Ian Brown and Christopher T. Marsden’s new book, Regulating Code: Good Governance and Better Regulation in the Information Age, will go down as one of the most important Internet policy books of 2013 for two reasons. First, their book offers an excellent overview of how Internet regulation has unfolded on five different fronts: privacy and data protection; copyright; content censorship; social networks and user-generated content issues; and net neutrality regulation. They craft detailed case studies that incorporate important insights about how countries across the globe are dealing with these issues. Second, the authors endorse a specific normative approach to Net governance that they argue is taking hold across these policy arenas. They call their preferred policy paradigm “prosumer law” and it envisions an active role for governments, which they think should pursue “smarter regulation” of code.

In terms of organization, Brown and Marsden’s book follows the same format found in Milton Mueller’s important 2010 book Networks and States: The Global Politics of Internet Governance; both books feature meaty case studies in the middle bookended by chapters that endorse a specific approach to Internet policymaking. (Incidentally, both books were published by MIT Press.) And, also like Mueller’s book, Brown and Marsden’s Regulating Code does a somewhat better job using case studies to explore the forces shaping Internet policy across the globe than it does making the normative case for their preferred approach to these issues.

Thus, for most readers, the primary benefit of reading either book will be to see how the respective authors develop rich portraits of the institutional political economy surrounding various Internet policy issues over the past 10 to 15 years. In fact, of all the books I have read and reviewed in recent years, I cannot think of two titles that have done a better job developing detailed case studies for such a diverse set of issues. For that reason alone, both texts are important resources for those studying ongoing Internet policy developments.

That’s not to say that both books don’t also make a solid case for their preferred policy paradigms, it’s just that the normative elements of the texts are over-shadowed by the excellent case studies. As a result, readers are left wanting more detail about what their respective policy paradigms would (or should) mean in practice. Regardless, in the remainder of this review, I’ll discuss Brown and Marsden’s normative approach to digital policy and contrast it with Mueller’s since they stand in stark contrast and help frame the policy battles to come on this front.

Governing Cyberspace: Mueller vs. Brown & Marsden

Mueller’s normative goal in Networks and States was to breathe new life into the old cyber-libertarian philosophy that was more prevalent during the Net’s founding era but which has lost favor in recent years. He made the case for a “cyberliberty” movement rooted in what he described as a “denationalized liberalism” vision of Net governance. He argued that “we need to find ways to translate classical liberal rights and freedoms into a governance framework suitable for the global Internet. There can be no cyberliberty without a political movement to define, defend, and institutionalize individual rights and freedoms on a transnational scale.”

I wholeheartedly endorsed that vision in my review of Mueller’s book, even if he was a bit short on the details of how to bring it about. But it is useful to keep Mueller’s paradigm in mind because it provides a nice contrast with the approach Brown and Marsden advocate, which is quite different.

Generally speaking, Brown and Marsden reject most forms of “Internet exceptionalism” and certainly reject the sort of “cyberliberty” ethos that Mueller and I embrace. They instead endorse a fairly broad role for governments in ordering the affairs of cyberspace. In their self-described “prosumer” paradigm, the State is generally viewed as benevolent actor, well-positioned to guide the course of code development toward supposedly more enlightened ends.

Consistent with the strong focus on European policymaking found throughout the book, the authors are quite enamored with the “co-regulatory” models that have become increasing prevalent across the continent. Like many other scholars and policy advocates today, they occasionally call for “multi-stakeholderism” as a solution but they do not necessarily mean the sort of truly voluntary, bottom-up multi-stakeholderism of the Net’s early days. Rather, they are usually thinking of multi-stakeholderism as what is essentially pluralistic politics; it’s the government setting the table, inviting the stakeholders to it, and then guiding (or at least “nudging”) policy along the way. “We are convinced that fudging with nudges needs to be reinforced with the reality of regulation and coregulation, in order to enable prosumers to maximize their potential on the broadband Internet,” they say. (p. 187)

Meet the New Boss, Same as the Old Boss?

Thus, despite the new gloss, their “prosumer law” paradigm ends up sounding quite a bit like a rehash of traditional “public interest” law and common carrier regulation, albeit with a new appreciation of just how dynamics markets built on code can be. Indeed, Brown and Marsden repeatedly acknowledge how often law and regulation fails to keep pace with the rapid evolution of digital technology. “Code changes quickly, user adoption more slowly, legal contracting and judicial adaptation to new technologies slower yet, and regulation through legislation slowest of all,” they correctly note (p. xv). This reflects what Larry Downes refers to as the most fundamental “law of disruption” of the digital age: “technology changes exponentially, but social, economic, and legal systems change incrementally.”

At the end of the day, however, that insight doesn’t seem to inform Brown and Marsden’s policy prescriptions all that much. Theirs is a world in which policy tinkering errors will apparently be corrected promptly and efficiently by still more policy tinkering, or “smarter regulation.” Moreover, like many other Internet policy scholars today, they don’t mind regulatory interventions that come early and often since they believe that will help regulators get out ahead of the technological curve and steer markets in preferred directions. “If regulators fail to address regulatory objects at first, then the regulatory object can grow until its technique overwhelms the regulator,” they say (p. 31).

