The one takeaway from the Mueller Report is that an internet that was designed to add resiliency to communications can be turned into a medium that supported a campaign designed to dupe millions of American voters. Has it become that easy to make the American electorate gullible?
Congress’ attempt at AI legislation
The 116th Congress has three bills or resolutions of note sitting in a number of committees that attempt to address the use of artificial intelligence in American society. H.Res. 153 is intended to support the development of guidelines for the ethical development of artificial intelligence.
Meanwhile, HR 2202 seeks to establish a coordinated Federal initiative to accelerate artificial intelligence research and development of the economic and national security of the United States, while H.R. 827 is concerned about training and retraining workers facing employment disruption by artificial intelligence.
The bills and resolution are more exploratory versus regulatory in nature. They don’t expressly get at any behavior that needs to be regulated. The nascent characteristic of artificial intelligence development along with government’s inability to keep regulation at the same pace as technology development may be in part the reason for the “let’s see what we have here” stance of early regulation. In other words, Congress may just be getting a feel for what AI is while taking care not to interfere with the innovation needed to further develop the technology.
On the other hand, these bills could help Congress get ahead of the issue of labor disruption. Workers read about AI’s capacity to replace jobs that are more pedestrian or mundane; jobs currently occupied by lower income workers. The prediction about labor disruption won’t leave certain higher-waged jobs untouched either as AI platforms, data mining, and machine learning threaten professions such as accounting or law. By determining the data needed to thoroughly analyze the impact and growth of artificial intelligence; identifying the industries that will benefit most from or be harmed the most by AI; and comparing today’s existing job skills with the job skills that will be needed in order to work alongside AI, Congress contribute to alleviating labor force disruption.
The Human-Machine Relationship
Unlike a number of dire predictions of the emergence of “SkyNet” and terminator-like machines subjecting humans to slavery or worse, most analysts and commentators see AI as a tool that augments human capabilities, making humans better or more productive. The emphasis will be on collaborative intelligence, with human and machine working together. And how well that relationship works depends on how well humans program the machine.
Another consideration is artificial intelligence’s ability to self improve. The goal of AI development is to build an artificial intelligent agent that can build another AI agent, preferably with even greater capabilities. The vision is to move from AI’s narrow, single-task capabilities to a more general AI, a concept that sees AI exhibiting greater abilities across multiple tasks, much like humans.
Possible targets of legislation or regulation
If legislation or regulation is to target the machine-human relationship, elected officials and regulatory heads will have to consider their policy initiatives impact on:
- the ability of humans to train machines;
- the ability of humans to explain AI outcomes;
- the ability of machines to amplify human cognitive skills;
- the ability of machines to embody the the human skills necessary that lead to the extension of human physical capabilities;
- the ability of artificial intelligence to self-improve;
- the difference between “safe” AI (the ability to maintain consistency in AI outcomes) versus “ethical” AI (ensuring that AI platforms are not a threat to human life.
Just like the application of artificial intelligence, Congress’ foray into regulation of AI is nascent. This is the time for AI’s stakeholders to either begin or maintain efforts to influence all levels of government on AI’s use in the commercial sector.
What the Business Media is Reporting
After the November 2016 presidential election, the new rallying cry was the “Trump Effect” as supporters of the newly minted president sold the narrative that Mr. Trump’s administration would be good for the financial markets and the economy as a whole. Mr. Trump’s Twitter pronouncements on NAFTA, manufacturing, and trade with China seemed to embolden markets, but as noted in this article in The Financial Times, Mr. Trump’s tweets no longer get the attention of traders.
What is getting the attention of traders? According to Bloomberg.com, among trader concerns are the dovish comments of central banks. The Federal Reserve has been signaling that it may take a break from rate hikes. Low yielding debt, according to Bloomberg analysis, has been scaring investors, however, increases in yields scare asset managers given the threat to values that result from the inverse relationship between yields and asset prices.
Bloomberg estimates that, under the rule of duration, a full percentage point increase in yields could result in a seven percent erosion in market value. The bond markets may be looking at a $2 trillion loss.
