one sphere; foreclosing freedom in one sphere will eventually affect freedom in the other.

C.  How “Code Failures” Are to Be Addressed

The cyber-libertarian believes that “code failures” (the digital equivalent of so-called “market failures”) are better addressed by voluntary, spontaneous, bottom-up, marketplace responses than by coerced, top-down, governmental solutions.   From a practical perspective, the decisive advantage of the market-driven approach to correcting code failure comes down to the rapidity and nimbleness of those responses.  Stated differently, cyber-libertarians have a strong aversion to the politicization of technology issues and efforts to replace market processes with bureaucratic processes.

Importantly, the cyber-libertarian defines “markets” broadly to include monetary and non-monetary transactions as well as proprietary and non-proprietary modes of production.  To be clear, collaborative, non-proprietary technologies and efforts ( e.g., Wikipedia and open source software) are not at odds with cyber-libertarianism.  But the cyber-libertarian does reject the notion these models are the only acceptable model or that they should be imposed on us by law.  The proper policy position with regards to the “open vs. closed” or “proprietary vs. non-proprietary” debate should be one of techno-agnosticism.  Lawmakers and courts should not be tilting the balance in one direction or the other.

More generally speaking, instead of seeking to define or impose a single utopian vision, the cyber-libertarian seeks to enable what libertarian philosopher Robert Nozick called a “Utopia of Utopias:” a framework within which many different models of organizing commerce and community can flourish alongside, and in competition with, each other.

D.  General Relationship to “Internet Exceptionalism”

Internet exceptionalists are first cousins to cyber-libertarians:  They believe that the Internet has changed culture and history profoundly and is deserving of special care before governments intervene.  [See Section IV for an expanded discussion.]

II. The Intellectual Foundations of Cyber-Libertarianism

A.  Traditional Libertarian Philosophy

• Natural Rights philosophers –John Locke, Ayn Rand, The Founders
• Utilitarian philosophers – John Stuart Mill (On Liberty), Herbert Spencer
• “Austrian School” of Economics – Ludwig von Mises, F.A.  Hayek, Murray Rothbard
• Milton Friedman (Free to Choose)
• Robert Nozick – argument for a minimalist state; “utopia of utopias” notion
• Thomas Sowell – critique of “The Vision of the Anointed”
• Richard Epstein – vision of “Simple Rules for a Complex World

B.  Modern Cyber-Libertarian Theorists

• Ithiel de Sola Pool (Technologies of Freedom)
• Alvin Toffler (The Third Wave , Future Shock)
• George Gilder (Microcosm , Telecosm)
• Peter Huber (Law & Disorder in Cyberspace)
• Tom W.  Bell
• Technology Liberation Front bloggers

C.  Internet Exceptionalists[see Sec.  IV below]

• Nicholas Negroponte (Being Digital)
• John Perry Barlow (“Declaration of the Independence of Cyberspace”)
• David Post
• Eric Goldman
• H.  Brian Holland

III. The Contrast with Cyber-Collectivism

A.  Cyber-Collectivism Defined

Cyber-collectivism is the opposite of cyber-libertarianism.  Cyber-collectivism refers to the general belief that cyber-choices should be guided by the State or an elite class according to some amorphous “general will” or “public interest.”  The distant influence of Plato, Rousseau, and Marx can often been seen in the work of cyber-collectivists.

Cyber-collectivism comes in many flavors, however.  “Left”-leaning cyber-collectivists, for example, are more focused on social concerns than economic ones.  Some “Right”-leaning cyber-collectivists are focused on controlling the impact of the Internet on culture or security.  In other words, cyber-collectivism is not as philosophically coherent as cyber-libertarianism—which, though it comes in many flavors, shares a larger core of common agreement

B.  General Relationship to “Information Commons” Movement

There is a close relationship between the Leftist variant of cyber-collectivism and the “digital commons” or “information commons” movement, which generally refers to the belief that digital resources should be shared or perhaps commonly owned instead of held privately—both because cyber-collectivists think this is more equitable and because they generally think such arrangements will ultimately work better.

Cyber-collectivists are typically not Marxists; few of them call for state ownership of the information means of production.  Rather, cyber-collectivists might better be thought of a “cyber social Democrats” (in a European sense) or “Digital New Dealers” (in the American tradition).  They advocate a generous role for law and regulation in many online matters, but do not typically resort to full-blown nationalization.

C. Exponents of Cyber-Collectivism

Some notable cyber-collectivists or information commons adherents (and their key works):

• Lawrence Lessig (Code , Free Culture)
• Tim Wu (Who Controls the Internet?)
• Yochai Benkler (The Wealth of Networks)
• Jonathan Zittrain (The Future of the Internet & How to Stop It)
• David Bollier (Viral Spiral)
• Harvard Berkman Center*
• New America Foundation*
• Public Knowledge*

(*We are, of course, generalizing a bit here. Not everyone in these institutions is a cyber-collectivist and, again, there are many flavors of cyber-collectivism, just as there are many flavors of cyber-libertarianism. Individuals in some of these organizations diverge significantly in attitudes towards technological change and the proper scope of government influence throughout the high-tech sector.)

IV. Relationship Between Cyber-Libertarianism & Internet Exceptionalism

Some non-libertarians occasionally join ranks with cyber-libertarians out of a belief that the Internet is different and deserving of special consideration and care. This is commonly referred to as “Cyber-Exceptionalism” or “Internet Exceptionalism.” John Perry Barlow’s 1996 “Declaration of the Independence of Cyberspace” was probably the earliest (and most extreme) articulation of “Internet Exceptionalism”:

Governments of the Industrial World, you weary giants of flesh and steel, I come from Cyberspace, the new home of Mind. On behalf of the future, I ask you of the past to leave us alone. You are not welcome among us. You have no sovereignty where we gather. We have no elected government, nor are we likely to have one, so I address you with no greater authority than that with which liberty itself always speaks. I declare the global social space we are building to be naturally independent of the tyrannies you seek to impose on us. You have no moral right to rule us nor do you possess any methods of enforcement we have true reason to fear. Governments derive their just powers from the consent of the governed. You have neither solicited nor received ours. We did not invite you. You do not know us, nor do you know our world. Cyberspace does not lie within your borders. Do not think that you can build it, as though it were a public construction project. You cannot. It is an act of nature and it grows itself through our collective actions. You have not engaged in our great and gathering conversation, nor did you create the wealth of our marketplaces. You do not know our culture, our ethics, or the unwritten codes that already provide our society more order than could be obtained by any of your impositions. You claim there are problems among us that you need to solve. You use this claim as an excuse to invade our precincts. Many of these problems don’t exist. Where there are real conflicts, where there are wrongs, we will identify them and address them by our means. We are forming our own Social Contract. This governance will arise according to the conditions of our world, not yours. Our world is different.

Similarly, in 1994, The Progress & Freedom Foundation brought together four leading technology visionaries (Esther Dyson, George Gilder, George Keyworth, and Alvin Toffler) to pen A Magna Carta for the Knowledge Age. In that manifesto, the authors argued:

Cyberspace is the land of knowledge, and the exploration of that land can be a civilization’s truest, highest calling. The opportunity is now before us to empower every person to pursue that calling in his or her own way. The challenge is as daunting as the opportunity is great. The Third Wave has profound implications for the nature and meaning of property, of the marketplace, of community and of individual freedom. As it emerges, it shapes new codes of behavior that move each organism and institution—family, neighborhood, church group, company, government, nation—inexorably beyond standardization and centralization, as well as beyond the materialist’s obsession with energy, money and control. Turning the economics of mass-production inside out, new information technologies are driving the financial costs of diversity—both product and personal—down toward zero, “demassifying” our institutions and our culture. Accelerating demassification creates the potential for vastly increased human freedom. It also spells the death of the central institutional paradigm of modern life, the bureaucratic organization. (Governments, including the American government, are the last great redoubt of bureaucratic power on the face of the planet, and for them the coming change will be profound and probably traumatic.)

As that last paragraph suggests, this “Magna Carta” for cyberspace contained some hints of cyber-libertarian thinking, but the general thrust of the document was more generally of the Internet Exceptionalist school of thought.

Internet Exceptionalists are sometime critiqued for sounding like techno-utopians, but it is a mistake to conflate the two. There are not always synonymous.

