Why the internet needs to be free

You may have heard that there’s a move by the ITU, an inter-government telecoms management committee, to take control of the internet. Take control of course means convince governments to give it control. This is a bad thing, and you should sign the petition against it here: http://www.freeandopenweb.com

However everything is not so simple and black and white. Why does the internet “need to be free”. Well we know the answer of course. It’s so we can download porn and make Skype calls without paying. These are important activities that bring the world together and make it a better place, but if we look past the everyday what is it that gives the internet its sense of freedom and power, and how is that in danger?

First we need to dispel some myths. The internet is not some libertarian triumph. It was built by the US government, the army, and it wasn’t for any military purpose. It was a military-industrial subsidy like many other tech successes. In the ’80s access was very elitist around the .edu domain while .com only admitted high-status companies like IBM. It was feared that opening up .com to all and sundry would sully the network with “trivial” traffic of nudes and jokes. At the time normal people got online by dialling a server with a phone and modem. This worked in the US because local calls were free, and mostly didn’t work in Europe for the converse reason. Closed portals like AOL and CompuServe were the norm. You dialled the portal and got whatever was hosted on the portal, which was a lot but it was a very controlled commercial thing.

The internet today is not free as beer or speech. As consumers we pay for local bandwidth and the ISPs roll up the cost to pay for the backbone. Sites that host a lot of traffic pay for bulk bandwidth. The backbone is run by telcos in competitive commercial terms. There is a measure of free speech but it’s a social freedom like the 1st amendment, not a natural freedom like the wild west. The old communication medium of amateur shortwave radio had global natural freedom. The laws of physics were on the side of freedom in that one. The internet runs through underground fiber that’s owned by national or corporate telcos and crosses borders at known points. Governments can and do spy and censor content. Routinely. Even in Europe and the US. The bar of what is allowed is set to a very tolerant level in the west compared to China or the Middle East, but that’s a social arrangement, not a technical or natural one.

The internet has a culture of freedom partly though the bliss of irrelevance. When computers were new, nothing you could do on your computer could affect much, so you were free. With early internet it was the same. It was a very equal gathering of people who couldn’t much harm each other. With every improvement that “legitimized” the internet, major brands, consumer access, commerce, banking, media, etc. came the attendant special interests and these interests demanded laws to protect something or other – usually business. So the innocence was gradually lost, and proponents of freedom were if anything slow to grapple with this as they were tempted to retreat into techno-savage fantasies. Cryptography is a case in point. It works for the consumer in a commercial context, to let you do banking or online games safely. Given the level of vulnerability of the average consumer PC, it doesn’t protect you from oppression.

All this is to say that the case for “internet freedom” is actually fairly weak by the conventional wisdom. Freedoms that we think exist are imaginary, and there are legitimate reasons for change. Excessive US focus has left us in a situation where .com is a US domain, not a global one. That’s clearly ridiculous. Why should Google be able to have political connections with the de-facto powers that run the network, who are American, and Baidu not so because it’s Chinese? So calls for change have merit. Now let me build up the case why moving to an intergovernmental model of governance under the ITU is specifically a bad thing.

The first case is economic. Competitive industries tend to have the property that the price consumers pay tends to match the marginal cost of the good. These industries tend to serve consumers well in terms of value. Some examples: Manufacturing, US gas, airlines mostly, taxis and buses, UPS/FedEx, produce and grain, doctors and plumbers, and land internet bandwidth. In these situations the price you pay relates more or less directly to the cost of what you buy, and if that holds competition works as per theory to give you good prices and some measure of choice. The way we pay for internet bandwidth is we buy or rent infrastructure. That’s the same thing that ISPs do upstream so it’s a healthy market. Providers can compete with each other, or customers can “do it themselves” and compete with providers if they need to. That keeps the market honest. We’re happy as consumers but it’s not very good for the companies because they don’t make any serious profits – much like airlines.