This is the same mentality that is often on display in Tim Wu’s work, which I have been quite critical of here and elsewhere. For example, Wu has advocated informal “agency threats” and the use of “threat regimes” to accomplish policy goals that prove difficult to steer though the formal democratic rulemaking process. As part of his “defense of regulatory threats in particular contexts,” Wu stresses the importance of regulators taking control of fast-moving tech markets early in their life cycles. “Threat regimes,” Wu argues, “are best justified when the industry is undergoing rapid change — under conditions of ‘high uncertainty.’ Highly informal regimes are most useful, that is, when the agency faces a problem in an environment in which facts are highly unclear and evolving. Examples include periods surrounding a newly invented technology or business model, or a practice about which little is known,” Wu concludes.

This is essentially where most of the “co-regulation” schemes that Brown and Marsden favor would take us: Code regulators would take an active role in shaping the evolution of digital technologies and markets early in its life cycle. What are the preferred regulatory mechanisms? Like Wu and many other cyberlaw professors today, Brown and Marsden favor robust interconnection and interoperability mandates bolstered by antitrust actions as well. And, again, they aren’t willing to wait around and let the courts adjudicate these issues in an ex post fashion. “Essential facilities law is a very poor substitute for the active role of prosumer law that we advocate, especially in its Chicago school minimalist phase” (p. 185). In other words, we shouldn’t wait for someone to bring a case and litigate it through the courts when preemptive, proactive regulatory interventions can sagaciously steer us to a superior end.

More specifically, they propose that “competition authorities should impose ex ante interoperability requirements upon dominant social utilities… to minimize network barriers” (p. 190) and they model this on traditional regulatory schemes such as must-carry obligations, API interface disclosure requirements, and other interconnection mandates (such as those imposed on AOL/Time Warner a decade ago to alleviate fears about instant messaging dominance). They also note that “Effective, scalable state regulation often depends on the recruitment of intermediaries as enforcers” to help achieve various policy objectives (p. 170).

The Problem with Interoperability Über Alles

So, in essence, the Brown-Marsden Internet policy paradigm might be thought of as interoperability über alles. Interoperability and interconnection in pursuit of more “open” and “neutral” systems is generally considered an unalloyed good and most everything else is subservient to this objective.

This is a serious policy error and one that I address in great detail in my absurdly long review of John Palfrey and Urs Gasser’s Interop: The Promise and Perils of Highly Interconnected Systems. I’m not going to repeat all 6,500 words of that critique here when you can just click back and read it, but here’s the high level summary: There is no such thing as “optimal interoperability” that can be determined in an a priori fashion. 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.

More importantly, when interoperability is treated as sacrosanct and forcibly imposed through top-down regulatory schemes, it will often have many unintended consequences and costs. It can even lock in existing market power and market structures by encouraging users and companies to flock to a single platform instead of trying to innovate around it. (Go back and take a look at how the “Kingsbury Commitment” — the interconnection deal from the early days of the U.S. telecom system — actually allowed AT&T to gain greater control over the industry instead of assisting independent operators.)

Citing Palfrey and Gasser, Brown and Marsden do note that “mandated interoperability is neither necessary in all cases nor necessarily desirable” (p. 32), but they don’t spend as much time as Palfrey and Gasser itemizing these trade-offs and the potential downsides of some interoperability mandates. But what frustrates me about both books is the almost quasi-religious reverence accorded to interoperability and open standards when such faith is simply not warranted after historical experience is taken into consideration.

Plenty of the best forms of digital innovation today are due to a lack of interoperability and openness. Proprietary systems have produced some of the most exciting devices (iPhone) and content (video games) of modern times. Then again, voluntary interoperable and “open” services and devices thrive, too. The key point here — and one that I develop in far greater detail in my book chapter, “The Case for Internet Optimism, Part 2 – Saving the Net From Its Supporters” — is that the market for digital services is working marvelously and providing us with choices of many different flavors. Innovation continues to unfold rapidly in both directions along the “open” vs. “closed” continuum. (Here are 30 more essays I have written on this topic if you need more proof.)

Generally speaking, we should avoid mandatory interop and openness solutions. We should instead push those approaches and solutions in a truly voluntary, bottom-up fashion. And, more importantly, we should be pushing for outside-the-box solutions of the Schumpeterian (creative destruction / disruptive innovation) variety instead of surrendering so quickly on competition through forced sharing mandates.

The Case for Patience & Policy Restraint

But Brown and Marsden clearly do not subscribe to that sort of Schumpeterian thinking. They think most code markets tip and lock into monopoly in fairly short order and that only wise interventions can rectify that. For example, they claim that Facebook’s “monopoly is now durable,” which will certainly come as a big surprise to the millions of us who do not use it all. And the story of MySpace’s rapid rise and equally precipitous fall has little bearing on this story, they argue.