V. Cyber-Libertarianism’s Early Legal Foundations & Victories

• Section 230 of the Communications Decency Act of 1996 is probably the best example of cyber-exceptionalism in practice. It grants broad immunity to online intermediaries for third party content except for criminal and IP law—breaking with traditional tort liability standards. Specifically, Sec. 230 rejected the “deputization of the middleman” model of liability.
• Overturning of the Communications Decency Act’s indecency & obscenity provisions in Reno v. ACLU decision
• Various court decisions blocking enforcement of the Child Online Protection Act (COPA) of 1999
• The encryption wars & the defeat of the “Clipper Chip”
• The Internet Tax Freedom Act of 1998

VI. Applications: How Cyber-Libertarians Think about Various Policy Issues

• Free speech & online child safety: Favor parental empowerment and industry self-regulation over censorship. “Household standards” should trump “community standards.”
• Privacy policy & online advertising: Privacy is a subjective condition and efforts to regulate to “protect privacy” could have unintended consequences for freedom of speech and the growth of online content and commerce. User empowerment and industry self-regulation represent the superior way to address privacy concerns.
• Net neutrality / infrastructure regulation: “Open access” regulation is nothing more the infrastructure socialism. Network operators should be free to own, operate, and price their systems and services as they see fit, subject only to enforcement of their terms of service and other voluntary disclosures as contracts with their users. New entry and innovation are better alternative to regulating yesterday’s networks and technologies.
• Internet taxation: No special taxes should be imposed on online services or Internet access. To the extent the Net disrupts traditional tax bases that should be seen as an opportunity to reform those tax systems.
• Online gambling: People should be free to do what they want with their money and Internet gambling is likely impossible to shut down entirely anyway, given the nature of the Internet.
• Antitrust: “Market power” and “code failures” are best dealt with by spontaneous evolution of markets and new entry, not bureaucratic micro-management of old technologies or market structures. Regulation often creates, or tends to foster, most monopolies. As Ithiel de Sola Pool once noted, “The force that preserves most monopoly privilege is law… most would vanish in the absence of enforcement.”
• IP issues: Cyber-libertarians are deeply divided over IP issues (especially copyright) and this reflects a long-standing division within libertarian ranks on these issues more generally. Some believe IP rights are a natural extension of traditional property rights and/or a sensible way to incentivize scientific and artistic creativity. Others believe no one has a right to “property-tize” intangible creations or that copyright is simply industrial protectionism. And there are many views in between.

VII. Prospects for Cyber-Libertarianism

A. The Pessimistic View

• Government’s will quash online freedom and bring the Internet under their thumbs.
• Regulatory efforts are expanding at a breathtaking pace and will not slow anytime soon.

B. The Optimistic View

• “Technologies of Freedom” (tools and methods to avoid online regulation, censorship and control) will ultimately triumph.
• Technology is evolving faster than government’s ability to regulate it.

VIII. Related Reading on Cyber-Libertarianism & Internet Exceptionalism

• John Perry Barlow, Declaration of the Independence of Cyberspace (1996).
• Tom W. Bell, Free Speech, Strict Scrutiny, and Self-Help: How Technology Upgrades Constitutional Jurisprudence , 87 U. Minn. L. Rev. 743 (2003).
• Esther Dyson, George Gilder, George Keyworth, & Alvin Toffler, The Progress & Freedom Foundation, A Magna Carta for the Knowledge Age (1994).
• Eric Goldman, The Third Wave of Internet Exceptionalism, Santa Clara Magazine (Winter 2008).
• H. Brian Holland, In Defense of Online Intermediary Immunity: Facilitating Communities of Modified Exceptionalism, Kansas L. Rev. (2007).
• Peter Huber, Law & Disorder in Cyberspace: Abolish the FCC and Let Common Law Rule the Telecosm (1997).
• Ithiel de Sola Pool, Technologies of Freedom (1983).
• David Post, In Search of Jefferson’s Moose: Notes on the State of Cyberspace (2009).
• Adam Thierer, The Pragmatic Internet Optimist’s Creed, Technology Liberation Front Blog (Nov. 11, 2008).
• Technology Liberation Front Blog, About the Technology Liberation Front (August 2004, revised 2008).

Cyber-Libertarianism: The Case for Real Internet Freedom [Ver 1.0 – Thierer & Szoka] http://d.scribd.com/ScribdViewer.swf?document_id=18490847&access_key=key-14tt6eb4f2cdcil8wnf2&page=1&version=1&viewMode=

What Unites Advocates of Speech Controls & Privacy Regulation? [pdf]

by Adam Thierer & Berin Szoka The Progress & Freedom Foundation, Progress on Point No. 16.19

Anyone who has spent time following debates about speech and privacy regulation comes to recognize the striking parallels between these two policy arenas. In this paper we will highlight the common rhetoric, proposals, and tactics that unite these regulatory movements. Moreover, we will argue that, at root, what often animates calls for regulation of both speech and privacy are two remarkably elitist beliefs:

1. People are too ignorant (or simply too busy) to be trusted to make wise decisions for themselves (or their children); and/or,
2. All or most people share essentially the same values or concerns and, therefore, “community standards” should trump household (or individual) standards.

While our use of the term “elitism” may unduly offend some understandably sensitive to populist demagoguery, our aim here is not to launch a broadside against elitism as Time magazine culture critic William H. Henry once defined it: “The willingness to assert unyieldingly that one idea, contribution or attainment is better than another.”^[1] Rather, our aim here is to critique that elitism which rises to the level of political condescension and legal sanction. We attack not so much the beliefs of some leaders, activists, or intellectuals that they have a better idea of what it in the public’s best interest than the public itself does, but rather the imposition of those beliefs through coercive, top-down mandates.

That sort of elitism—elitism enforced by law—is often the objective of speech and privacy regulatory advocates. Our goal is to identify the common themes that unite these regulatory movements, explain why such political elitism is unwarranted, and make it clear how it threatens individual liberty as well as the future of free and open Internet. As an alternative to this elitist vision, we advocate an empowerment agenda: fostering an environment in which users have the tools and information they need to make decisions for themselves and their families.

I. The Elitism of Speech Regulation

First, consider how those two elitist beliefs identified above are on display when lawmakers or regulatory advocates make efforts to control speech or content.^[2] Calls to regulate free speech are often premised on the belief that something must be done to “protect The Children.”^[3] Personal and parental responsibility ^[4] are regarded as inadequate safeguards ^[5] since some parents will inevitably fall down on the job by not adequately shielding their children’s eyes and ears from potentially objectionable (or supposedly harmful) speech. Therefore, government must regulate content that is indecent, profane, excessively violent, and so on. The definition of those things is then left to unelected bureaucrats and judges to make on our behalf.

But it’s not just about “The Children.” Some regulatory advocates believe that even the choices made by consenting adults must be disregarded because some people fail to understand the supposedly destructive nature of the speech they are consuming. Government must act to protect people from making what some regulatory advocates regard as destructive or even immoral choices that could bring harm to them or their loved ones.

In sum, regulatory advocates are essentially saying that people cannot be trusted or left to their own devices and, therefore, government must intervene and establish a baseline “community standard” on behalf of the entire citizenry to tell them what‘s best for them.^[6] Even if those citizens have tools and information at their disposal to make sensible decisions about objectionable content, that’s not good enough because they might not do the job properly. Government must do it for them!

II. The Elitism of Privacy Regulation

This same mentality motivates calls for privacy regulations. Those who call for government interventions to “protect privacy” often claim that people too willingly surrender personal information about themselves and that they don’t understand the adverse consequences of those actions.^[7] Alternatively, regulatory advocates claim that advertising and marketing efforts are inherently “manipulative” and that people do not realize they are being duped into surrendering personal information or into buying products or services they supposedly don’t need.^[8] Of course, those regulatory advocates rarely pause to explain to us how it is that they were not also duped and manipulated by the same things—again revealing their deeply-rooted elitism! (As discussed below, this makes it clear how the psychological phenomenon of “third-person effect hypothesis” is driving much of this debate.)

“Protecting The Children” is also used as a rhetorical cover for regulation here, but not as often in debates over speech controls.^[9] Instead, regulatory advocates mostly focus on adults who are presumed not to know what is in their own best interest—necessitating paternalistic government intervention on their behalf.

III. Intellectual Schizophrenia on Both the Left & Right

What is particularly interesting about all this is the way these two issues expose a sort of intellectual schizophrenia at work on both the Left and Right of the political spectrum. Left-leaning policymakers and intellectuals typically decry censorship efforts (except where “commercial speech,” “hate speech” and “bias” are at issue), but are quick to rally around proposals to layer privacy regulations on the Internet. The opposite is often true of many on the Right of the political spectrum: They typically declare privacy regulations to be paternalistic and antithetical to free enterprise (or perhaps just erosive of efforts to legislate morality),^[10] but in the next breath advocate controls on content they find objectionable.

Few on either side stop to consider the relationship between speech and privacy. In fact, they are but two sides of the same coin. After all, what is your “right to privacy” but a right to stop me from observing you and speaking about you?^[11] “Protecting privacy,” therefore, typically means restricting speech rights in the process. Advocates of privacy regulation often insist that the use, processing and collection of information are “conduct” unprotected by the First Amendment, but in fact, the First Amendment broadly protects the gathering and distribution of information as part of the process of communication (“speech”).^[12] Similarly, attempts to “clean up” speech or “protect The Children,” often require regulations that would betray the privacy of adults by expanding the role of government, and impose serious burdens on businesses and markets—such as age verification mandates ^[13] or extensive data retention requirements.^[14]

IV. Common Tactics & Regulatory Mechanisms

The two movements also share common political tactics and regulatory approaches. Privacy advocates generally favor “opt-in” mandates as the federal “baseline standard” for any website collecting information about users, especially their browsing habits (regardless of whether the information is “personally identifiable”). In other words, the law would create a property right in such “personal information” (ironically, many advocates of this approach criticize or reject intellectual property.) In a similar vein, many advocates of speech controls push for mandatory parental control tools or restrictive default settings.^[15] That is, if government won’t censor speech outright, regulatory advocates want lawmakers to at least (1) require that media, computing and communications devices be shipped to market with parental controls embedded or included (as proposed in Australia and with China’s “Green Dam” filter),^[16] and possibly, (2) that such controls be defaulted to their most restrictive position—forcing users to opt-out of the controls later if they want to consume media rated above a certain threshold.

