(to read part 1 in this series click here: http://tradewithdave.com/?p=4261)
Harvard’s resident expert on networks is Yochai Benkler the author of a book titled The Wealth of Networks. For those of you who aren’t students of free-market economies the book title is a take-off from Adam Smith’s The Wealth of Nations published in 1776 and credited as essentially the birth certificate of political economics. Although I agree with many of Benkler’s assertions, particularly in the realm of peer production and crowdsourcing, I tend to see the wealth of networks either circulating in peer-to-peer models or aggregating in the server at the expense of the clients in server-centric models. All nodes are not created equal. Or as Adam Smith would have described it, the central server may have its invisible hand in the pocket of the client.
peer-to-peer network client-server network
From a standpoint of content creation and the power of peer production, websites such as Wikipedia.org, CraigsList.com, Freecycle.com, and Youtube.com or user-friendly blogging sites such as Ning.com are a testament to the disruptive power of a virtual ant farm of writers and producers. Although examples of peer-to-peer networking platforms such as the former Napster.com, ThePirateBay.org (host of BitTorrent), Seti@Home and Dyne:bolic are fundamentally structural in nature rather than content-driven. These peer-to-peer models are more complex to build, risky to launch and maintain and often lead to issues such as those encountered by WikiLeaks or Napster when it comes to the hosting of controversial material or the infringement of intellectual property rights. The recent actions by the U.S. Attorney General’s office in regard to copyright enforcement attest to the risk of unprecedented take-downs of websites by the government.
The Anti-Counterfeiting Trade Agreement has been described by Attorney General Eric Holder as being in the best interest of good business. Holder said “crimes threaten economic opportunities and financial stability. They destroy jobs.” The U.S. Government has shut down numerous websites without due process of law based on these beliefs as they relate to copyrighted material. The stakes are bigger than just a few sites and the reality is that the internet has transcended governments and their ability to effectively manage the flow of information. The knee jerk reaction of attacking a few perpetrators based on copyright enforcement while denying their basic rights to seeing the law applied to their situation should serve as a stark warning to anyone who has based their business model on an unregulated world wide web that they’re building on shifting sands.
To understand the threat of the government’s involvement in evaluating the internet, just take a look at other media channels regulated by the Federal Communications Commission. FCC Commissioner Michael Copps has proposed that the government conduct a “public value test” of every commercial broadcast station before they are relicensed to use the public airwaves every four years. Such subjective issues as “public value” when applied to the internet would no doubt lead to arbitrary outcomes and ultimately the censorship of free expression. Copps went onto say that the media is not “producing the body of news and information that democracy needs to conduct its civic dialogue.” Unlike the TV airwaves and free radio, the internet exists primarily upon the privately owned yet federally regulated telecom infrastructure, but such ideas would essentially be the application of the fairness doctrine reborn and applied to the web. Just this week Rev. Al Sharpton met with FCC commissioners to discuss how opinions expressed by Rush Limbaugh might be deemed as being outside of acceptable freedom of expression and should be reined in.
Media Professor Douglas Rushkoff recently commenting for a story at RawStory.com described the Internet as never having been democratically controlled. Rushkoff elaborated on the anti-trust lawsuit Name.Space v. Network Solutions, Inc. as effectively breaking up the domain name registration (DNS) system, but creating an artificial gateway that we subject ourselves to for the purpose of making it easy to find websites. “If you don’t want to use the domain name servers that are officially in charge of the net, you can create your own network of domain name servers. You can set up your computer to look them up instead of the official ones.” Rushkoff said. In other words, if you’re concerned that Attorney General Eric Holder is going to shut down TradeWithDave.com, you could set your computer to go directly to our IP address effectively by-passing the DNS server. How many people would actually do that and how important are search engines to finding the websites you’re looking for? Not only is the U.S. Government breathing down the neck of the internet, the United Nations is getting into the act. In mid-December of 2010 U. N. representatives called for an international body made up of Government staffers that would attempt to create global standards for policing the internet in reaction to Wikileaks.