But, no matter how you define the “social networking market,” here are two facts about it: First, it is still very, very young. It’s only about a decade old. Second, in that short period of time, we have already witnessed the entire first generation of players fall by the wayside. While the second generation is currently dominated by Facebook, it is by no means alone. Again, millions like me don’t use it at all and get along just fine with other “social networking” technologies, including Twitter, LinkedIn, Google+, and even older tech like email, SMS, and yes, phone calls! Accusations of “monopoly” in this space strain credulity in the extreme. I invite you to read my Mercatus working paper, “The Perils of Classifying Social Media Platforms as Public Utilities,” for a more thorough debunking of this logic. (Note: The final version of that paper will be published in the CommLaw Conspectus shortly.)

Such facts should have a bearing on the debate about regulatory interventions. We continue to witness the power of Schumpeterian rivalry as new and existing players battle in a race for the prize of market power. Brown and Marsden fear that the race is already over in many sectors and that it is time to throw in the towel and get busy regulating. But when I look around at the information technology marketplace today, I am astonished just how radically different it looks from even just a few years ago, and not just in the social media market. I have written extensively about the smartphone marketplace, where innovation continues at a frantic pace. As I noted in my essay here on “Smartphones & Schumpeter,” it’s hard to remember now, but just 6 short years ago:

• The iPhone and Android had not yet landed.
• Most of the best-selling phones of 2007 were made by Nokia and Motorola.
• Feature phones still dominated the market; smartphones were still a luxury (and a clunky luxury at that).
• There were no app stores and what “apps” did exist were mostly proprietary and device or carrier-specific; and,
• There was no 4G service.

It’s also easy to forget just how many market analysts and policy wonks were making absurd predictions at the time about how the telecom operators at the time had so much market power that they would crush new innovation without regulation. Instead, in very short order, the market was completely upended in a way that mobile providers never saw coming. There was a huge shift in relative market power flowing from the core of these markets to the fringes, especially to Apple, which wasn’t even a player in that space before the launch of the iPhone.

As I noted in concluding that piece last year, these facts should lead us to believe that this is a healthy, dynamic marketplace in action. Not even Schumpeter could have imagined creative destruction on this scale. (Just look as BlackBerry). But much the same could be said of many other sectors of the information economy.  While it is certainly true that many large players exist, we continue to see a healthy amount of churn in these markets and an astonishing amount of technological innovation.

Public Choice Insights: What History Tells Us

One would hope these realities would have a greater bearing on the policy prescriptions suggested by analysts like Brown and Marsden, but they don’t seem to. Instead, the attitude on display here is that governments can, generally speaking, act wisely and nudge efficiently to correct short-term market hiccups and set us on a better course. But there are strong reasons to question that presumption.

Specifically, what I found most regrettable about Brown and Marsden’s book was the way — like all too many books in this field these days — the authors briefly introduce “public choice” insights and concerns only to summarily dismiss them as unfounded or overblown. (See my review of Brett Frischmann’s book, Infrastructure: The Social Value of Shared Resources for a more extended discussion of this problem as it pertains to discussions about not just infrastructure regulation by the regulation of all complex industries and technologies.)

Brown and Marsden make it clear that their intentions are pure and that their methods would incorporate the lessons of the past, but they aren’t very interested in dwelling on the long, lamentable history of regulatory failures and capture in the communications and media policy sectors. They do note the dangers of a growing “security-industrial complex” and argue that “commercial actors dominate technical actors in policy debates.” They also say that the “potential for capture by regulated interests, especially large corporate lobbies, is an essential insight” that informs their approach. The problem is that it really doesn’t. They largely ignore those insights and instead imply that, to the extent this is a problem at all, we can build a better breed of bureaucrats going forward who will craft “smarter regulation” that is immune from such pressures. Or, they claim that “multi-stakeholderism” — again, the new, more activist and government-influenced conception of it — can overcome these public choice problems.

A better understanding of power politics that is informed by the wisdom of the ages would instead counsel that minimizing the scope of politicization of technology markets is the better remedy. Capture and cronyism in communications and media markets has always grown in direct proportion to the overall scope of law governing those sectors. (I invite you to read all the troubling examples of this that Brent Skorup and I have documented in our new 72-page working paper, “A History of Cronyism and Capture in the Information Technology Sector.” Warning: It makes for miserable reading but proves beyond any doubt that there is something to public choice concerns.)

To be clear, it’s not that I believe that “market failures” or “code failures” never occur, rather, as I noted in this debate with Larry Lessig, it’s that such problems are typically “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).” It’s not just that traditional regulatory remedies cannot keep pace with code markets, it’s that those attempting to craft the remedies do not possess the requisite knowledge needed to know how to steer us down a superior path. (See my essay, “Antitrust & Innovation in the New Economy: The Problem with the Static Equilibrium Mindset,” for more on that point.)