More sophisticated advocates of speech controls and privacy regulation will likely argue that their paternalism is less elitist or intrusive because they merely want to “nudge” the public into making “better” decisions. Economist Richard Thaler and legal scholar Cass Sunstein (director of President Obama’s Office of Information and Regulatory Affairs, responsible for analyzing most new federal regulations) popularized this approach with their 2008 book Nudge: Improving Decisions about Health, Wealth, and Happiness. Based on behavioral economics studies, they argue that both government and private actors must inevitably make decisions about “choice architecture” and that, by setting defaults, incentives and rules smartly, “choice architects” can and should improve decision-making without blocking, fencing-off or significantly burdening choices.^[17]

In this regard, Sunstein and Thaler’s approach parallels the work of Lawrence Lessig, one of the most influential Internet policy thinkers. Lessig has argued that the “architecture” of “code” (how software is written) “regulates” all online activities and requires government oversight and intervention to keep in check. Otherwise, he warned ominously a decade ago, “Left to itself, cyberspace will become a perfect tool of control.”^[18] Lessig’s hyper-pessimistic predictions have proven unwarranted, however. Far from fostering a world of “perfect control,” code and cyberspace have proven remarkably difficult to regulate, but nonetheless has generally benefited consumers and citizens without centralized direction.^[19] Still, Lessig, Sunstein, and others of this ilk persist in their advocacy of “nudges” of many varieties to impose their will on cyberspace through mandates from above.

But while it might be possible to define “better decisions” and argue that poor choice architecture leads people to choose things they clearly don’t want in contexts like investment decisions and mortgages, how can elites know what other people really want in highly subjective contexts like privacy and speech? Should they rely on opinion polls—the highly subjective results of which depend heavily on “choice architecture” of question-crafting—to guess what the right default should be?^[20] Was the Chinese proposal to mandate deployment of “Green Dam” just a harmless “nudge” because users weren’t barred from uninstalling the filtering software that must accompany their computers (i.e., “opting-out”)? The problem becomes even more difficult where trade-offs among competing values are inevitable. For example, data collection about Internet users raises privacy concerns for some but benefits all, creating more funding for “free” content (i.e., speech) and services users prefer by making more valuable the advertising that supports online publishers. In short, regulations of speech and privacy are likely to be pure paternalism, even when billed as “libertarian paternalism as Thaler and Sunstein label their approach.^[21]

What might be called “regulatory blackmail” is also a time-honored tradition among both advocates of speech controls and privacy regulation. When censorship advocates have previously been impeded by the First Amendment, they have worked behind the scenes with lawmakers or regulatory agencies to use indirect pressure and strong-arming tactics to extract “voluntary concessions” from companies or others.^[22] For example, in 2004, the FCC strong-armed radio giant Clear Channel into agreeing to a “voluntary” consent decree that involved taking Howard Stern off the air.^[23] Similarly, in 2008, XM and Sirius Satellite Radio finally agreed to set aside 4% of their system capacity for use by politically favored racial minorities (a kind of speech control) as a “voluntary condition” of their merger—after the FCC had sat on their application for nearly 16 months.^[24] This race-based preference would have been unconstitutional if the FCC had imposed it directly.^[25] While the FTC has been far less prone to such abuse and actually plays a key role in holding companies to their promises, its current Chairman, Jon Leibowitz, has hung the “regulatory sword of Damocles” over the heads of the online advertising industry, threatening them with a “day of reckoning” if he doesn’t get what he wants from industry self-regulatory efforts.”^[26] The sword could actually fall if the FTC turns self-regulation into the European model of “co-regulation,” where the government steers and industry simply rows.^[27]

V. The Crisis Mentality that Drives Regulation

Speech and privacy regulatory advocates share another trait in common: an affinity for the use of a crisis mentality as a method of spurring political action. In his 1995 book The Vision of the Anointed: Self-Congratulation as a Basis for Social Policy, political philosopher and economist Thomas Sowell formulated a model that he argued drives ideological crusades to expand government power over our lives and economy. “The great ideological crusades of the twentieth-century intellectuals have ranged across the most disparate fields,” noted Sowell. But what they all had in common, he argued, was “their moral exaltation of the anointed above others, who are to have their different views nullified and superseded by the views of the anointed, imposed via the power of government.”^[28] These government-expanding crusades shared several key elements, which Sowell identified as follows:

1. Assertion of a great danger to the whole society, a danger to which the masses of people are oblivious.
2. An urgent need for government action to avert impending catastrophe.
3. A need for government to drastically curtail the dangerous behavior of the many, in response to the prescient conclusions of the few.
4. A disdainful dismissal of arguments to the contrary as either uninformed, irresponsible, or motivated by unworthy purposes.

We see this model at work on a daily basis today with our government’s various efforts to reshape our economy, but the model is equally applicable to debates over speech controls and privacy regulation. In particular, the various “technopanics”^[29] we have witnessed in recent years fit this model. For example, consider how this model plays out in the debate over online social networking:

1. Assertion of a great danger to the whole society [online sexual predators], a danger to which the masses of people are oblivious.
2. An urgent need for government action [such as mandatory online age verification ^[30] or the Deleting Online Predators Act ^[31]] to avert impending catastrophe.
3. A need for government to drastically curtail the dangerous behavior of the many [must stop kids and adults from being online together on same sites], in response to the prescient conclusions of the few [some state Attorneys General].^[32]
4. A disdainful dismissal of arguments to the contrary as either uninformed, irresponsible, or motivated by unworthy purposes [child safety researchers and others are told that their research is meaningless or offbase].^[33]

We also see this model in play in other debates, such as efforts to regulate “excessively violent” video games and television programming.^[34] And consider how this model plays out on the privacy front:

1. Assertion of a great danger to the whole society [amorphous privacy violations], a danger to which the masses of people are oblivious.
2. An urgent need for government action [“baseline federal privacy regulation”] to avert impending catastrophe.
3. A need for government to drastically curtail the dangerous behavior of the many [anyone who shares information online], in response to the prescient conclusions of the few [a handful of privacy advocacy groups].
4. A disdainful dismissal of arguments to the contrary as either uninformed, irresponsible, or motivated by unworthy purposes [any suggestion that privacy concerns are being overblown and that most information-sharing is socially beneficial is dismissed out-of-hand].

Worse yet, regulatory intervention in these cases simply begets more and more intervention to correct the inevitable failures of, or dissatisfaction with, previous interventions.^[35] Thus, the “crisis” cycle never ends.

VI. Third-Person Effect Hypothesis as an Explanation

Something more profound than simple political elitism seems to be at work here, however. A phenomenon psychologists refer to as the “third-person effect hypothesis” can explain many calls for government intervention, especially in the media world.^[36] Simply stated, speech and privacy critics sometimes seem to only see and hear in media or communications what they want to see and hear—or what they don’t want to see or hear. When they encounter perspectives or preferences that are at odds with their own, they are more likely to be concerned about the impact of those things on others throughout society and come to believe that government must “do something” to correct those perspectives. Many people desire regulation because they think it will be good for others, not necessarily for themselves. The regulation they desire has a very specific purpose in mind: “re-tilting” speech or market behavior in their desired direction.

The third-person effect hypothesis was first formulated by W. Phillips Davison in a seminal 1983 article:

In its broadest formulation, this hypothesis predicts that people will tend to overestimate the influence that mass communications have on the attitudes and behavior of others. More specifically, individuals who are members of an audience that is exposed to a persuasive communication (whether or not this communication is intended to be persuasive) will expect the communication to have a greater effect on others than on themselves.^[37]

Davison used this hypothesis to explain how media critics on both the Left and Right seemed to simultaneously find “bias” in the same content or reports when they couldn’t possibly both be correct. In reality, their own personal preferences were biasing their ability to fairly evaluate that content. Davison’s article prompted further research by many other psychologists, social scientists, and public opinion experts to test just how powerful this phenomenon was in explaining calls for censorship and other social phenomena.^[38] In these studies, third-person effect has been shown to be the primary explanation for why many people fear—or even want to ban—various types of speech or expression, including news,^[39] misogynistic rap lyrics,^[40] television violence,^[41] video games,^[42] and pornography.^[43] In each case, the subjects surveyed expressed strong misgivings about allowing others to see or hear too much of the speech or expression in question, but greatly discounted the impact of that speech on themselves. Such studies thus reveal the strong paternalistic instinct behind proposals to regulate speech. As Davison notes:

Insofar as faith and morals are concerned… it is difficult to find a censor who will admit to having been adversely affected by the information whose dissemination is to be prohibited. Even the censor’s friends are usually safe from the pollution. It is the general public that must be protected. Or else, it is youthful members of the general public, or those with impressionable minds.^[44]

It’s easy to see how this same phenomenon is at work in debates about privacy. Regulatory advocates imagine their preferences are “correct” (right for everyone) and that the masses are being duped by external forces beyond their control or comprehension, even though the advocates themselves are somehow immune from the brain-washing and privy to some higher truth that the hoi polloi simply cannot fathom. Again, this is Sowell’s “Vision of the Anointed” at work.