Government Moves Traders Should be Concerned About
This is budget season as committees in Congress review agency requests. According to the Congressional Budget Office, the U.S. government is facing a Fiscal Year 2019 budget deficit of $897 billion. Unless the government can close this gap with increased revenues or less spending, it will go into the debt markets, issuing bonds to help close the gap.
As the deficit widens, there will be an increase in supply of government bonds, a fall in bond prices, and an increase in interest rates. Funds will be taken out of the private sector portion of the economy and move into government coffers. In other words there will be less money available to invest in factories, plant, and other infrastructure necessary for economic growth.
While the Federal Reserve gets a lot of play in the media, traders should not allow the glitz that the media paints on the central bank to distract them from the budget activities of Congress. Congress, as keeper of the purse strings, has a key role in managing the economy. Its processes, while a lot more mundane than a presidential tweet, are important to monitor.
About fifteen years ago I worked for a local government agency that was responsible for regulating basic cable rates and managing the franchise agreement the county had with two cable providers. One day I received a call from a Bear Sterns analyst. He wanted some information on the probability that the county would approve a cable company’s new franchise, if I recall correctly. While we did not get too many calls from investment bank analysts, I was not completely surprised that an investment bank would take interest in a regulatory matter, especially one that would impact the cable company’s revenue.
What does surprise me, however, is how little the investment community appears to know about how people in government think. This lack of knowledge may start as far back as business school. Take a cursory review of an MBA program’s curriculum and there is a dearth of coursework on how government operates or the impact of policy making on private sector revenues.
I don’t know the specific reason for this gap in knowledge. I can hazard the guess that the investment sector like the general public sees government as that inconvenience, that necessary institutional evil comprised of soulless rules and laws and unaware bureaucrats that slows down innovation while imposing undue tax burdens. The cynic in me would agree with this overall assessment, but I would caution that any member of the investment community engaging a regulator stop short at viewing the staff member or ultimate decision maker in a government agency as “soulless” or “inconvenient.” That approach won’t get you far, especially when trying to either anticipate an event, understand a policy, or influence an agency’s proposed regulatory action.
Government and politics is a people business. With all the talk of artificial intelligence and machine learning, government decision making is a human endeavor, with agency heads and staffs taking into account the positions of various stakeholders, all of whom are human as well. While being “best friends” with a government analyst is not necessary to effectively extract information or exercise influence, understanding an agency’s mission and its decision making methodology or mechanism is important. Knowledge of a staffer or decision maker’s educational background can also help. Being a fellow alum can be an icebreaker. Also, understanding past decisions and the rationale behind them can help in anticipating future outcomes.
Also, keep in mind that the agency staffer or decision maker is interested in the private sector as well. The staffer may have an interest in the evolution of the product she regulates. For example, while a staffer at the Florida Public Service Commission I found the emergence of the internet fascinating. Watching telephone companies and cable companies position themselves and develop the technology that would later power what is today called broadband was a great experience.
If that interest on the part of a staffer is recognized by a private sector player, an opportunity is created to make more robust, detailed presentations because an interested staffer is one that has done her homework about the service being regulated.
Bottom line, engage the regulator as more than someone presenting a legal or regulatory barrier or espousing rules.
This morning the U.S. House Committee on Science, Space, and Technology Subcommittee on Research and Technology held a hearing to consider the Fiscal Year 2020 budget request of the National Institute of Standards and Technology. NIST’s published mission is “to promote U.S. innovation and competitiveness by advancing measurement science, standards and technology in ways that enhance economic security and improve our quality of life.” The agency provides measurements, standards, and reference materials for the technology behind a range of products and services, including computers, GPS systems, cellphones, and automobiles.
Leading Democrats Didn’t Share Too Much Concern About Artificial Intelligence
Based on the opening statement of the chairman of the House Committee on Science, Space, and Technology, Eddie Bernice Johnson, Democrat of Texas, the primary concern of the Democrats appears to be the impact last year’s shutdown had on NIST research and staffing and how the proposed reductions would compound the problem of reduced research output combined with a reduction in staff.
