The Internet & Public Policy
What are the unresolved public policy challenges in our networked world?
Allen S. Hammond
The Internet is no longer the stuff of science fiction or the protected fledgling network technology of a nascent rapidly expanding upstart industry. Today, it is society’s maturing network of choice. It has facilitated the migration of businesses and customers from brick and mortar to point and click commerce. It has redefined the meaning of publication and distribution leading to potential benefits in education, job training, and individual control of information.
Along with the Internet’s growth into adolescence have come the inevitable growing pains. There is growing competition the established technologies, and telephony, cable and broadcasting firms are threatened by convergence and for migration of voice and video traffic to the net. Microchip and software firms attempt to ensure market dominance via standard setting. User innocence and privacy allegedly are lost due to the relatively unfettered speech and marketing on the net. There is a considerable threat to network commerce from unauthorized network intrusions, rapidly proliferating viruses, and denial of service attacks. And, there are recurring unresolved questions regarding affordable, equitable, non-discriminatory access to high-speed networks and accessible equipment.
Meanwhile, biotechnology has moved from the realm of the fantastic and fanciful into the realm of the realistic and inevitable. This evolution has raised sobering questions. What is the role of human as opposed to divine agency in human genetics? How should we resolve the conflict between corporate innovation, private ownership, and compassion for human suffering and need? What is the appropriate balance among the electronic efficiencies of society’s participation in genetic research, the potential for medical benefit, and the loss of personal privacy?
We are in the midst of an era in which we are experiencing fundamental change in the fabric and function of our communications networks––the external commercial and social nervous system of our society. In this same era we have embarked on a fundamental re-evaluation of what it means to be human. This time is pregnant with promise and fraught with unforeseen difficulties. How do we as citizens of a democracy of the premiere producers, consumers, and presumed beneficiaries of these technologies exercise responsible agency?
The panel on the Internet and public policy sought to offer suggestions on how we might begin the process. Over the course of ninety minutes, Andrew Shapiro (Visiting Lecturer, Yale University, and Senior Advisor, Markle Foundation), Ira Magaziner (President, SJS Inc., and former Presidential Advisor) and Timothy Bresnahan (Professor of Economics and Computer Industry Project Director, Stanford University), assisted by moderator Haynes Johnson, discussed some of the pressing policy questions before us and suggested the process by which we might begin to answer them.
Revolution as Metaphor
Andrew Shapiro asserted that in order to have an intelligent discussion about the Internet and public policy, it is necessary to ascertain the appropriate context. He suggested that the concept of political revolution provided such context. Citing political dissidents’ use of e-mail in Beijing and Belgrade, online day trading which bypassed established trading houses, and online music trading which threatened the market position of record distributors, Shapiro argued that the Internet has engendered a revolutionary shift in control from institutions to individuals. But, as in all political revolutions, there are counter responses from established elites whose positions of power are threatened.
Regarding online music trading, Shapiro commented: “I think the Napster case in many ways is the greatest emblem of what the Internet is doing to our culture, our politics, and our policy world. On the one hand it’s shifting power away from established entrenched authorities, the recording industry. It’s putting that power in the hands of individuals. We consumers of music can get to all sorts of songs and artists that we never could before and we can distribute and share music in ways we never could before. And then we see the resistance the record companies crack down using our courts to try to regain control. And you see the recording companies and other information industries trying to tweak technology so that it actually changes the potential for empowerment.”
In later remarks, both Magaziner and Bresnahan addressed themselves to strategies for responding to the counter-revolution of entrenched elites. For Magaziner, the inevitable push back could be blunted at the outset. For instance, when the Clinton Administration refused to apply broadcast or telephone regulatory models to the Internet, broadcasters and telephone companies were precluded from forcing the Internet to play by their rules. Applications of the old regulations would have assured the established firms a competitive and regulatory advantage. For Bresnahan, government assertion of a competition policy that precludes a return to the centralized, vertically integrated business models of IBM and AT&T monopolies of the 1980s would assure the continuation of positive economic development for the Internet. Similarly, Bresnahan argued that one of the government’s enduring roles is to assure that intellectual property law operates to encourage rather than preclude future invention and innovation.
Shapiro expressed concern about the Internet’s ability to allow users and marketers to personalize information to match individual tastes. He queried whether this capability might not result in a potential instance of revolutionary excess. “There are ways in which that narrowing of information, that desire to only tap into the virtual communities that meet your interests can backfire. It can backfire against us as individuals because we won’t be as well informed and well rounded as we might be. And it can backfire against us as a society, because after all, what is it that holds us together as communities and societies other than common information and shared experiences?”