Consider the flare-up in 2004 over the introduction of Gmail, Google’s free email service. At a time when Yahoo! mail (then as now the leading webmail provider) offered customers less than 10 megabytes of email storage, Gmail offered an astounding gigabyte of storage that would grow over time (now over 7 GB). Rather than charging some users for more storage or special features, Google paid for the service by showing advertisements next to each email “contextually” targeted to keywords in that email—a far more profitable form of advertising than “dumb banner” ads previously used by other webmail providers.^[45] Self-appointed (or, to extend Sowell’s framework, “self-anointed”) privacy advocates howled that Google was going to “read users’ email,” and led a crusade to ban such algorithmic contextual targeting.^[46] Thierer responded to these critics by pointing out that the service was purely voluntary and noted:

you don’t speak for me and a lot of other people in this world who will be more than happy to cut this deal with Google. So do us a favor and don’t ask the government to shut down a service just because you don’t like it. Privacy is a subjective condition and your value preferences are not representative of everyone else’s values in our diverse nation. Stop trying to coercively force your values and choices on others. We can decide these things on our own, thank you very much.^[47]

Interestingly, however, the frenzy of hysterical indignation about Gmail was followed by a collective cyber-yawn: Users increasingly understood that algorithms, not humans, were doing the “reading” and that, if they didn’t like it, they didn’t have to use it. Today, nearly 150 million of people around the world use Gmail, and it has a steadily growing share of the webmail market. Even though cyber-consumers have embraced the service, some privacy advocates persist in their effort to shut down Gmail. They appear determined to stop at nothing to impose their will on others—the essence of political elitism—even if that means cutting off free email service for 150 million people!^[48]

A similar debate has played out more recently regarding targeted online advertising in general. Advertising on search engines is, much like Gmail, targeted “contextually” based on search terms entered by users and most advertising on other websites is based on the nature of content on a site or page. But certain data is collected about users as they browse to make that advertising more effective—by measuring its performance, reducing fraud, preventing over-exposure, etc. Some privacy advocates have insisted that industry self-regulation of such practices (even if enforced by the FTC) is inadequate and have called for preemptive regulation. They are even more offended by “behavioral advertising” which allows publishers whose content would have little value as the basis for contextually targeting advertising on their own sites to compete for more highly valued advertising by showing ads to users based on other sites they’ve visited. In both cases, data collection can increase the funding available to publishers to produce more of the content and services preferred by users, thus conferring an enormous indirect benefit on users, but also directly benefits users by increasing the relevance of the advertising they see.^[49] For some of the more extreme advocates of privacy regulation, however, there are no trade-offs, only absolutist “solutions:” To them, privacy is so obviously desirable that they feel at ease in deciding what’s best for everyone else. Such absolutists often respond with righteous indignation and conspiratorial fulmination when challenged to identify the harm against which they’re protecting consumers, while disdainfully dismissing all talk of the benefits of online advertising as self-serving industry propaganda.^[50]

VII. The Principled Alternative: Trust People & Empower Them

There is an alternative to this elitist mentality: freedom and personal responsibility. Individuals should be permitted to live a life of their own, even if they sometimes make mistakes or choices that are at odds with what elites think is best for them. ^[51]

Of course, the world isn’t perfect. In an ideal world, adults would be fully empowered to tailor speech and privacy decisions to their own values and preferences. Specifically, in an ideal world, adults (and parents) would have (1) the information necessary to make informed decisions and (2) the tools and methods necessary to act upon that information. Importantly, those tools and methods would give them the ability to not only block the things they don’t like—objectionable content, annoying ads or the collection of data about them—while also finding the things they want.

Achieving that ideal is likely impossible, but the good news is that we are moving closer to it with each passing day. Citizens have more tools and methods at their disposal than ever before which enable them to make decisions for themselves and their families. And this is true for both parental controls ^[52] and privacy controls.^[53]

Of course, some speech and privacy elitists will argue that we can’t trust empowerment tools ( e.g., filters, rating systems, or other controls) that are created by companies or other affected parties. But rather than trying to enhance those tools and educate users about how to use them, these elitists skip right past user empowerment and channel their energies into regulations that would impose a top-down, one-size-fits all standard on all adults and families—or even into trying to craft the perfect “nudge” that will help users make what elites believe to be the “right” decisions. Of course, these tools can, and should, be improved. Those groups worried about speech/content and privacy issues should focus on how we might drive such protections from the bottom-up by empowering individuals instead of government bureaucrats. The goal in both cases should be a “let-a-thousand-flowers-bloom” approach, which offers diverse tools and strategies for our diverse citizenry.^[54] We need not accept “one-size-fits” all approaches, whether they be regulatory mandates or “nudges,” based on the presumption that elites know best.

Finally, it is vital not to lose sight of what’s ultimately at stake here. If regulatory approaches trump the empowerment agenda we have described, the future of a free and open Internet—indeed, as technology converges, the future of all media—is at risk.^[55] By imposing technological solutions from the top-down that can never keep pace with technological change, regulation necessarily forecloses freedom and innovation.^[56] By contrast, individual empowerment allows innovation to flourish. The better approach across the board is education, not regulation.^[57] Empowerment, not elitism, is the path forward. The digital elite should be leading this effort by developing and promoting technologies of empowerment, not crafting regulatory mandates to force their will upon us.^[58]

#

Adam Thierer is a Senior Fellow with The Progress & Freedom Foundation and the director of its Center for Digital Media Freedom. Berin Szoka  is a Senior Fellow with PFF and the Director of PFF’s Center for Internet Freedom.

[1] . William A. Henry, In Defense of Elitism (1995) at 2-3.

[2] . See Adam Thierer, The Progress & Freedom Foundation, Congress, Content Regulation, and Child Protection: The Expanding Legislative Agenda, Progress Snapshot 4.4, Feb. 2008, www.pff.org/issues-pubs/ps/2008/ps4.4childprotection.html. Like American courts, we use the term “speech” as a broad catch-all for communications, including both actual speaking as well as other forms of transmitting, as well as receiving, information (“content”).

[3] . See generally Adam Thierer, Don’t Scapegoat Media, USA Today, Dec. 4, 2008, www.pff.org/issues-pubs/ps/2008/ps4.24scapegoatmedia.html; Marjorie Heins, Not in Front of the Children, “Indecency,” Censorship, and the Innocence of Youth (2001); Karen Sternheimer, It’s Not the Media: The Truth about Pop Culture’s Influence on Children (2003); Karen Sternheimer, Kids These Days: Facts and Fictions about Today’s Youth (2006).

[4] . See Adam Thierer, The Progress & Freedom Foundation, FCC Violence Report Concludes that Parenting Doesn’t Work, PFF Blog, Apr. 26, 2007, http://blog.pff.org/archives/2007/04/fcc_violence_re.html.

[5] . See Adam Thierer, The Progress & Freedom Foundation, Sen. Rockefeller Gives Up on Parenting at Senate Violence Hearing, PFF Blog, June 26, 2007, blog.pff.org/archives/2007/06/sen_rockefeller_1.html.

[6] . Adam Thierer, Conservatives, Porn, and “Community Standards,” The Technology Liberation Front, March 2, 2009, http://techliberation.com/2009/03/02/conservatives-porn-and-community-standards.

[7] . Berin Szoka & Adam Thierer, The Progress & Freedom Foundation, Online Advertising & User Privacy: Principles to Guide the Debate, Progress Snapshot 4.19, Sept. 2008, www.pff.org/issues-pubs/ps/2008/ps4.19onlinetargeting.html.

[8] . Jeff Chester, for decades the great gadfly of American advertising, has decried “the system … developed to track each and every one of us and our behavior for one-on-one marketing efforts” as “manipulative, intrusive and un-democratic.” Wendy Melillo, Q&A: Chester Writes the Book on Privacy, Dec. 11, 2007, www.gfem.org/node/227. For instance, Chester and other leading “privacy advocates” ridicule the idea of smart phones as a “liberating technology” and insist that,

Despite the glowing words about customization and personalized service, what marketers and advertisers are increasingly offering consumers is merely the illusion of free choice. Mobile operators offer their various options and services, not on an individual basis, but preconfigured according to segmented demographic profiles.

Center for Digital Democracy and U.S. Public Interest Research Group, Complaint and Request for Inquiry and Injunctive Relief Concerning Unfair and Deceptive Mobile Marketing Practices, Jan. 13, 2009 (emphasis original), www.democraticmedia.org/files/FTCmobile_complaint0109.pdf. See generally Berin Szoka & Adam Thierer, The Progress & Freedom Foundation, Targeted Online Advertising: What’s the Harm & Where Are We Heading?, Progress on Point 16.2, Feb. 2009, www.pff.org/issues-pubs/pops/2009/pop16.2targetonlinead.pdf.