Regardless, at a minimum, I expect scholars to take seriously the very real public choice problems at work in this arena. You cannot talk about the history of these sectors without acknowledging the horrifically anti-consumer policies that were often put in place at the request of one industry or another to shield themselves from disruptive innovation. No amount of wishful thinking about “prosumer” policies will change these grim political realities. Only by minimizing chances to politicize technology markets and decisions can we overcome these problems.

Conclusion

For those of us who prefer to focus on freeing code, Brown and Marsden’s Regulating Code is another reminder that liberty is increasingly a loser in Internet policy circles these days. Milton Mueller’s dream of decentralized, denationalized liberalism seems more and more unlikely as armies of policymakers, regulators, special interests, regulatory advocates, academics, and others all line up and plead for their pet interest or cause to be satisfied through pure power politics. No matter what you call it — fudging, nudging, coregulation, smart regulation, multistakeholderism, prosumer law, or whatever else, — there is no escaping the fact that we are witnessing the complete politicization of almost every facet of code creation and digital decisionmaking today.

Despite my deep reservations about a more politicized cyberspace, Brown and Marsden’s book is an important text because it is one of the most sophisticated articulations and defenses of it to date. Their book also helps us better understand the rapidly developing institutional political economy of Internet regulation in both broad and narrow policy contexts. Thus, it is worth your time and attention even if, like me, you are disheartened to be reading yet another Net policy book that ultimately endorses mandates over of markets as the primary modus operandi of the information age.

Additional Resources about the book:

• the official MIT Press website for Regulating Code
• shorter Brown & Marsden paper on “Prosumer Law” (via SSRN)
• Little Atoms podcast featuring Brown & Marsden discussing Regulating Code
• Ian Brown edited this beefy Research Handbook On Governance Of The Internet, which makes a nice complement to Regulating Code. It offers even more detailed case studies on the major issues featured in the book. A terrific resource (if you can afford it!)
• a video of Brown & Marsden discussing the book at the Oxford Internet Institute (also embedded below):

Other books you should read alongside “Regulating Code” (links are for my reviews of each):

• Milton Mueller’s Networks and States: The Global Politics of Internet Governance
• John Palfrey & Urs Gasser’s Interop: The Promise and Perils of Highly Interconnected Systems
• Rebecca MacKinnon’s Consent of the Networked: The Worldwide Struggle for Internet Freedom
• David G. Post’s In Search of Jefferson’s Moose: Notes on the State of Cyberspace
• Christopher Yoo’s The Dynamic Internet: How Technology, Users, and Businesses are Transforming the Network
• Larry Lessig’s Code (my 2-part exchange with Lessig upon Code’s 10^th anniversary: Part 1, Part 2)

If you follow me on Twitter, you’ll see in among the last several weeks’ dreck some Tweets skeptical of various themes about the Tea Party movement—chiefly that they’re significantly racist/xenophobic, or that they’re handmaidens of figures like Glenn Beck or Sarah Palin.

I may have been bending over backwards to resist attempts to define the Tea Party movement. In secret, I’ve thought about parallels to punk rock, which seemed at times to have as many strains as people. Part of being punk was not fitting into anyone else’s categories, and the Tea Party seems to have this quality—rejecting Washington, D.C.’s party labels and ideological affiliations.

Well, I’ve finally come across a careful assessment of the Tea Party movement. National Journal‘s Jonathan Rauch spent a good deal of time studying the Tea Party movement and came up with the article (and video), “How Tea Party Organizes Without Leaders.”

The winner paragraph for me:

“Essentially what we’re doing is crowd-sourcing,” says Meckler, whose vocabulary betrays his background as a lawyer specializing in Internet law. “I use the term open-source politics. This is an open-source movement.” Every day, anyone and everyone is modifying the code. “The movement as a whole is smart.”

I do believe there is something special about the Tea Party movement. Somewhat like the Internet regards censorship as damage and routes around it, the Tea Party routes around centralizers’ attempts to capture its mojo.

There are plenty working to capture its mojo: Right-wing and Republican leaders are using it to aggrandize themselves, marching in front of the Tea Party for TV cameras and newspapers. Left-wing groups and progressives are searching for—and finding—the racism and xenophobia that unfortunately does exist in any large collection of average Americans. The decentralized character of the Tea Party movement makes it easy for charlatans to claim its mantle and fund-raise deceptively on the “Tea Party” brand.

There are some bad people in the Tea Party movement, just like there are some bad users of the Internet. But overall a self-organizing political/cultural network will produce better things—and faster—than a hierarchical organization.

I’d love to have the Tea Party movement push for exquisitely libertarian outcomes, and I regret hearing Tea Party participants veer into anything resembling racism, fear of Islam, or anti-immigration rhetoric, but I don’t get to own the Tea Party either.

If there is a theme that doesn’t unfairly push the Tea Party movement into a box, I think it’s “self-government.” It seems like Tea Partiers are tired of being told how to do their politics, tired of being told how their government is going to run them. On the whole, I’ll stand up for a network of people who think like that—but don’t try to push me into a box either.