A total of 82 websites were shut down by Customs Enforcement Division of the Department of Homeland Security over the Thanksgiving weekend through their policing effort named “Operation In Our Sights.” It was reported by the New York Times in a December 19th story that at least one of the sites that was shuttered by the government, www.dajaz1.com, had received their songs and videos directly from the record companies or official promoters for artists. The websites operator who goes by the name “Splash” showed the reporter for the New York Times multiple examples of emails he had received from the record companies requesting that he promote the copyrighted material in question on his site.
In the United Kingdom government officials are asking internet service providers to get out in front of the problem by self-regulating the distribution of certain material, especially adult content. As reported by the Guardian.co.uk in a December 19th story, the state’s Communications Minister Ed Vaizey said “This is a very serious matter. I think it is very important that it’s the ISP’s come up with solutions to protect children.” Although a slightly different issue than illegal downloads of copyrighted music, Vaizey is suggesting that business take the lead to avoid regulation by structuring certain content to be default opt-out unless specifically requested by customers such as adult-only sites. “I’m hoping they (Internet Service Providers) will get their acts together so that we don’t have to legislate, but we are keeping an eye on the situation and we will have a new communications bill in the next couple of years,” Vaizey said.
Regardless of whether the approach to addressing internet challenges is government imposed or industry self-regulation, much of the challenge that is being faced by the internet is from an entirely new dimension of content creation. Harvard’s Benkler says that the process of social sharing and exchange, such as what is found in non-profits like Wikipedia or in social media for-profit sites such as Facebook, has created an entirely new economic quadrant Benkler calls the “4th transactional framework.” Growing out of the old dichotomy of firms and markets, the 4th frame relies on social sharing and exchange that is essentially free to create and consume, at least on the surface. Of course much of the bandwidth and infrastructure is supported through advertising models such as Google’s search engine supported by Google AdSense platform. Benkler’s research shows that within a dichotomy of centralized and decentralized models contrasted with market-based and non-market based systems that we move beyond price systems, firm heirarchy and government/non-profits as a source for economy as the growth of social sharing and exchange overwhelms the marketplace. A perfect example of this can be seen in the impact that blogs just like this one are having on the traditional daily newspaper industry. Whether you’re using the success of Apache Web Server, Linux as a computer operating system or a blog like TradeWithDave.com, the reality of the success of instances of open source economics is undeniable. On the other hand, Steve Jobs and Apple’s success stand in stark contrast to this model. Rather than unlocking the source code, Apple has successfully monetized the slide from “trading analog dollars to digital dimes”, a paradigm effectively described by NBC Universal CEO Jeff Zucker. Apple did this primarily by offering great products, cultivating a cult-like following and never losing site of the fact that it’s average users who actually use a user interface… not geeks or programmers.
As the Federal Communications Commissioners are set to vote today on a new set of net neutrality rules, Republican Commissioner Robert McDowell wrote in an op-ed article for the Wall Street Journal on Monday that the FCC effort is designed to fix something that ain’t broke to start with.
“On this winter solstice, we will witness jaw-dropping interventionist chutzpah as the FCC bypasses branches of our government in the dogged pursuit of needless and harmful regulation, the darkest day of the year may end up marking the beginning of a long winter’s night for Internet freedom.” McDowell continued “The Internet has been open and freedom-enhancing since it was spun off from a government research project in the early 1990s. Its nature as a diffuse and dynamic global network of networks defies top-down authority. Ample laws to protect consumers already exist.” Robert McDowell, FCC Commissioner
All signs point to the adoption of a set of new rules as proposed by FCC chairman Julius Genachowski that will preserve certain aspects of a free and neutral internet while also addressing concerns of bandwidth hogging practices at the expense of the private owners of the regulated infrastructure. More important than all this however is that there will be a very crucial distinction between wireline (the phone lines running to your house) and non-wireline or mobile applications such as those beamed to your cell phone or Ipad from the nearest cell tower or future mesh network. That new space, the one that almost no one seems concerned about will become the virtual Jurassic Park in which The Moveable Beast will pursue its prey.