[9] . Berin Szoka & Adam Thierer, The Progress & Freedom Foundation, COPPA 2.0: The New Battle over Privacy, Age Verification, Online Safety & Free Speech, Progress on Point 16.11, May 2009, www.pff.org/issues-pubs/pops/2009/pop16.11-COPPA-and-age-verification.pdf.

[10] . The Supreme Court has used a “right to privacy” to strike down laws against the use of contraception by married couples, Griswold v Connecticut, 381 U.S. 479 (1965), and abortion, Roe v. Wade, 410 U.S. 113 (1973).

[11] . Eugene Volokh, Freedom of Speech and Information Privacy: The Troubling Implications of a Right to Stop People From Speaking About You, 52 Stanford L. Rev. 1049 (2000), available at www.pff.org/issues-pubs/pops/pop7.15freedomofspeech.pdf.

[12] . See , Amicus Brief for Association Of National Advertisers, Cato Institute, Coalition For Healthcare Communication, Pacific Legal Foundation And The Progress & Freedom Foundation In Support Of Appellants, IMS Health v. Sorrell, No. 09-1913-cv(L), 09-2056-cv(CON) (2nd Cir. 2009), available at www.pff.org/issues-pubs/filings/2009/071309-Brief-Amici-Curiae-ANA-et-al-Second-Circuit-(09-1913-cv).pdf.

[13] . See Adam Thierer, The Progress & Freedom Foundation, Social Networking and Age Verification: Many Hard Questions; No Easy Solutions, Progress on Point No. 14.5, March 2007, www.pff.org/issues-pubs/ pops/pop14.8ageverificationtranscript.pdf; www.pff.org/issues-pubs/pops/pop14.5ageverification.pdfAdam Thierer, The Progress & Freedom Foundation, Statement Regarding the Internet Safety Technical Task Force’s Final Report to the Attorneys General, Jan. 14, 2008, www.pff.org/issues-pubs/other/090114ISTTFthiererclosingstatement.pdf; Nancy Willard, Why Age and Identity Verification Will Not Work—And is a Really Bad Idea, Jan. 26, 2009, www.csriu.org/PDFs/digitalidnot.pdf; Jeff Schmidt, Online Child Safety: A Security Professional’s Take, The Guardian, Spring 2007, www.jschmidt.org/AgeVerification/Gardian_JSchmidt.pdf.

[14] . Adam Thierer, The Progress & Freedom Foundation, Mandatory Data Retention: How Much is Appropriate, PFF Blog, June 26, 2006, http://blog.pff.org/archives/2006/06/mandatory_data.html

[15] . Adam Thierer, The Progress & Freedom Foundation, The Perils of Mandatory Parental Controls and Restrictive Defaults, Progress on Point 14.4, Apr. 11, 2008, www.pff.org/issues-pubs/pops/2008/pop15.4defaultdanger.pdf.

[16] . Adam Thierer, China’s Green Dam Filter and the Threat of Rising Global Censorship, PFF Blog, June 17, 2009, http://blog.pff.org/archives/2009/06/chinas_green_dam_filter_and_threat_of_rising_globa.html

[17] . They define choice architecture as follows: “A structure designed by a choice architect(s) to improve the quality of decisions made by homo sapiens. Often invisible, choice architecture is the specific user-friendly shape of an organization’s policy or physical building when homo sapiens come into contact with it. Examples of choice architecture include a voter ballot, a procedure for handling well-meaning people who forget a deadline, or a skyscraper.” Nudge Glossary of Terms, www.nudges.org/glossary.cfm.

[18] . Lawrence Lessig, Code and Other Laws of Cyberspace (1999) at 6.

[19] . See Adam Thierer, Code, Pessimism, and the Illusion of “Perfect Control,” Cato Unbound, May 2009, www.cato-unbound.org/2009/05/08/adam-thierer/code-pessimism-and-the-illusion-of-perfect-control

[20] . See Solveig Singleton & Jim Harper, With A Grain of Salt: What Consumer Privacy Surveys Don’t Tell Us, 2001, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=299930.

[21] . As Cato Institute scholar Will Wilkinson has argued, the book’s “agreeably banal doctrine of choice-preserving helpfulness” blurs the lines between paternalism and libertarianism, and thus “the thrust of the conceptual renovation behind the term libertarian paternalism is to empower, not limit, political elites.” Why Opting Out Is No “Third Way,” Reason, October 2008, www.reason.com/news/show/128916.html. See also Adam Thierer, The Progress & Freedom Foundation, Sunstein’s “Libertarian Paternalism” is Really Just Paternalism, PFF Blog, April 7, 2008, http://blog.pff.org/archives/2008/04/sunsteins_liber.html.

[22] . See Robert Corn-Revere, “’Voluntary’ Self-Regulation and the Triumph of Euphemism,” in Rationales & Rationalizations: Regulating the Electronic Media (Robert Corn-Revere, ed., 1997), at 183-208.

[23] . Telecom Policy Report, Commission Settles Indecency Charges, But At What Cost?, June 30, 2004, http://findarticles.com/p/articles/mi_m0PJR/is_25_2/ai_n6091525.

[24] . See Adam Thierer, XM-Sirius, Regulatory Blackmail, and Diversity, June 17, 2008, http://blog.pff.org/archives/2008/06/xmsirius_regula.html.

[25] . See Comments of W. Kenneth Ferree on Implementation of Sirius-XM Merger Condition, The Progress & Freedom Foundation, MB Docket No. 07-57, March 30, 2009, www.pff.org/issues-pubs/filings/2009/033009siriusXMconditionfiling.pdf.

[26] . See Szoka & Adam Thierer, supra note 8 at 3.

[27] . See id. at 2.

[28] . Thomas Sowell, The Vision of the Anointed: Self-Congratulation as a Basis for Social Policy (1995) at 5.

[29] . Alice Marwick, To Catch a Predator? The MySpace Moral Panic, First Monday, Vol. 13, No. 6-2, June 2008, www.uic.edu/htbin/cgiwrap/bin/ojs/index.php/fm/article/view/2152/1966; Wade Roush, The Moral Panic over Social Networking Sites, Technology Review, Aug. 7, 2006, www.technologyreview.com/communications/17266; Anne Collier, Why Techopanics are Bad, Net Family News, April 23, 2009, www.netfamilynews.org/2009/04/why-technopanics-are-bad.html; Adam Thierer, Parents, Kids & Policymakers in the Digital Age: Safeguarding Against ‘Techno-Panics,’ Inside ALEC, July 2009, at 16-17, www.alec.org/am/pdf/Inside_July09.pdf; Adam Thierer, Progress & Freedom Foundation, Technopanics and the Great Social Networking Scare, PFF Blog, June 10, 2008, http://techliberation.com/2008/07/10/technopanics-and-the-great-social-networking-scare.

[30] . Supra note 13.

[31] . In the 109th Congress, former Rep. Michael Fitzpatrick (R-PA) introduced the Deleting Online Predators Act (DOPA), which proposed a ban on social networking sites in public schools and libraries. DOPA passed the House of Representatives shortly thereafter by a lopsided 410-15 vote, but failed to pass the Senate. The measure was reintroduced just a few weeks into the 110th Congress by Senator Ted Stevens (R-AK), the ranking minority member and former chairman of the Senate Commerce Committee. It was section 2 of a bill that Sen. Stevens sponsored titled the “Protecting Children in the 21st Century Act” (S. 49), but was later removed from the bill. See Declan McCullagh, Chat Rooms Could Face Expulsion, CNet News.com, July 28, 2006, http://news.com.com/2100-1028_3-6099414.html?part=rss&tag=6099414&subj=news.

[32] . See Emily Steel & Julia Angwin, MySpace Receives More Pressure to Limit Children’s Access to Site, Wall Street Journal, June 23, 2006, online.wsj.com/public/article/SB115102268445288250-YRxkt0rTsyyf1QiQf2EPBYSf7iU_20070624.html; Susan Haigh, Conn. Bill Would Force MySpace Age Check, Yahoo News.com, March 7, 2007, www.msnbc.msn.com/id/17502005.

[33] . See, e.g., Letter of Henry McMaster, Attorney General, South Carolina to Attorney General Richard Blumenthal and Attorney General Roy Cooper Regarding Internet Safety Task Force (“ISTTF”) Report, January 14, 2009, www.scag.gov/newsroom/pdf/2009/internetsafetyreport.pdf

[34] . See Adam Thierer, The Progress & Freedom Foundation, Video Games and “Moral Panic,” PFF Blog, Jan. 23, 2009, http://blog.pff.org/archives/2009/01/video_games_and_moral_panic.html ; Adam Thierer, The Progress & Freedom Foundation, Fact and Fiction in the Debate over Video Game Regulation, Progress Snapshot 13.7, March 2006, www.pff.org/issues-pubs/pops/pop13.7videogames.pdf.