House Subcommittee on Research and Technology chairman Haley Stevens appeared to emphasize the defunding of programs that support the manufacturing sector and also expressed her concerns about the potential of 400 staffers being let go from the agency.
Both Chairman Johnson and Chairman Stevens provided more of a passing reference to artificial intelligence and advanced communication, observations that don’t appear commensurate with the proposed reductions the areas of advanced communications, networks, and data systems.
The Administration’s proposed cuts in advanced communications, networks, and data systems are severe. The Administration wants to reduce spending in this area by 41.4%, from $68.6 million in FY 2018 and FY 2019 to $40.2 million in FY 2020. While NIST director, Dr. Walter Copan, explained that there would be a $8 million increase in spending in the area artificial intelligence, he could not provide, during his testimony, the specific methodology leading to the Administration’s proposed overall reductions for artificial intelligence and advanced communications.
What Messages Are Being Sent?
From the Trump Administration’s end, the message appears to be the hope that NIST’s attempts to coordinate research initiatives between the private sector, public sector, and academia will make up for the reduced contribution by the federal government to research.
Congressional Democrats may see the Administration’s proposal as an opportunity to portray funding reductions as a threat to America’s economic growth. The President’s budget may give them the opportunity to make an argument that Mr Trump is continuing his shutdown of the government with this request and again risking the creation of a negative impact on the economy.
Congressional Republicans may have their bluff called on how dedicated they are to economic growth. Supporting the President’s proposed reductions may be seen as in direct conflict with their economic growth narrative. How can the Republicans support infrastructure development and investment while cutting of a conduit for development and investment?
On the other hand, Congressional Republicans could turn this into an opportunity to push back on their party’s leader, just enough to show a little independence from the White House.
In the end, Congress controls the purse strings and could present a budget in the fall that invests more in the NIST than the President is requesting.
A couple early morning thoughts on the digital divide. So far the digital divide narrative has occupied two schools of thought that are not necessarily opposed to each other.
Race and the Digital Divide
The first school of thought revolves around race. Given that within the black American community there is a higher level of poor households, affordability is keeping blacks from accessing the internet via high-speed broadband infrastructure. If blacks do not have the income to sustain a broadband business model, then internet access providers are less likely to deploy facilities in poor neighborhoods. Lack of deployment in these neighborhoods may result in a barrier to valuable information that may lead to greater economic opportunities, according to advocates seeking to close this gap.
Rural Communities and the Digital Divide
The second school of thought revolves around rural communities. The argument is that lower population density as compared to urban areas makes deploying broadband access facilities in rural areas more expensive. In addition, terrain, such as that faced by internet access providers in mountain states, has traditionally added to the problem of higher costs to provide broadband access facilities.
An Overlooked Divide
There is another divide, one that is often overlooked and it has to go to what is known as “first-mover advantage.” The real value generated by the internet is the ability to extract, analyze, package, and distribute information, and have that information be available digitally forever. The focus on a gap between facilities deployed in black neighborhoods versus facilities deployed in white neighborhoods or the gap between rural community deployment versus urban community deployment goes to seeking out new suppliers of information. The civil right veneer that has been placed over the broadband racial divide hides this supply-side characteristic from the policy debate. It has also created the opportunity for the political left to craft an electoral package that can be sold to voters.
It is the other side of the equation, the production side, that, in my opinion holds more value. When we look at the history of the internet, particularly the period when the internet was commercialized, its players included white venture capitalists; Web 1.0 internet service providers, i.e. AOL, CompuServ, Mindspring, etc.; and dial-up access providers such as BellSouth.
Black Americans could always access information from analog sources, i.e. television; print media; or word of mouth, but the efficient extraction, cataloging, indexing, aggregation, and distribution of information via the internet were the domain of companies invested in and managed by whites. As whites continued to level their first-mover advantage, this gap between producer/owner of capital and consumer continued to grow.