Anti-competitive industries are easily spotted by a price structure that’s unrelated to the real costs of the goods. You pay for one thing but the vendor’s cost model is completely different. This creates a large gap that can lead to failure if companies over-invest relative to what they can monetize (Facebook), it can allow an enlightened cross-subsidy that arguably benefits consumers (Apple, Google, railways), or it can yield industry-wide anti-competitive profits: Retailing, banking, books, films, music, cable TV, software, and cellular/mobile telecoms. In these industries the costs are dominated by coverage and cost of sales. Providers purchase or build access to a region and then market to consumers. Although there’s a real cost to building a cell tower in an urban area, it’s small compared to the call minutes and wireless data it can provide. Because you pay for minutes and gigabytes but the carrier pays for infrastructure, price settles at a level where you can afford less connection than you’d like and could otherwise have (economists call this underconsumption) and the carrier gets to keep profits that would be excessive in a competitive market.

So the first real threat is that the ITU, which is after all made up of people in the big telco industry and related government agencies, will try to change the pricing model of the internet from a direct, and hence competitive, infrastructure rent to an obfuscated and much more profit-seeking model of pay-per-use for various types of content. In fact this motive is probably at the top of their agenda, pursued with much more vigor than any political scheming. There have been many murmurs of telcos wanting to block Skype, Netflix/Hulu, and other media that competed with their pay-per-use models in the past. These have been resisted by an industry-to-industry face off between the telcos and the new media companies, including Google, with the latter winning in the US. This, and a somewhat enlightened US justice system, is what gives us what we know and take for granted as “net neutrality”: The idea that a bit is a bit in the net. If the ITU, which is basically the telcos, wins, that means they’ll charge you one inflated price for a voice bit, another for a movie bit, and they’ll block some bits altogether mainly on the grounds that they can’t monetize them. For example it’s not unlikely they’d block games because they compete (as a substitute) with your TV watching time.

The second case is about governments and their scalability as they get larger. All governments are fundamentally conservative things. They stand to some extent for power, “respectability” and a certain set of people who are in the constituency, the citizens, who are assumed to be in competition with the outside foreigners. However the dynamic changes with size. Cities tend to be open and enlightened. Nation states bring the worst of conservatism and tribalism. But what happens next? We have two structures of governance in the world beyond nation states: The inter-governmental model, and empires. The US is a mostly benevolent empire. So is China. India is another. Brazil almost. These are post-national gatherings of people functioning as a state. The inter-governmental model is the United Nations or the EU. There it’s mostly national governments who meet at a higher level assembly, agree stuff, and then come back to sell or enforce the stuff on their respective people.

Here’s the thing: Empires are better. Empire may be a dirty word, but it’s a better way to run things than the nation-state for anyone except the most established national elite. For everyone else an empire is more tolerant, more orderly and peaceful, more fair, and more productive economically since it’s less protective of local interests. The internet came to be because an empire made it – the US. France couldn’t have done it, nor could France have done it with Britain. They’d have produced a protectionist, ineffective thing full of concessions to national telco and media interests, petty political fears, and prejudices. That is the problem with the inter-governmental model. Each representative nation would send two kinds of lobbyists to the ITU: The telco and media people demanding some sort of exceptional protection, and politicians who pander to local fears about porn, religious sensibilities, nationalisms, privacy, and the like. You see the failure of the inter-governmental model in the EU (in most areas, but here we’re talking about the internet). You can’t buy books or movies online because of fragmented copyright fiefdoms. Germany or Italy bring Google to court over nonsense cases based on early 20th century notions of privacy or publishing. Because the internet is effectively run by the US empire, it sweeps away all that.

Remember, the internet is not libertarian. If it were, a different dystopia would form out of the overwhelming difference in power between corporations and people. Some of that is already happening: ACTA, the DMCA, and other oppressive activities of the “content” industry are glimpses of the libertarian dystopia. The internet needs governance on trans-national scale to stand up to the corporations and enforce fairness: between corporations, towards new entrants, and towards consumers. This is absolutely critical and those who describe an anarchic internet owned “by the people” are peddling a dangerous myth. However, for now and for the foreseeable future, US polity is far better placed to govern the net than any dysfunctional and captured inter-governmental body vying for the role. This is why the move by the ITU is a bad thing. In time, when the EU sorts itself out and China and the other empires find their footing, we should ask again.

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