[35] . “All varieties of interference with the market phenomena not only fail to achieve the ends aimed at by their authors and supporters, but bring about a state of affairs which—from the point of view of their authors’ and advocates’ valuations—is less desirable than the previous state affairs which they were designed to alter. If one wants to correct their manifest unsuitableness and preposterousness by supplementing the first acts of intervention with more and more of such acts, one must go farther and farther until the market economy has been entirely destroyed and socialism has been substituted for it.” Ludwig von Mises, Human Action, at 858 (3rd ed. 1963) (1949).

[36] . See generally Adam Thierer, The Progress & Freedom Foundation, Media Myths: Making Sense of the Debate over Media Ownership (2005) at 119-123, www.pff.org/issues-pubs/books/050610mediamyths.pdf (Explaining how the third-person effect serves as a powerful explanation for the heated backlash that followed an FCC effort to moderately liberalize media ownership rules in 2003-04).

[37] . W. Phillips Davison, The Third-Person Effect in Communication, 47 Public Opinion Quarterly 1, Spring 1983, at 3.

[38] . For the best overview of third-person effect research, see Douglas M. McLeod, Benjamin H. Detenber, and William P. Eveland., Jr., Behind the Third-Person Effect: Differentiating Perceptual Processes for Self and Other, 51 Journal of Communication, Vol. 51, No. 4, 2001, at 678-695.

[39] . Vincent Price, David H. Tewksbury & Li-Ning Huang, Third-person Effects of News Coverage: Orientations Toward Media, Journalism & Mass Communications Quarterly, Vol. 74, at 525-540.

[40] . Douglas M. McLeod, William P. Eveland & Amy I. Nathanson, Support for Censorship of Violent and Misogynic Rap Lyrics: And Analysis of the Third-Person Effect, Communications Research, Vol. 24, 1997, at 153-174.

[41] . Hernando Rojas, Dhavan V. Shah, and Ronald J. Faber, For the Good of Others: Censorship and the Third-Person Effect, International Journal of Public Opinion Research, Vol. 8, 1996, at 163-186.

[42] . James D. Ivory, Addictive, But Not For Me: The Third-Person Effect and Electronic Game Players’ Views Toward the Medium’s Potential for Dependency and Addiction, University of North Carolina at Chapel Hill, School of Journalism and Mass Communication, Aug. 2002.

[43] . Albert C. Gunther, Overrating the X-rating: The Third-person Perception and Support for Censorship of Pornography, Journal of Communication, Vol. 45, No. 1, 1995, at 27-38

[44] . Supra note 37 at 14. Along these lines, a December 2004 Washington Post article documented the process by which the Parents Television Council, a vociferous censorship advocacy group, screens various television programming. One of the PTC screeners interviewed for the story talked about the societal dangers of various broadcast and cable programs she rates, but then also noted how much she personally enjoys HBO’s “The Sopranos” and “Sex and the City,” as well as ABC’s “Desperate Housewives.” Apparently, in her opinion, what’s good for the goose is not good for the gander! See Bob Thompson, Fighting Indecency, One Bleep at a Time, The Washington Post, Dec. 9, 2004, at C1, www.washingtonpost.com/wp-dyn/articles/A49907-2004Dec8.html.

[45] . See Chris Anderson, Free: The Future of a Radical Price at 112-118 (2009).

[46] . See Letter from Chris Jay Hoofnagle, Electronic Privacy Information Center, Beth Givens, Privacy Rights Clearinghouse, Pam Dixon, World Privacy Forum, to California Attorney General Lockyer, May 3, 2004, http://epic.org/privacy/gmail/agltr5.3.04.html.

[47] . See email from Adam Thierer to Declan McCullaugh on Politech Email discussion group, April 30, 2004, http://lists.jammed.com/politech/2004/04/0083.html (emphasis added).

[48] . See Complaint and Request for Injunction of the Electronic Privacy Information Center against Google, Inc., March 17, 2009, http://epic.org/privacy/cloudcomputing/google/ftc031709.pdf; see also Ryan Radia, Should the FTC Shut Down Gmail and Google Docs Because of an Already-Fixed Bug?, Technology Liberation Front Blog, March 18, 2009, http://techliberation.com/2009/03/18/should-the-ftc-shut-down-gmail-and-google-docs-because-of-an-already-fixed-bug/.

[49] . See Berin Szoka & Mark Adams, The Progress & Freedom Foundation, The Benefits of Online Advertising & the Costs of Regulation, PFF Working Paper, forthcoming.

[50] . Anti-advertising crusader Jeff Chester often resorts to questioning the motives of those who question whether his regulatory prescriptions would actually benefit consumers, see, e.g., http://techliberation.com/2009/06/17/behavioral-advertising-industry-practices-hearing-some-issues-that-need-to-be-discussed/#comment-11698840. See generally Jeff Chester, Digital Destiny: New Media and the Future of Democracy (2007).

[51] . “The only freedom which deserves the name is that of pursuing our own good in our own way, so long as we do not attempt to deprive others of theirs or impede their efforts to obtain it. Each is the proper guardian of his own health, whether bodily or mental and spiritual.” John Stuart Mill, On Liberty (Penguin Classics, 1859, 1986) at 72.

[52] . Adam Thierer, The Progress & Freedom Foundation, Parental Controls & Online Child Protection, Special Report, Version 4.0, Summer 2009, www.pff.org/parentalcontrols.

[53] . Adam Thierer, Berin Szoka & Adam Marcus, The Progress & Freedom Foundation, Privacy Solutions, PFF Blog, Ongoing Series, http://blog.pff.org/archives/ongoing_series/privacy_solutions.

[54] . Comments of Adam Thierer, The Progress & Freedom Foundation, In the Matter of Implementation of the Child Save Viewing Act; Examination of Parental Control Technologies for Video or Audio Programming; MB Docket No. 09-26, April 16, 2009, www.pff.org/issues-pubs/filings/2009/041509-%5bFCC-FILING%5d-Adam-Thierer-PFF-re-FCC-Child-Safe-Viewing-Act-NOI-(MB-09-26).pdf.

[55] . See Adam Thierer, FCC v. Fox and the Future of the First Amendment in the Information Age, Engage, Feb. 20, 2009, www.fed-soc.org/doclib/20090216_ThiererEngage101.pdf

[56] . “To act on the belief that we possess the knowledge and the power which enable us to shape the processes of society entirely to our liking, knowledge which in fact we do not possess, is likely to make us do much harm.” Friedrich von Hayek, “The Pretence of Knowledge,” in The Essence of Hayek, (Hoover Inst., 1984), at 276.

[57] . Adam Thierer, The Progress & Freedom Foundation, Two Sensible, Education-Based Legislative Approaches to Online Child safety, Progress Snapshot 3.10, Sept. 2007, www.pff.org/issues-pubs/ps/2007/ps3.10safetyeducationbills.pdf.

[58] . See, e.g., Berin Szoka, Google, CDT, Online Advertising & Preserving Persistent User Choice Across Ad Networks Through Plug-ins, Technology Liberation Front Blog, March 13, 2009, http://techliberation.com/2009/ 03/13/google-cdt-online-advertising-preserving-persistent-user-choice-across-ad-networks-through-plug-ins/.

Building on this week’s Cato Unbound online debate over the impact of Lawrence Lessig’s Code ten years after it’s release, Tim Lee has posted a terrific essay over at the Freedom to Tinker Blog “Sizing Up “Code” with 20/20 Hindsight.”  Tim concludes:

It seems to me that the Internet is rather less malleable than Lessig imagined a decade ago. We would have gotten more or less the Internet we got regardless of what Congress or the FCC did over the last decade. And therefore, Lessig’s urgent call to action — his argument that we must act in 1999 to ensure that we have the kind of Internet we want in 2009 — was misguided. In general, it works pretty well to wait until new technologies emerge and then debate whether to regulate them after the fact, rather than trying to regulate preemptively to shape the kinds of technologies that are developed. As I wrote a few months back, I think Jonathan Zittrain’s The Future of the Internet and How to Stop It makes the same kind of mistake Lessig made a decade ago: overestimating regulators’ ability to shape the evolution of new technologies and underestimating the robustness of open platforms. The evolution of technology is mostly shaped by engineering and economic constraints. Government policies can sometimes force new technologies underground, but regulators rarely have the kind of fine-grained control they would need to promote “generative” technologies over sterile ones, any more than they could have stopped the emergence of cookies or DPI if they’d made different policy choices a decade ago.

I agree whole-heartedly, of course, and this is the point I was trying to make in my in my first essay in the Cato debate when I argued:

Lessig’s lugubrious predictions proved largely unwarranted. Code has not become the great regulator of markets or enslaver of man; it has been a liberator of both. Indeed, the story of the past digital decade has been the exact opposite of the one Lessig envisioned in Code. Cyberspace has proven far more difficult to “control” or regulate than any of us ever imagined. More importantly, the volume and pace of technological innovation we have witnessed over the past decade has been nothing short of stunning.

Anyway, read Tim’s entire essay.