Capital not only seeks a vacuum, it also seeks a return. Returns from investing in black or even rural communities were not going to be as high as returns invested in affluent neighborhoods, neighborhoods whose residents probably owned shares in the very companies that commercialized the internet in the first place. Closing the “digital divide” means first closing the capital divide.
What will Government Do Next?
Government will do nothing from a capital perspective to close the digital divide. The Federal Communications Commission has a number of universal service funding initiatives designed to encourage mobile and fixed broadband deployment in rural areas; to facilitate the delivery of health care via broadband; and to reduce the costs incurred by low-income consumers for accessing and maintaining high-speed broadband service. By subsidizing the consumer demand for broadband services, the Commission hopes to encourage the delivery of broadband services. But again, the focus is on consumer demand, not bridging the capital gap.
The philosophical underpinnings of the American economy, where capital is to flow freely to its best use may prohibit government from taking any concrete action for closing a capital gap. If blacks or rural residents had sufficient capital to purchase, construct, or maintain broadband access facilities, using their intimate knowledge of their communities to distribute services, we might see a decrease in the gap. We should expect that government will stay on a path of incentivizing capital investment in infrastructure development versus trying to repair capital discrepancies via a capital transfer.
Last March, U.S. Senator Elizabeth Warren, Democrat of Massachusetts, made an argument for dismantling three of the internet’s biggest portal companies: Amazon, Facebook, and Google. Ms. Warren asserts that these companies have too much power over the private lives of Americans as well as over the economy. Through their economic and political behavior, Amazon, Facebook, and Google have, according to Ms. Warren, have stifled the ability of smaller players to enter and innovate in the internet markets.
Elizabeth Warren’s Argument
Ms. Warren asserts that Amazon, Facebook, and Google use two strategies to create dominance on the internet. The first strategy is the use of mergers by large internet portals to effectively eliminate competition. Under this strategy, Amazon, Facebook, and Google buy out their competition, at times, according to Ms. Warren, at a discounted price.
The second strategy used by internet portals is to create proprietary marketplaces to limit or eliminate competition. Under this scenario, a portal like Amazon creates a competitive product for sale on its website and uses its scale to price out a competitive product that is also offered for sale on Amazon’s website.
Ms. Warren believes this dominance can be addressed by by taking two steps. First, portals such as Amazon, Facebook, and Google would be designated as platform utilities. This means that Facebook would have to divest itself of a service provider that competes with other service providers that use Facebook’s platform to connect to its consumers.
The Problem with Ms Warren’s Approach
Ms. Warren’s approach is similar to the regulatory approach used in the 1990s where local telephone companies that wanted to provide toll services beyond their local areas had to set up separate subsidiaries. The two differences between the telecom scenario of the 1990s and Ms. Warren’s platform utility model is that telecoms didn’t have to divest these companies, but operated them separately.
More important, these telecom companies were still utilities exercising monopoly control of local service areas. Until 1996, their local rates were still regulated and they still needed permission to add certain local services. Their monopoly power resulted from the inefficiencies that would occur from multiple firms trying to provide the same telecommunications services in limited geographic space. Monopoly power granted by the state to these firms was the response by the State to the problems occurring from congestion.
The Open Internet Eliminates Monopoly Power
Amazon, Facebook, and Google, for all their dominance in the e-commerce space operate in the open internet. In the open internet, any firm or other association of individuals with the right search algorithms, expert technical knowledge, and adequate capital, can set up servers almost anywhere in the world, and start a competing service or carve out a niche portal service. The internet’s technical openness is rivaled only by its global nature. Amazon, Facebook, Google may be dominant in the American e-commerce market, but constant regulatory threats by the European Union and hostility to them from China reduces their perceived dominance. Ms. Warren has not shown how these firms can dominate a global network of 100,000 interconnected computers that operate on an open architecture.
Internet Portals are Not Utilities
It should also be mentioned that the internet itself is not a utility. In 2015, Federal Communications Commission member Michael O’Rielly made this point during a speech. Mr. O’Rielly said the following:
“It is important to note that Internet access is not a necessity in the day-to-day lives of Americans and doesn’t even come close to the threshold to be considered a basic human right. … People do a disservice by overstating its relevancy or stature in people’s lives. People can and do live without Internet access, and many lead very successful lives. It is even more ludicrous to compare Internet access to a basic human right. In fact, it is quite demeaning to do so in my opinion.”