Update: David Boaz has written an excellent post at Cato@Liberty about the Tea Party movement’s relationships to libertarianism and social conservatism.

I’ve been wading through the FCC’s latest Mobile Wireless Competition Report, and articles about it trying to make sense of what the the agency might be up to on this front.  It’s hard to get a read on where the agency may be going here. As my PFF colleague Mike Wendy suggested in his post on the FCC’s report, “far from press reports which state the FCC clearly determined the market is not ‘effectively competitive,’ well, that’s wrong. In fact, the FCC fails to make any such determination whatsoever.”  Moreover, just flipping through the charts and tables of the 237-page report, one is struck by how dynamic this marketplace is, and how crazy it would be for the FCC to declare it anything other than effectively competitive and highly innovative.

Yet, the FCC and many others seem hung up on industry structure. In particular, there seems to be a lot of hand-wringing about increasing consolidation among the sector’s top players.  But the data the FCC reproduces in the report seem to undermine that concern. For example, here’s a snapshot of the “Mobile Market Structure in Selected Countries,” which appears on pg. 197 of the FCC report.  It shows how much more consolidated foreign mobile markets are relative to the U.S., which is true of wireline markets too.  And you can find much more evidence of how competitive the marketplace is in these two reports.

Nonetheless, it is still they case that the mobile marketplace is experiencing more consolidation these days. It’s nothing to fret about, however. The sky isn’t about to fall on consumers as some seemingly fear. The problem with this “big-is-bad” thinking is that it fails to understand the nature of competition in network industries. The economics of network industries are not those of a corner lemonade stand. We’re never going to have hundreds or even dozens of companies providing the underlying backbone over which bits of information travel. There are significant sunk costs associated with providing network services. Deploying all these network alone is a nightmare. Rolling out a sophisticated and reliable wireless architecture is incredibly costly and labor-intensive. Just siting all the towers, for example, can be cumbersome and get quite expensive.  And then there are the endless “truck rolls” to fix tiny problems and upgrade facilities.

The bottom line is this: The networking business is for big boys, and there are only going to be so many big boys that will ever be able to stick with it and turn a profit to keep those networks functioning properly while also planning for future innovations and upgrades. We learned this lesson the hard way in the late 1990s as we witnessed the FCC conduct a grand experiment with infrastructure sharing in an effort to create more competition in the telecom business. The idea was simple: Let’s provide small telecom resellers every possible incentive to use the networks owned by incumbent telecom companies so we can create a new crop of “competitors.” It was obvious that this scheme was never going to produce any legitimate new network competitors, but what was so interesting about this misguided episode in regulatory planning was that it didn’t even produce any reliable “fake” competitors either. The resellers that were given access to existing networks were never able to concoct a legitimate business model to convince investors (or even that many customers) that they were worthwhile investments. These resellers create networks built of paper instead of serious, facilities-based networks. As a result, almost all of them went under.  Again, the hard lesson here was that the networking business is not a Mom-and-Pop operation.

THIS IS NOT TO SAY THAT THE NETWORKING BUSINESS IS A NATURAL MONOPOLY. Indeed, from everything we know today, we can safely conclude that the wireless world and broadband networking business can be very competitive with even just a couple of major providers in each region. When it comes to wireless, we’re damn lucky to have 4 or more providers in many regions today. I still find it astonishing we have as many wireless providers as we do. Still, many will claim that’s just not enough. We need more networks to have “real” competition, they will say. But, again, the economics of networking will simply not allow it. There is just no way that more than a few providers will be able to remain profitable in direct competition with each other. To amortize the sunk costs of network deployment, maintenance and upgrades, carriers need to have a steady base of customers and fairly reliable rate of return on their investments. Nobody has put it better in recent memory than the current Obama administration Department of Justice when the agency’s leading officials noted in a filing to the FCC:

In markets such as this, with differentiated products subject to large economies of scale (relative to the size of the market), the Department does not expect to see a large number of suppliers. Nor do we expect prices to be equated with incremental costs. If they were, suppliers could not earn a normal, risk-adjusted rate of return on their investments in R&D and infrastructure.

Exactly right. Moreover, almost every mature industry usually shakes out to just a handful of providers. If you don’t believe me, check out The Rule of Three: Surviving and Thriving in Competitive Markets by Jagdish Sheth and Rajendra Sisodia. It’s a few years old now, but it remains the best explanation I’ve seen of how things typically play out in most markets. The following table is a bit dated, but here’s a snapshot of the “big 3” in many other major industry sectors:

If we can live with 3 or 4 players in markets such as these, we’ll be just fine with just 3 or 4 major backbone providers or wireless operators. And if we expect major wireless players to make the investments necessary to support the robust, nationwide, high-speed networks that we will need to have invented and then reinvented every couple of years, then we must allow them to have the assets and scale necessary to thrive going forward. Lemonade stand economics can work for corner coffee shops and shoe shines, not for sophisticated wireless networks.