Shapiro also cautioned against the tendency of many lawmakers, policy analysts, and theorists encountering the Internet either to respond by attempting to apply the old rules and regulations to the new technology or throw out all prior rules and start again. Instead, Shapiro strongly urged that we“apply a ‘principles in context’ approach.
We must identify the values and principles that have animated all the important parts of our policy world, whether it’s freedom of speech, privacy, intellectual property, taxation, fairness, equality, and non-discrimination. These are values that have been honed over hundreds of years. We need to isolate them and learn to map them to the new context.”
A Policy Framework for Sustaining Revolution
In contrast to Shapiro’s perspective as social critic and outside observer, Ira Magaziner spoke from the perspective of the policy maker as facilitator of revolution. In the process, Magaziner provided substantive examples of how Shapiro’s proposed mapping of values to context might work. Magaziner and various members of the Clinton Administration, as students of the industrial revolution, sought to fashion policy for the information and biotechnology revolutions that would nurture revolution to secure its benefits and avoid its potential pitfalls.
According to Magaziner, “in 1995, we in the Clinton Administration identified two things that could potentially drive the world economy if we got the policy framework right. The first was the commercialization of the Internet that had just begun in 1993. And secondly, the Human Genome Project and its economic spin-offs which, we reckoned with a five or ten year lag, would follow the Internet as creating that economic potential.”
Magaziner summarized five principles that ultimately were established to facilitate Internet growth. First, wherever possible, rely on market driven rather than government driven development. Second, in the face of market uncertainty avoid government imposition of broad rules and standards and rely on private rather than public leadership. Third, eschew efforts at global coordination in favor of decentralized coordination by stakeholders organized to address specific functions. Fourth, recognize that the Internet has no borders and therefore is part of a seamless global marketplace. And fifth, recognize that government still retains an affirmative obligation to regulate when the marketplace fails.
Market Driven Development
At the Internet revolution’s inception, policy makers sought to capitalize on the positive aspects of market competition and eschew government regulation whenever possible. Magaziner emphasized that this decision was not political and ideological, but practical and pragmatic. The policy was based on an acknowledgment of the uncertain nature of the market’s future development and a critical assessment of the relative capabilities of government in relation to technical evolution and corporate competition. Thus, at the beginning, U.S. policy makers sought to avoid the imposition of regulations developed for the In the case of telephony the substantial size of initial investment relative to the small size of companies necessitated the creation of government-sanctioned monopolies to build out the infrastructure. In the case of broadcasting, spectrum limitations necessitated a government administered licensing scheme. By comparison, with the Internet, “you were going to have one of the greatest competitions in the history of free enterprise to build out the Internet among computer, software, telecommunications, wireless, and satellite companies. The best thing we could do was allow competition to flow, because we couldn’t repeal all of the telecommunications acts. But we realized that convergence was coming; that broadcast, telecommunications and the Internet would all converge. We said that all high bandwidth networks and all packet switched networks would stay out of FCC regulation and that allowed a market driven approach to the building out of the infrastructure.”
Rely on Private Leadership and Industry Self Regulation
The policy makers also eschewed the temptation to develop broad proscriptive requirements in the areas of indecency, privacy and technical standards that might hamper the speed and direction of development. Instead, “…where possible we should look to private sector leadership and industry self-regulation rather than government regulation. We felt the Internet was as close to a pure market as you could get and was moving very fast, and therefore governmental processes which are inherently slow moving and bureaucratic would be too slow and would bog down the Internet. Therefore we preferred private sector, self-initiative where possible. That was not to say that at some very precise points government might need to act. But, the general principle ought to be not to act and to do no harm because the only thing we knew for certain was that we didn’t understand where it was headed. And therefore the possibility of doing harm by government action was too great.”
Avoid the tendency to implement far-reaching regulations and standards.
U.S. policy makers opposed censorship, privacy and standards regulation. They viewed broad proscriptive censorship and privacy rules as policies too often unworkable and unenforceable that would still tend to slow development. While technical standards regulation would have taken too long to develop and even if appropriate would be obsolete by the time they were implemented. Instead, reliance on consumer demand driven technical innovation would better serve to address consumer’s indecency and privacy concerns. Ironically, this laissez faire policy later proved problematic for the government when the FBI proposed the “Carnivore” program to allow government surveillance of illegal activity conducted by individuals and organizations using sophisticated encryption to avoid detection.
In one of the rare instances of disagreement, Shapiro diverged from Magaziner on the issue of privacy regulation. Shapiro argued that because Internet based information gathering has become so pervasive while most Americans remain unsure of what privacy means and unaware of technologies available to enhance privacy, the government should set a minimum standard. Ironically, the minimum would be set by a government whose potential reliance on Carnivore and pursuit of policies to restrict the development and use of advanced encryption technology have caused great concern and consternation in the Internet and free speech communities.