When we think of utilities, we think of monopolies that, due to their efficient delivery of vital services such as water and energy, are granted an exclusive market within which to provide those services. As alluded to earlier, because of the open nature of the internet and its global reach, it is near impossible for one firm to have an exclusive market, unless a government decides to grant it, and that move would be irrational because government exclusivity would block the very cross-border data flows facilitated by an open internet.
Acquisition of Apps and Brick and Mortar Stores by an Internet Portal Does Not Create Monopolies
The second step Ms. Warren would take to squelch internet portal dominance would be to designate regulators that would prevent Amazon, Facebook, or Google from merging with other firms and thus eliminating competition. She provides a couple examples: Facebook and WhatsApp; Google and Waze; Amazon and Whole Foods. There are two problems with her examples and the conclusion that these “mergers” are not competitive.
First, these were not mergers but acquisitions. Two information portals, Facebook and Google, acquired two information assets. Given the services these assets provide, Facebook and Google made the business judgment that adding these services to their portfolios made sense from a services and revenue perspective. Amazon, first and foremost an online retailer, added a retail food service from which Amazon’s subscribers could purchase groceries at a discount.
Ms. Warren failed to argue how Facebook’s ownership of a messaging service keeps other firms from developing their own messaging service. She failed to explain how Google’s acquisition of Waze keeps other technology firms from creating an app that provides drivers with directions. Ms. Warren also fails to show how Amazon is keeping, say Kroger, from creating its own grocery delivery service.
It would be one thing to say that these firms monopolized physical infrastructure to the point where other firms would see increasing costs of entry, but the internet’s openness, combined with access to technical talent and expertise and cheap capital means that the assets purchased by Amazon, Facebook, and Google are themselves subject to competition.
Conclusion: Internet Openness and its Global Nature Keeps Monopoly Power in Check
The open and global nature of the internet combined with access to expertise, talent, and cheap capital works to mitigate monopoly behavior. As technology evolves and entrepreneurs innovate, the services rivaling WhatsApp, Waze, or even Facebook will emerge. Given the current make-up of the Congress and the low probability of Elizabeth Warren winning the Democratic nomination, the likelihood of her proposals being enacted via law or administrative fiat is close to zero. This does not mean that internet portals concerned about this type of overreach should stay less than vigilant in preparing to push back against them.
As machines become self aware, will they need legal protection? Maybe the question is a bit too far ahead, but discussions regarding artificial intelligence and machine learning had me contemplating the relationship between man and machine thirty or fifty years from now. At this stage I have admittedly more questions than answers but that is what exploration is all about. Given my interest in what I term pure digital information trade where machines are collecting, analyzing, and trading data and information among themselves without human intervention, and the potential for machines to become sentient, I am considering what the legal relationship will be between man and machine. Will man consider the self aware machine an “equal” in terms of sentient rights or will the machine continue to be what it is today: a tool and a piece of property?
What do we mean by “sentient?”
Sentient, according to Webster’s New World Dictionary, is defined as “of or capable of perception; conscious. To be conscious is to have an awareness of oneself as a thinking being. As thinking beings we formulate ideas or thoughts and either act on them or exchange the ideas and thoughts with others through some communications medium. Can machines do this? No.
Machines are not aware of themselves. They can only take commands; follow their programming; respond to patterns. Their creator and programmer, man, does not even have a full understanding of the human brain, currently the only place where consciousness resides. Without an understanding of the brain and the consciousness it generates, replicating consciousness within a machine would be impossible.
But if machines became sentient ….
By 2020, futurist and inventor Ray Kurzweil believes that we will have computers that emulate the brain and by 2029 the brain will be “reversed engineered”; with all areas mapped and copied so that the “software” necessary for emulating all portions of the brain can be produced. In addition, Mr. Kurzweil believes that as information technology grows exponentially, machines will be able to improve on their own software design and that by 2045 the intelligence of machines will be so advanced that technology will have achieved a condition he calls “singularity.”