Yesterday I engaged in a lively luncheon debate about Net neutrality regulation with Ben Scott of Free Press at a Catholic University Law School event on “Implementing the National Broadband Plan.” To open the debate, I made a very quick 5-Part Case against Net Neutrality Regulation. I argued that the the objections to a Net neutrality regulatory regime can be grouped into 5 major categories: (1) Legal; (2) Economic; (3) Engineering; (4) Practical; and (5) Philosophical / Principled. Down below you will find my working notes to see how I then elaborated on each objection in a bit more detail. And then Ben and I engaged in some spirited banter for the next 45 minutes.

Unfortunately, it doesn’t appear that the video of our debate is online just yet, but once it is I will post it here. However, the folks from NextGenWeb asked me to shoot a short 2 1/2 min video clip after the debate summarizing my remarks. If you can stand the sight of my big fat head in your browser for that long, here ya go:

The 5-Part Case against Net Neutrality Regulation

The objections to a Net neutrality regulatory regime can be grouped into 5 major categories: (1) Legal; (2) Economic; (3) Engineering; (4) Practical; and (5) Philosophical / Principled. Each objection will be briefly summarized below:

(1)   The Legal Case

• The FCC utterly lacks the authority to regulate in this way: The Commission’s current effort, which is tantamount to throwing stuff at wall to see what sticks, is troubling. They should go to Congress for authority.
• Importantly, Sec. 230 & 706 of the Telecom Act cannot be the hook: They were deregulatory in nature & aimed at keeping govt’s hands off the Net.
• Litigation nightmare : Regardless of how the FCC or Congress plows forward, we’re going to get tied up in the courts for years if we continue down the regulatory path. It will become “full employment” for telecom lawyers.

(2)    The Economic Case

• NN will likely create substantial disincentives to invest and innovate: At a time when we’re trying to build out broadband infrastructure the last thing we should be doing is disincentivizing network investment.
• NN could regress into old fashion rate or return / price control regime. In the history of network regulation, price and rate controls have always accompanied service regulations.
• Sharing is not competing: If this is all just greasing the skids for a new line-sharing or forced access regime, well, we’ve been there before and it didn’t end well. Creating networks built on paper is a worthless endeavor.
• Facilities-based competition, not infrastructure sharing is the path forward if we want truly robust & competitive networks and markets.
• Contestability counts: This is a contestable market. Threats of new entry at margins keep incumbents on their toes.

(3)   The Engineering Case

• We shouldn’t be freezing networks in stone: (Can you imagine if we would have frozen 1999 walled garden model in place?) The Net was “designed for change” (Richard Bennett) and it should be allowed to adapt to changing circumstances.
• Flexibility is crucial for fast-moving technologies & networks: In particular, we need to grant network managers the flexibility to deal with congestion, latency, malware & other unforeseen problems.
• Innovation at the core of networks is every bit as important as innovation at the edge: We don’t want stagnation at the core or networks, and the applications that ride on them, will suffer.

(4)   The Practical Case

• The FCC just isn’t very good at regulating fast-moving industries & technologies: And its track record is poor when it comes to incentivizing new things (remember Video Dialtone? Open Video System rules?)
• No such thing as a “simple rule” when it comes to Net neutrality or network regulation in general: Consider the paperwork burden generated by just three major “competition” rules the FCC issued in an attempt to implement the Telecom Act and define the “cost” of unbundled network elements (“UNEs”):

o   Local Competition Order (1996): 737 pages, 3,283 footnotes o   UNE Remand Order (1999): 262 pages, 1,040 footnotes o   UNE Triennial Review (2003): 576 pages; 2,447 footnotes o   That’s 1,575 pages and 6,770 footnotes worth of regulation in just three orders! o   This was all implemented following the passage of a bill (The Telecom Act) that was supposed to be deregulatory in character! And this doesn’t even begin to cover the tens of thousands of pages of legal filings, economic studies, consultant reports and other filings submitted to the FCC and state agencies by groups and individuals looking to have a say in the matter. That’s an enormous deadweight loss.

• The potential for industry capture grows in proportion to size of the regulatory regime: Alfred Kahn, author of the seminal Economics of Regulation said it best long ago: “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.”
• Markets need not be perfect to be preferable to government regulation: That’s especially true in light of the inefficiencies associated with bureaucratic regulation.
• Community policing can help: Any deviations from “neutrality” will be policed by the watchful eyes of the digital world (and the press) and the white hot spotlight of public attention will scrutinize every carrier move (and already is). Plus, experts and technical bodies (ex: Net Neutrality squad) will be watching.

(5)   The Philosophical/Principled Case

• Whatever happened to “Hands Off the Net”? Do we believe in markets or not? And are we willing to let the experiment we started with the Telecom Act continue or not?
• NN is a declaration of surrender and a call to return to the era of public utility-style regulation. We should not give up so easily on the idea of facilities-based competition. Even just two major rivals per region is better than one regulated monopoly.
• The slippery slope of regulation is real: Neutrality mandates will gradually spread to other layers of the Net and cover content and applications. (FCC is already hinting at interest in regulating in the cloud and other Net services and content). Google and Apple’s necks will be on the neutrality chopping block next.
• There are some First Amendment concerns in play here, but not those raised by regulatory advocates (Net Neutrality is not the Internet’s First Amendment as the regulatory advocates claim; the First Amendment is the Internet First’s Amendment).