Ted Dziuba has penned a humorous and sharp-tongued piece for The Register about last week’s Adblock vs. NoScript fiasco.  For those of you who aren’t Firefox junkies, a nasty public spat broke out between the makers of these two very popular Firefox Browser extensions (they are the #1 and #3 most popular downloads respectively).  To make a long and complicated story much shorter, basically, NoScript didn’t like Adblock placing them on their list of blacklisted sites and so they fought back by tinkering with the NoScript code to evade the prohibition.  Adblock responded by further tinkering with their code to circumvent the circumvention!  And then, as they say, words were exchanged.

Thus, a war of words and code took place.  In the end, however, it had a (generally) happy ending with NoScript backing down and apologizing. Regardless, Mr. Dzuiba doesn’t like the way things played out:

The real cause of this dispute is something I like to call Nerd Law.  Nerd Law is some policy that can only be enforced by a piece of code, a public standard, or terms of service. For example, under no circumstances will a police officer throw you to the ground and introduce you to his friend the Tazer if you crawl a website and disrespect the robots.txt file. The only way to adjudicate Nerd Law is to write about a transgression on your blog and hope that it gets to the front page of Digg. Nerd Law is the result of the pathological introversion software engineers carry around with them, being too afraid of confrontation after that one time in high school when you stood up to a jock and ended up getting your ass kicked.

Dziuba goes on to suggest that “If you actually talk to people, network, and make agreements, you’ll find that most are reasonable” and, therefore, this confrontation and resulting public fight could have been avoided. They “could have come to a mutually-agreeable solution,” he says.

But no. Sadly, software engineers will do what they were raised to do. And while it may be a really big hullabaloo to a very small subset of people who Twitter and blog their every thought as if anybody cared, to the rest of us, it just reaffirms our knowledge that it’s easy to exploit your average introvert.  After all, what’s he gonna do? Blog about it?

OK, so maybe the developers could have come to some sort of an agreement if they had opened direct channels of communications or, better yet, if someone at the Mozilla Foundation could have intervened early on and mediated the dispute.  At the end of the day, however, that did not happen and a public “Nerd War”  ensued.  But I’d like to say a word in defense of Nerd Law and public fights about “a piece of code, a public standard, or terms of service.”

What we had here was a code war that, despite some nastiness, was resolved reasonably well and on a reasonably timely basis.  Now, imagine if this sort of dispute had gone legal, or worse yet, been subjected to a federal regulatory proceeding.  Can you imagine the Federal Communications Commission being asked to adjudicate such a thing!  Next time you hear of a major dispute coming before the commission, start your stopwatch and pray that it doesn’t die before the FCC finally gets around to rendering its judgment on the matter at hand. Worse yet, sit back and watch as entire forests will fall from the resulting paperwork war as both sides hire teams of lawyers, economists, and consultants to file an endless stream of indecipherable documents with the Commission.

What got me thinking about all this is that recently I’ve been critiquing Lessig’s “code-is-law” thesis and pointing out that code really doesn’t have the same force as law, and thank God it doesn’t!  Precisely because it does not have the coercive capacity of actual law or regulation it means that code developers must use other means to persuade competitors or the public to side with them in disputes.  It means that code developers must find ways to innovate around problems, sometimes even creating messy code wars in the process.  And yes, it sometimes means that, when that process goes badly, a war of words may take place online.  But still, isn’t that better than the legal alternative or a regulatory approach?

And, so, when Mr. Dziuba suggests that “The only way to adjudicate Nerd Law is to write about a transgression on your blog and hope that it gets to the front page of Digg,” I guess I just don’t see as much of a downside to that approach as he does.  I share his belief that it would be nice to get both sides to a table to talk and hopefully to hammer out an agreement, but sometimes that doesn’t always happen in cyberspace or in realspace for that matter. What’s going on here is the same game that companies and unions have been playing for years:  Push the envelope in public by any means necessary to drive a better bargaining position when you eventually must come to the table and reach an agreement.  Athletes and sports clubs do the same thing.

Thus, I am rather fond of “Nerd Law,” or “Code Wars” or whatever you want to call it. (Perhaps “hard-nosed public negotiations” is the better umbrella term).  Let coders have their fights and air their dirty laundry in public because, at the end of the day, that process will likely reach a better conclusion than if they took a highly legalistic or regulatory approach to things.  I do not mean to suggest that law or regulation never has a place in resolving disputes. Rather, I am suggesting that the sheer cost of the legal / regulatory route — in terms of time, money, lost innovation opportunities, etc — makes is generally sub-optimal when compared to relying on non-legal means of dispute resolution.

So, let the coders have their Nerd Wars, I say.  And let the best code win.

Over at the Verizon Policy Blog, Link Hoewing has a sharp piece up entitled, “Of Business Models and Innovation.” He makes a point that I have often stressed in my debates with Zittrain and Lessig, namely, that the whole “open vs. closed” debate is typically greatly overstated or misunderstood.   Hoewing correctly argues that:

The point is not that open or managed models are always better or worse.  The point is that there is no one “right” model for promoting innovation.  There are examples of managed and open business models that have been both good for innovation and bad for it. There are also examples of managed and open models that have both succeeded and failed.  The point is in a competitive market to let companies develop business models they believe will serve consumers best and see how things play out.

Exactly right.  Moreover, the really important point here is that there exists a diverse spectrum of innovative digital alternatives from which to choose. Along the “open vs. closed” spectrum, the range of digital technologies and business models continues to grow and grow in both directions.  Do you want wide-open, tinker-friendly devices, sites, or software? You got it. Do you want a more closed, simple, and safe online experience?  You can have that, too.  And there are plenty of choices in between.

This is called progress!

The Isle of Man may soon implement a “blanket license” whereby Manx broadband users could download as much music as they like in exchange for paying a “fee” (also known as a “tax,” since this would be non-optional) to their ISP that would supposedly be as low as $1.38/month.  The Manx proposal sounds a lot like how SoundExchange administers a blanket license in the U.S. for web-casting of copyrighted music:

the money collected by the Internet providers would be sent to a special agency that would distribute the proceeds to the copyright owners, including the record labels and music publishers. They would receive payments based on how often their music was downloaded or streamed over the Internet, as they now do in many countries when it is performed live or on the radio.

As Adam Thierer has noted,  Larry Lessig has endorsed at least a voluntary version of this idea, but Adam has raised a number of tough questions:

How do we determine who should get paid what under a blanket licensing system for the Net? What formula shall we use to determine why one artists gets more than another? After all, counting downloads won’t be simple, and it can be gamed. Lessig says that “there are plenty of ways that we might tag and trace particular uses of copyrighted material.” (p. 272)  Really? If that was the case today, then we would have a fully functioning copyright clearance and compensation system in place already. But “tagging and tracing” is easier said than done. The fact is, the same complexities we face trying to enforce such tagging and tracing systems under the present copyright system would be present in any compulsory licensing system…. There are many thorny questions about the fairness of imposing a blanket fee on all online users even if they don’t listen to any music, or those who would be offended at the prospect of being forced to pay for certain types of music (think of grandmas paying for gangsta rap). On the opposite end of the equation, there’s the question of fairness to artists who may not want to surrender the rights to their musical creations at government-set terms and rates. Finally, what about other types of media creators and distributors? If we’re going to have a blanket fee for online music, why not movies, television content, video games, and everything else?

For further reading, check out “What’s Wrong with ISP Music Licensing” by copyright gurus Chris Castle and Amy Mitchell and this 2004 Cato study by Robert Merges.  Not being a copyright expert, I don’t really have anything more to add on this issue.  But I look forward to hearing what our readers—and my co-bloggers—think.

Before commenting on Lawrence Lessig’s latest call to abolish the Federal Communications Commission (he issued a similar call for the FCC’s abolition earlier this year, which I commented on here), let’s recall what Tim Lee posted yesterday about “Real Regulators“:

Too many advocates of regulation seem to have never considered the possibility that the FCC bureaucrats in charge of making these decisions at any point in time might be lazy, incompetent, technically confused, or biased in favor of industry incumbents. That’s often what “real regulators” are like, and it’s important that when policy makers are crafting regulatory scheme, they assume that some of the people administering the law will have these kinds of flaws, rather than imagining that the rules they write will be applied by infallible philosopher-kings.

Ironically, Prof. Lessig — who typically defends many forms of high-tech regulation like Net neutrality and online content labeling — is essentially agreeing with Tim’s critique of bureaucracy. But Lessig seems to ignore the underlying logic of Tim’s critique and instead imagines that we need only reinvent bureaucracy in order to save it. But I’m getting ahead of myself. First, let’s hear what Lessig proposes.

In a Newsweek column this week entitled “Reboot the FCC,” Lessig argues that the FCC is beyond saving because, instead of protecting innovation, the agency has succumb to an “almost irresistible urge to protect the most powerful instead.” Consequently, he continues:

The solution here is not tinkering. You can’t fix DNA. You have to bury it. President Obama should get Congress to shut down the FCC and similar vestigial regulators, which put stability and special interests above the public good. In their place, Congress should create something we could call the Innovation Environment Protection Agency (iEPA), charged with a simple founding mission: “minimal intervention to maximize innovation.” The iEPA’s core purpose would be to protect innovation from its two historical enemies–excessive government favors, and excessive private monopoly power.