Great efforts have been undertaken to blur the space between “wireline” and “wireless” by promoters of “open society” as opposed to a “free society.” The distinctions are so fine and the interpretations so well-crafted that the telecommunications industry is the equivalent of a pair of siamese twins who are being ever so carefully separated primarily for the benefit of two corporations; Google and Verizon.
Folks such as Ben Scott while at www.FreePress.net and now a policy advisor on innovation to the U.S. State Department have been masterful in their attempts to steer the conversation and blur the line between “open expression” and “free expression.” Scott’s proposals, although nice enough in their outward appearance are essentially Marxist in nature and undermine the fundamental free market principle of caveat emptor or buyer beware. Scott’s belief is simply that it is the government’s job to protect us and that consumers cannot be trusted to make their own choices to support businesses that provide quality products and service. Consistent with ideas as proposed by White House Information Czar, Cass Sunstein, people cannot be trusted to know what is best for them and their choices should be “nudged” in the right direction by government because the highly trained minds in positions of authority know what’s best for the “man in the street.” There’s a strong argument that corporations have acted irresponsibly and failed to balance corporate responsibility with the pursuit of profits. The solution for such wrecklessness is in the accountability of corporate management and corporate boards of directors and the rule of law, not the layering on of yet more regulatory nonsense such as that exhibited by the Securities and Exchange Commission in the Madoff affair or the Commodity Futures Trading Commission in its failed effort to regulate derivatives that contributed to the economic collapse.
When it comes down to the creation of an entirely new playground for the two biggest players in this moveable feast of broadband and mobile profits, all eyes have been on the Google-Verizon partnership as promoted by California Representative Henry Waxman who hails from such a content rich area as Beverly Hills, Santa Monica and West Hollywood. It was Waxman who predicted today’s vote when he said,“Eventually, government is going to have to be responsible to help and resolve these issues” while speaking about the crisis in journalism and communications as caused by the internet.
Google CEO, Eric Schmidt weighed in on the Google-Verizon pact when he was quoted as saying, “We have been talking to Verizon for a long time about trying to get an agreement on the definition of what net neutrality is. We’re trying to find solutions that bridge between the hardcore net neutrality view and the telecom view. I want to be clear what we mean by net neutrality. What we mean is if you have one data type like video, you don’t discriminate against one person’s video in favor of another. But it’s OK to discriminate across different types, so you could prioritize voice over video, and there is general agreement with Verizon and Google on that issue. The issues of wireless vs. wireline get very messy because of the issue of Type I vs Type II regulation and that is an FCC issue not a Google issue.”
You don’t have to be a genius to understand why Google and Verizon would want to partner on such an endeavor. Verizon is essentially a wireline (now fiber optic wireline with FIOS) and mobile phone company that handles traffic while Google is essentially an internet advertising company that generates web-based traffic. They need each other and the last thing Verizon needs is companies such as Netflix and Roku hogging their brand new fiber optic lines that have been run into suburbia at great expense. At the same time Google doesn’t want to be shut out of the potential for next generation mesh networks emerging within densely populated urban centers that will create entirely new communication platforms including opportunities to leverage wifi and voip applications for both voice and data and even more importantly for advertising. What Skype VOIP has been to calling your cousin in Kosovo, Google’s mesh partnerships with municipalities will be to using the internet to make phone calls in cities while getting coupon notifications that Starbucks is just around the corner, or Krispy Kreme has “hot donuts now!”
(to read part 1 in this series click here: http://tradewithdave.com/?p=4261)
(to read part 3 in this series click here: http://tradewithdave.com/?p=4308)