I was over at the Federal Communications Commission (FCC) the other day chatting with someone about various regulatory issues and Rush Limbaugh’s WSJ editorial came up.  The person I was speaking with made a comment about how conservatives have really been energized and unified in opposition to the re-imposition to the Doctrine.  I reminded them, however, that it wasn’t always the case that conservatives stood together in the fight over the Fairness Doctrine.  In fact, when I first came to town almost 20 years ago, there were still plenty of conservatives who actually favored it.  I was reminded of that fact when reading a new piece in Engage about “Broadcast ‘Fairness’ in the Twenty-First Century” by my friend Robert Corn-Revere.  Bob is one America’s great First Amendment defenders and his new essay offers an excellent history of efforts to micro-manage speech on the broadcast airwaves over the years.  In it, he reminds us that:

Given the recent vocal opposition to the Fairness Doctrine in the interest of preserving conservative talk radio, it is easy to forget that many prominent conservatives championed the doctrine before its demise. Phyllis Schlafly was a vocal proponent of the Fairness Doctrine because of what she described as “the outrageous and blatant anti-Reagan bias of the TV network newscasts,” and she testified at the FCC in the 1980s in support of the policy “to serve as a small restraint on the monopoly power wielded by Big TV Media.” Senator Jesse Helms was another long-time advocate of the Fairness Doctrine, and conservative groups Accuracy in Media and the American Legal Foundation actively pursued fairness complaints at the FCC against network newscasts.

Likewise, in our book, A Manifesto for Media Freedom, Brian Anderson and I note that some other prominent right-leaning politicians, such as Sen. Trent Lott, favored the Fairness Doctrine.  Moreover, even though most of those conservative individuals and groups have now turned against the Fairness Doctrine, some Republicans still defend (or even seek to expand) the same underlying regulatory concepts that served as the foundation of the Fairness Doctrine.  As Corn-Revere notes:

More recently, a Republican-controlled FCC under Kevin Martin has advocated far more extensive controls over broadcast and cable programming, including news and public affairs. These proposed regulations include requirements governing local programming, restrictions on the use of video news releases, and other new rules that would extend content controls beyond broadcasting. These initiatives have been embraced by liberal media activists, who have said they will seek to ensure that the FCC under the Democrats will adopt and enforce the proposals of the Martin Commission.  The common denominator of the liberal and conservative factions is the overriding belief that traditional First Amendment protections should not be applied to broadcasting or other electronic media.

Unfortunately, Bob’s got it exactly right: You really can’t trust anyone on the Left or Right to make a principled or consistent argument in favor of First Amendment freedoms across the board, including for broadcasting. I have made that point in greater detail in my recent essay on “FCC v. Fox and the Future of the First Amendment” as well as this old law review article, “Why Regulate Broadcasting: Toward a Consistent First Amendment Standard for the Information Age.”

Simply stated, proposals to regulate speech — especially speech delivered over broadcast TV and radio platforms — can emanate from either side of the political aisle.  Of course, each side has their own set of rationales for imposing controls on speech and violating the First Amendment. It often comes down to content restraint (the conservative justification) versus content promotion (the liberal justification).  In his excellent book, The Creation of Media: Political Origins of Modern Communications, media historian Paul Starr labels these different groups the “advocates of repression” (those in favor of content restraint), versus the “advocates of uplift” (those in favor of promoting specific types of content). Typically, conservatives and Republicans have dominated the “advocates of repression” camp, while most liberals and Democrats fall in the “advocates of uplift” category.  Ford Rowan, author of the book Broadcast Fairness, put it this way: “Many liberals want regulation to make broadcasting do wonderful things; many conservatives want regulation to restrain broadcasting from doing terrible things.”

Increasingly, however, the ideological divide is disappearing between these two camps. Congressional lawmakers such as former Sen. Hillary Clinton (D-NY) and Sen. Joseph Lieberman (D-Conn.) on the political Left often favor the same content controls and mandates that Sen. John McCain (R-Ariz.) and Sen. Sam Brownback (R-Kan.) on the political Right. That’s true not just of broadcast regulation, but for proposals to censor video games, the Internet, and social networking sites.  And, even when it comes to the Fairness Doctrine, until just recently there was “a vast bipartisan conspiracy” to keep it on the books, as Corn-Revere argues.  I’m glad those conservatives who once favored the Fairness Doctrine came around to seeing the error in the ways.  Nonetheless, this episode illustrates how, once again, those of us who care about free speech and expression must remain vigilant in defending the First Amendment from attacks by both conservatives and liberals.