As was the case with his earlier call to “blow up the FCC,” I am tickled to hear Lessig call for shutting down an agency that many of us have been fighting against for the last few decades. (Here’s a 1995 blueprint for abolishing the FCC that I contributed to, and here’s PFF’s recent “DACA” project to comprehensively reform and downsize the agency.)

But is Lessig really calling for the same sort of sweeping regulatory reform and downsizing that others have been calling for? And has he identified the real source of the problem that he hopes to correct?  I don’t think so. There are 3 basic problems with the argument Lessig is putting forward in his essay. I will address each in turn.

(1) Real Reform or Just Reshuffling of Deck Chairs?

The first problem is that Lessig isn’t really calling for complete abolition of the FCC; just the transfer of many of its regulatory responsibilities to the supposedly less “corrupt” new Innovation Environment Protection Agency (iEPA). As you read the paragraphs below, note how in the process of re-branding the FCC as the “iEPA,” Lessig seems to be handing that new agency a lot of the FCC’s old powers:

The iEPA’s first task would thus be to reverse the unrestrained growth of these monopolies. For example, much of the wireless spectrum has been auctioned off to telecom monopolies, on the assumption that only by granting a monopoly could companies be encouraged to undertake the expensive task of building a network of cell towers or broadcasting stations. The iEPA would test this assumption, and essentially ask the question: do these monopolies do more harm than good? With a strong agency head, and a staff absolutely barred from industry ties, the iEPA could avoid the culture of favoritism that’s come to define the FCC. And if it became credible in its monopoly-checking role, the agency could eventually apply this expertise to the area of patents and copyrights, guiding Congress’s policymaking in these special-interest hornet nests. The iEPA’s second task should be to assure that the nation’s basic communications infrastructure spectrum— the wires, cables and cellular towers that serve as the highways of the information economy—remain open to new innovation, no matter who owns them. For example, “network neutrality” rules, when done right, aim simply to keep companies like Comcast and Verizon from skewing the rules in favor of or against certain types of content and services that run over their networks. The investors behind the next Skype or Amazon need to be sure that their hard work won’t be thwarted by an arbitrary decision on the part of one of the gatekeepers of the Net. Such regulation need not, in my view, go as far as some Democrats have demanded. It need not put extreme limits on what the Verizons of the world can do with their network—they did, after all, build it in the first place—but no doubt a minimal set of rules is necessary to make sure that the Net continues to be a crucial platform for economic growth. Beyond these two tasks, what’s most needed from the iEPA is benign neglect. Certainly, it should keep competition information flowing smoothly and limit destructive regulation at the state level, and it might encourage the government to spend more on public communications infrastructure, for example in the rural areas which private companies often ignore.

“But beyond these limited tasks, ” Lessig claims, “whole phone-books worth of regulation could simply be erased. And with it, we would remove many of the levers that lobbyists use to win favors to protect today’s monopolists.”

Again, from what he’s said here, it sure doesn’t sound like “whole phone books worth of regulation” are being erased. What Lessig has done is essentially restate the current powers and responsibilities of the FCC.  I don’t see much serious downsizing being proposed here at all. Indeed, his call for Net neutrality regulation represents an expansion of bureaucracy.

Instead, what Lessig seems to be saying is that the new iEPA will do the job right because it will be less “corrupt” and enlightened. But that’s not true either.

(2) What Larry Doesn’t Get (about Bureaucracy)

Lessig is essentially calling for the same sort of “scientific” or “professional” bureaucracy that his progressive forefathers advocated a century ago when the modern regulatory leviathan was being envisioned and erected. But what has changed since then? Nothing. Special interests were able to gain influence then just as they do now.

This gets back to Tim Lee’s point about how many pundits and policymakers foolishly believe that everything will magically be better once rules are “applied by infallible philosopher-kings.” Apparently Lessig believes that lots of those folks will be walking the halls at the new iEPA. They’ll somehow be immune from the the “almost irresistible urge to protect the most powerful” that FCC bureaucrats have fallen prey to.

But Lessig provides no rational reason for us to believe that this will really be the case. And really, why should we believe that story? Do we have any good historical evidence to support such a proposition? To the contrary, everything we know from the history of regulation and bureaucracy tells us that exactly the opposite will be the case.

As I so often do when I debate quixotic progressives who say they can construct a more “enlightened” regulatory state, I invite Prof. Lessig to take a hard look at the definitive 2-volume Economics of Regulation by a far more experienced progressive Democrat, Professor Alfred E. Kahn. In Kahn’s masterwork, Prof. Lessig will find the following words of wisdom (and caution) from someone who spent a lifetime studying the issue:

When a commission is responsible for the performance of an industry, it is under never completely escapable pressure to protect the health of the companies it regulates, to assure a desirable performance by relying on those monopolistic chosen instruments and its own controls rather than on the unplanned and unplannable forces of competition.  … Responsible for the continued provision and improvement of service, [the regulatory commission] comes increasingly and understandably to identify the interest of the public with that of the existing companies on whom it must rely to deliver goods.

(3) No Right to Petition Government ?

At this point, Prof. Lessig and his defenders will no doubt say that everything will be different this time around when they reinvent bureaucracy. The secret, they seem to suggest, is “getting money out of politics” or “ending corruption” by “special interests.” Again, hard to argue against any of that — except to say as we have here many times before that if Big Government exists, special interests will exist to influence it (probably unduly so). Thus, the logical solution is real regulatory reform and downsizing of bureaucracy. That is the only way we are ever really going to solve the problem Prof. Lessig wants to address.

But Prof. Lessig and his supporters are obviously not going to accept that. What they want is government activism without the ugly downsides of lobbying and special interest influence polluting the process. Is there any way to do it? Again, for the reasons I have stated here, I doubt it. But what, exactly, would it mean in practice to let them try?  I fear that what Prof. Lessig and many other “progressives” mean by “ending special interest influence” is really ending the free speech rights of citizens to petition their government if those citizens happen to be corporations.

Let’s remember what the First Amendment says:

“Congress shall make no law … abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.”

Now, I certainly realize how unpopular this will be to some, but if you believe in the plain text of the Constitution then you should respect the right of citizens (including corporate entities) to petition (i.e., “lobby”) the government for consideration of their interests, especially if the government is imposing significant regulatory burdens on them. Calling for limits on the ability of the regulated to petition their regulators is a fundamental betrayal of the plain language of the First Amendment.

I don’t want to put words in Prof. Lessig’s mouth, but I have a feeling that this is where his proposal is heading. He says that the staff of his new iEPA will be “absolutely barred from industry ties” but doesn’t really spell out what that means. If it just means limits on who can be hired for certain positions in the new agency, I’m generally fine with that (even though I do not for one minute believe it will magically “end corruption.”) If, however, Lessig and his fellow progressives want rules restricting the ability of “interests” to communicate with this new agency, then I find such a proposal quite troubling.

One final point: What exactly counts as a “special interest”? No doubt, Lessig and other progressives equate interests with corporations. But what about unions, co-ops, non-profits, schools, charities, think tanks, etc.?  They all petition government endlessly. Would Lessig limit their rights?

I hope Prof. Lessig takes the time to ellaborate on his proposal because he may have good answers to many of the quibbles I have raised here. I really do want to take him at his word and believe that he is ready to radically reform the regulatory beast that has so completely failed in its mission to improve consumer welfare.  But I have my doubts. And, sadly, I have history on my side.

Over just the past 24 hours, there’s been quite a hullabaloo surrounding the Wall Street Journal’s controversial front-page story on Google’s edge caching plan and whether it violates Net neutrality. (See Cord’s post and Bret’s). Lessig calls it a “made-up drama“, David Isenberg says it’s “bogus” and “bullshit,” and Google’s Rick Whitt has said it’s much ado about nothing.

Regardless, here’s the important thing not to overlook about this episode: It is a prime example of the what Tim Lee has referred to as “the fundamental problem of backlash” that ensues whenever there is even a hint of a potential violation of network neutrality (however one defines it). As Tim argued in his excellent Cato paper on Net neutrality, “No widespread manipulation would go unnoticed for very long,” and a “firestorm of controversy would… be unleashed if a major network owner embarked on a systematic campaign of censorship on its network.” (p. 23). Indeed, this (non-)story about Google’s edge-caching plans have spawned an intense “firestorm of controversy” over the past 24 hours and it doesn’t even involve serious network meddling or censorship! I’ve been trying to keep up with all the traffic about this on TechMeme and Google News during that time, but I have given up trying to digest it all. (Take a look at those snapshots I pasted down below to get a feel for the volume we are talking about here).

In that regard, I love this quote from the always-bloodthirsty Tim Karr of the (inappropriately-named) regulatory activist group Free Press:

If Google or any other tech company were secretly violating Net Neutrality, there would be an absolute and cataclysmic backlash from the grassroots and netroots who have made Net Neutrality a signature issue in 21st Century politics. The Internet community would come crashing down on their heads like Minutemen on Benedict Arnold.

Indeed, that’s exactly what we saw today. But it wasn’t just pro-regulatory fanatics like Free Press. The entire tech and business blogoshere and even some of the mainstream media were on top of this. That’s the “fundamental problem of backlash” at work, and with a vengeance.