But if this singularity is achieved; if this state of self-recursive improvement is achieved, where a machine is able to examine itself and recognize ways to improve its design; to improve upon itself, then how should humans treat the machine at that point?
Since my interest is in pure digital data trade markets, I would like to know how humans will treat machines capable of interconnecting with each other over the internet and exchanging machine-generated information and value without human intervention? Will they receive the same level of privacy humans today seek regarding their personal data? Given the exponential growth Mr. Kurzweil references, will privacy law even matter to a sentient machine capable, probably, of outperforming the technology of the State? What type of regulatory scheme might government create in order to mitigate this scenario?
The year 2045 is only around the corner….
Defining Digital Trade
There is no set definition of “digital trade“. Depending on the organization, digital trade is used interchangeably with “e-commerce.” To give you an idea of the variance in definitions, consider the following:
“The production, distribution, marketing, sale, or delivery of goods or services by electronic means.” — World Trade Organization
“Purchases and sales conducted over computer networks. E-commerce can involve physical goods as well as intangible (digital) products and services that can be delivered digitally. ” — United Nations Conference on Trade and Development
“The delivery of products and services over either fixed-line or wireless digital networks. It excludes commerce in most physical products, such as goods ordered online and physical goods that have a digital counterpart, such as books and software, and music and films sold on CDs or DVDs.” — United States International Trade Commission
“The direct exchange of digital goods, and digitally enabled exchanges of services or labour. The exchange of personal communications is included in the definition.” — McKinsey Global Institute
What strikes me about most of the definitions is that “digital” refers to an alternative method of delivery of goods and services versus the actual construction of the market itself. The value from digitization is likely lower costs to producers and distributors and to consumers likely benefits are lower costs of product acquisition, assuming the costs of shipping and handling resulting from online shopping don’t exceed the costs of shopping in person.
Where’s the Surprise?
But beyond this, where is the “surprise” from using a communications medium like the internet to engage in e-commerce? In my opinion, the real value, the surprise, should be beyond the actual goods and services exchanged.
The pursuit of time saving, one of the benefits of online trade, is nothing new. Today I saw two women walk into Starbucks and grab coffee ordered via an app. The value for them was getting in and out of the coffee shop with the coffee versus sitting down in a Starbucks at 7:45 am with a group of people admittedly looking a bit too scruffy.
But is this enough, the time saving to the consumer and the costs savings to the producer to treat digital trade separately from traditional trade?
The Value in Digital Trade is in the Independence of a Digital Market
As currently constructed, digital trade is more an infrastructure adjunct to traditional, physical trade. True digital trade will happen when there are pure digital players exchanging data that can only be created in cyberspace through cyberspace. A true digital market and the digital trade that occurs within should be separate from human intervention where machines are responsible for analyzing, organizing, and distributing information and knowledge over digital networks.
One example of this digital market independence is occurring in the financial markets. In an article for Forbes.com, Bernard Marr shares how artificial intelligence is being used by hedge funds to trade stocks. According to Mr. Marr, what is extraordinary is an artificially intelligent machine making trades without the assistance of a data scientist. Mr. Marr goes on further to say that:
“Artificially intelligent machines analyze inordinate amounts of data at extraordinary speeds that is impossible for humans. They learn from the information they analyze to improve their trading acumen. This information includes market prices to corporate financial reports and accounting documents to social media, news trends, and macroeconomic data. Once the information is analyzed by thousands of machines, the machines then “vote” on what action to take and the best trades to make. “
While Mr. Marr doesn’t go on to discuss AI machines on the other side of the trade, I can envision the next step where an AI machine for Trader x exchanges shares with an AI machine for Trader y making a market entirely without human assistance. This exchange of shares or information and the making of a market for information independent of human intervention is the true digital trade.