Some sensible thinking here about broadband pork stimulus plans from Saul Hansell of the New York Times. In his piece on the NYT Bits blog this week, “Does Broadband Need a Stimulus?” he argues that people should stop grumbling about the “relatively small sum” of $6 billion that the new administration has proposed for wiring rural areas and urban centers. Hansell argues:

This also seems to be a rather sound policy choice because, as I look at it, the noise about a broadband gap is hooey. With new cable modem technology becoming available, 19 out of 20 American homes eventually will be able to have Internet service that is faster than any available now anywhere in the world. And that’s without one new cable being laid. That fact hasn’t prevented a lot of folks involved in telecommunications policy from calling for a lot of money to be spent on backhoes and cable riggers. For example, the Communications Workers of America and the Telecommunications Industry Association called for $25 billion in subsidies to network providers as well as tax breaks. The Free Press, a group that advocates for media diversity, recommended spending $44 billion, with an emphasis on subsidizing companies to compete with existing cable and phone companies. Running a new fiber-optic cable to every American home may well increase competition in broadband providers, but it isn’t needed to deliver high-speed Internet service. Current cable modems use just one of the more than 100 channels on a typical cable system and can often offer speeds of 16 megabits per second or more. The next generation of modems, using a technology called Docsis 3, allows several of those video channels to be combined to offer what ultimately can be Internet service as fast as 1 gigabit per second — 10 times faster than is offered in Japan, which generally is regarded as having the fastest broadband infrastructure.

What is most significant about Docsis 3 is that it turns out to be quite inexpensive to upgrade existing cable systems to use it. As a result, Comcast and other cable systems are already deploying the technology rather quickly. In other words, with no government intervention, the country is going to have the infrastructure very soon to provide almost everyone with the fastest possible Internet service. To be sure, Verizon and, to a much lesser degree, AT&T, are already building out fiber-optic-based networks that compete with the cable companies in broadband, voice and video. Clearwire, a venture that includes Sprint, is building a wireless broadband network. Certainly, competition often lowers prices and increases choices. But it is hardly clear that the country would get an adequate return from subsidizing what is essentially duplicate capacity.

Amen to all that. Plus, Hansell might have cited the 70 years of experience we have with universal service programs, which have proven to be the very model of waste, fraud, and abuse that many tax-and-spenders claim they now wish to avoid. Moreover, those inefficient subsidies have discouraged competition in rural areas. If we only subsidized McDonalds in rural area, do you think Burger King, Taco Bell or any other fast-food chain would have ever come to town?  But that’s basically the way this racket has worked in the telecom world for years.

Faithful readers will recall that, several months ago, I penned a 7-part “Media Metrics” series that took a hard look at the health of the media marketplace. Today, the Progress & Freedom Foundation is releasing a greatly expanded version of these essays that I have put together with my PFF colleague Grant Eskelsen. In this 100-page special report, “Media Metrics: The True State of the Modern Media Marketplace,” we begin by noting that heated debates about the state of the media marketplace continue to rage in Washington, and opinions seem to range from grim to outright apocalyptic. As we note on pg. 1:

Many people—including a large number of legislators and regulators—argue that America’s media marketplace is in a miserable state. Some claim that citizens lack choice in media outlets and that options are just as scarce as ever. Others believe that media “localism” is dead or that many groups or niches go underserved because of a lack of true “diversity” in media. Others argue that the market is hopelessly over-concentrated in the hands of a few evil media barons who are hell-bent on force-feeding us corporate propaganda. And still others say that the quality of news and entertainment in our society has deteriorated because of a combination of all of the above. It all sounds quite troubling, but is any of it true?

After taking an objective look at the true state of America’s media marketplace, we conclude that such pessimism is unwarranted. Indeed, a careful review of the facts reveals that—contrary to what those media critics suggest—we have more media choice, more media competition, and more media diversity than ever before. Indeed, to the extent there was ever a “golden age” of media in America, we are living in it today. The media sky has never been brighter and it is getting brighter with each passing year. We come to this conclusion by looking beyond the rhetoric that has for too long governed debates about media in American and providing a comprehensive look at a variety of media sectors such as audio, video, print and online media. Our survey contains over 70 charts and exhibits illustrating facts and figures on such diverse topics as advertising revenue, company market share, audience trends, and areas of growth in the sector. We will also aim to periodically updated the report to reflect the rapidly evolving media industry.

We encourage readers to provider input about how to improve and expand the report going forward in an attempt to refine and improve the metrics. And we look forward to future debates on this subject–debates that we hope will be guided by facts instead of fanaticism and by evidence instead of emotion. The hyperbolic rhetoric, shameless fear-mongering, and unsubstantiated claims that have driven policy debates in recent years have no foundation in reality and should be rejected as the debate over media policy continues.

This and future installments of “Media Metrics: The True State of the Modern Media Marketplace” will be available on the PFF website at www.pff.org/mediametrics. I have also embedded the entire document below as a Scribd file so that those interested in the topic can peruse the report immediately.