Avoid efforts to impose top down global coordination while maintaining open borders.
The Clinton policy makers saw the Internet as an inherently decentralized medium. Therefore attempts to impose central control ultimately would prove unsuccessful if not impossible. According to Magaziner, the Internet was a medium that should grow up free of coordination. “But where it needed coordination, there already had been mechanisms established in very focused ways for example to set the protocols or the architecture of the Internet. So the model we wanted to follow was not to have any attempt at coordinating globally but instead having private stakeholder based non-profit groups be set up to help coordinate specific areas of the Internet such as domain names. Not one body to do everything but decentralized bodies for specific functions.”
“Similarly, as the Internet has no borders, there should be a seamless global marketplace. In its efforts to achieve this vision, the U.S. negotiated treaties to avoid tariffs on Internet transmissions and avoid taxation while protecting copyright and trademarks. In the process the government was instrumental in establishing a copyright act, assuring that a uniform commercial rather than a political code would regulate electronic contracts and international commerce on the Internet. In addition the U.S. supported self-regulation in privacy and a tax moratorium to set the market driven approach as global norm.”
Finally, Magaziner stressed that government is still needed to play a role to assure that Internet does not widen the current income gap. So programs such as the “E-rate” that help finance the provision of Internet access to schools and the wiring of schools are critical. Government also has a role in funding research for the next generation Internet. This role is historical and dates back to the government’s early funding of experimentation with Arpanet that helped lead to the Internet of today.
The Government still has a Proactive Role to Play.
Professor Bresnahan, the last panelist to speak, proposed two more areas of public policy where the government has a role to play. They are a competition policy, which includes antitrust, international competition, and intellectual property, and a pro-growth, pro-investment, macro-economic policy.
According to Bresnahan, the United States, as the largest seller of information technology, has been the beneficiary of two parallel industrial trends. The first trend was the evolution of the computer industry from the centralized “IBM model” of a large company that does everything to a “PC model” of a large number of specialized entrepreneurial companies doing a number of specialized things. The second trend was the parallel evolution of the telecommunications industry from the vertically integrated organization model of AT&T, to the distributed, Internet organizational model. These two trends with the increased numbers of specialized competitors are “highly congruent to the supply challenges of new technology, and the new business models posed by the commercial Internet.” The problem, as Bresnahan sees it, is the threat of the same counter-revolution by established elites that Shapiro identified. It is in response to the counter-revolution that government must act through competition policy. Two recent examples of this phenomenon are the government’s antitrust action against Microsoft and its efforts to maintain open, competitive telecommunications data networks.
Bresnahan argued, “the third area where government is compelled to participate in competition policy is in intellectual property.” In this area, the government faces “a potential problem that intellectual property rules, rather than incenting people to invent new technologies for the future, can be deployed by agents that want to resist the movement to the future served by strengthening the hand of the old business model rather than the new one. There is an interesting problem in setting intellectual property in areas like the Internet, or with regard to genetics, to make sure that it is forward looking and not backward looking.”
Aggregate Macro Economic Policy
Bresnahan next briefly addressed the need for sound aggregate macro economic policy. He suggested that the aggregate macro economic environment and the average aggregate investment climate in the United States has made the last 15 years “a pretty good time to be in the capital goods businesses of Internet software and equipment.” At this stage of the revolution, Bresnahan sees a divergence in the policy road. “We have an opportunity to continue the policies of a gentle, long run oriented, stable money supply while avoiding the temptation of fine tuning the economy or reacting to the current slowing of growth by engaging in short run interventionist activist demand management policy.” Bresnahan is convinced that attempts to fix the short run recession will worsen the investment climate and in the process, undermine the “economic incentives that could let the further build out of the Internet revolution gain a lot of economic value.”
Conclusions and Future Directions
In their discussions and responses to questions, the panelists identified several key areas where public policy is needed to guide the continuing evolution of technology. The first was the issues of public policy in a borderless world, where there is likely to be a “counter revolution” to technological changes, such as bio-technology, that pose complex threats to diverse cultures. A second area is that of the distinction between government and governance. New forms of governance, such as international organizations like ICAN (which controls Internet domain names) will replace governmental organizations. Misuse of personal information and attacks on personal privacy will require considerable work to develop public policy that provides a safety net for individuals. And, finally, public policy relating to the budget for education will be the most important public policy issue if we are to effectively deal with the complex issues of our technological revolution.