While the commercial internet is three decades old, I don’t think we are at a stage yet where we can say we have complete digital trade. At best, digital trade is a subset of cross border trade and robust markets for autonomous trade between pure digital players in cyberspace is around the corner with the innovation and inclusion of artificial intelligence. The definitions we have now for digital trade should be changed to reflect the creation of true digital markets.
Speaker of the House Nancy Pelosi and her fellow Democrats today announced introduction of the Save the Internet Act, legislation that would repeal the Federal Communications Commission’s 2017 Restoring Internet Freedom order and replace the 2017 order with the Commission’s 2015 Open Internet order. Speaker Pelosi’s rationale for replacing the 2017 order with the 2015 order includes:
- Lowering costs and increasing choice for consumers;
- Giving entrepreneurs a level playing field on which to compete;
- Helping bring broadband to every corner of the country; and
- Ensuring American innovation and entrepreneurialism can continue to be the envy of the world.
From a banking and trade perspective, the rationale offered by the Democrats for repealing the current set of net neutrality rules at the Commission sounds good. Lowering the cost for accessing an information trading platform provides the benefit of reducing information discovery costs. Bringing broadband to every corner does increase the chances of network effects taking hold where the value of a network increases as more traders use it. As network effects increase, more data traders and content providers will be encouraged to carve out more niches on the internet and provide data consumers more options for content sources.
But what was blatant from an economics perspective was the total lack of discussion in the bill itself about how an advanced communications infrastructure underpins the economy; its role as part of a three-layered infrastructure that has supported the exchange of value since the earliest days of trade between small communities. At issue here is, in terms of trade, does the Save the Internet Act facilitate trade? My answer is no and the failure is due in large put to a number of mistakes driven more by politics than economics.
Mistake: Believing the Internet is About Democracy. It is Not.
The classic argument from the Democrats is that a free and open internet is great for American democracy; that gateway keepers such as AT&T, Comcast, and Verizon should not be allowed to prevent citizens from expressing themselves via broadband. But is accessing content via a communications technology the same as expressing thought via voice, graphics, and text over that medium?
I can buy and read a newspaper but it is not the same as sending letters to the editor or leaving comments online. If democracy is about expression, then there are plenty of examples where expression is limited in the private sector, and we should not forget that core providers, such as AT&T and Verizon, and edge providers, such as Facebook and Netflix, are private companies providing the data collection, data distribution, and data access that creates value on the internet.
Could Americans in their zeal for unfettered access to the internet as a digital medium for exchanging value and communications be conflating corporate power with government power? Building on the earlier point, democracy is about the relationship between citizens and government. Democracy is about the limits citizen and government agree to.
Democracy recognizes, at least in theory, that the State has a resources advantage that can be used to oppress the individual, thus preventing her from trading for and consuming resources necessary for daily survival. This imbalance in power is why democracy, again in theory, allows the citizen to express herself in the ballot box by choosing the representatives that are supposed to keep government at bay.
Unless core and edge providers have some agency relationship with government that puts them in a position to bring down the power of government on the citizenry, then corporation is in no position to stifle democracy.
Mistake: Congress Does Not Understand the Relationship Between Corporation and Government.
Corporations are not chartered by governments (state or federal) to protect consumer rights. Corporations are expected by government to create taxable events. They are expected to hire labor and apply capital in order to extract and process resources in such a way that they become deliverable for end use consumption. Both wages paid to labor and purchases are taxed in order to fill government coffers. To maximize taxable events, corporations must come up with more revenue streams or innovate the packaging and sales of product in order to create additional demand.
In the case of broadband access providers, they see an information services market that they would like to play in so that they can increase shareholder wealth. Competing with Facebook and Google allows these companies to create additional revenue streams that can be used not only to increase their shareholders’ wealth but, as mentioned above, generate taxes that go into government coffers. In short, government shoots itself in the foot by disallowing broadband access providers to not enter the content market.
The Democrats’ two-page legislation will not bring any improvement to a communications infrastructure that provides support for trade and commerce in the United States. It keeps broadband access providers out of the information markets, eliminating incentives for broadband access providers to expand their service offerings.