Facebook’s challenges demonstrate it is time to level the regulatory playing field

This week’s joint senate hearing on Facebook’s privacy and transparency policies raised the question, does the public expect Facebook to act like a information utility? Reactions on Facebook to Mark Zuckerberg’s testimony before the U.S. Senate’s commerce and judiciary committees ranged from calling the 33-year old CEO a “shitbag” to praising him for confidently addressing questions from a 44 senators, a significant number of whom gave the impression that they had no clue as to what Facebook’s model is.

Consumers have been bitching and moaning about Facebook for years, expressing displeasure whenever the company changed the configuration of its pages, added or subtracted icons, or changed its algorithms in order to present what it thinks is more pertinent information to its users. Most users access Facebook’s content at no out-of-pocket cost to them and I personally know of no one who clicks on the ad links that pop up along the right hand side of our timelines. Yet, a significant number of users have expectations about how Facebook treats them, especially when they get put in “Facebook jail” for stating positions that may not be in keeping with the Facebook’s “righteousness police squad.”

If any senator yesterday came close to summarizing my personal sentiments on Facebook it was Orrin Hatch, Republican of Utah. The 42-year senate veteran, in the five minutes allotted to each senator, was able to get across that Facebook was not a utility; that if people were not satisfied with the product that they could go elsewhere on the internet. I don’t view Facebook as a necessity although I admit I probably spend too much time posting there albeit not as much eleven years ago when I was invited to join the Facebook community.  It can see where it can be addicting, but in the end it is not a utility.

With a utility there is an understanding that in exchange for a service generated with the use of natural resources purchased by the utility, you the consumer will compensate the utility for the generation and distribution of said service. And if that utility is regulated, the regulator is following a mandate to balance the consumer’s interest in fair and reasonable rates and consumer protection with the utility’s interest in maximizing its shareholders’ wealth. The senators that seemed adamant about Facebook not being considerate of its user community seemed to come very close to wanting to treat Facebook like a utility, but were very far from considering Facebook’s investor needs.

If Congress wants to regulate Facebook like a utility, it will have to come to terms with the fact that Facebook has only one set of consumers; the firms that purchase its advertising services. The users that Congress is so concerned about are the fuel for Facebook’s advertising platform, specifically the information attached to each user. The user is extracted, organized, and packaged as a fuel cell for advertisers, creating the eyeballs to which company advertising is targeted.

Unlike coal, oil, or natural gas, the fuel for Facebook delivers itself voluntarily over broadband access infrastructure. Whether by wired or wireless access, these transmission pipes are a necessary part of Facebook’s “information utility” business. No fuel, no eyeballs for advertisers. As former Federal Communications Commission chairman Tom Wheeler argued, the consumer experience on the internet should be seamless. Consumers should be able to access websites like Facebook without broadband access providers throttling speeds or otherwise determining which websites would get access to the consumer at certain speeds and vice versa. Also, to create the seamless experience, broadband access providers had to exercise a great degree of transparency regarding their management practices while protecting the privacy of data used to fuel the information utilities, such as Facebook, that deliver services on the edge.

The problem with the Wheeler approach is that the framework balkanized regulation of the internet. Wheeler and other progressives favored archaic transparency and privacy of information rules based on the Communications Act of 1934 applied to broadband access providers. Edge providers, like Facebook, Google, and Twitter, were to remain outside of this regulatory framework where they would be allowed to innovate and not have their information utility business model threatened by AT&T, Comcast, or Verizon. But Facebook’s current dilemma, Russian use of its platform and the trade in its user private data by unauthorized third-parties, demonstrates that if policy makers and elected officials want a seamless internet that projects transparency, all stakeholders will have to be placed on a level regulatory playing field.

Transparency can’t end at a broadband access provider’s point of presence and then enter an edge provider’s black hole.  If consumers want their data to stay private and advocate for policies that keep that data private along and throughout the internet, policymakers will have to ensure that privacy policies extend from the modem in the consumer’s home to the servers that store the data that social media collects on its users. If Congress cannot deliver seamless regulation, then yesterday and today’s hearings will equate to the mindless twerking we see on Instagram.

Is broadband access less about connectivity and more about individuality?

My sister recently experimented with Whole Foods‘ delivery service. As an Amazon Prime member, she could take advantage of no cost delivery to her home in the West End. This is a smart move on the part of Whole Foods to deliver to the West End, an area where the median household income is lower than the rest of Atlanta’s sectors. My observation has nothing to do with the wishful thinking that Whole Foods is practicing altruism, but the probability that Whole Foods is betting on the continued gentrification of the area; that it makes sense to plant a flag in the area so that when higher-income, cheap rent seeking young white couples move into the area, Whole Foods will be there to greet them. And while increasing the area’s investment value may not have been on the top of Whole Foods’ agenda, current property holders can at least tell their friends living in other areas of the city that they have not been left out of high-end food delivery options.

Going online and ordering your groceries is an example of what the long-term purpose of broadband connectivity is all about, especially for those with capital. If we accept the Facebook model of broadband and the internet, then we support the argument that broadband and the internet are about connecting people for the sake of creating a larger global community that leads to more democracy, peace, and understanding. This is one of the premises underlying net neutrality; the creation and maintenance of an open internet.  Two billion people connecting on Facebook may be deemed evidence that the globe is demanding this type of connectivity and community development on the world wide web, but such a view fails to account for the “politico-economic physics” of broadband and the internet. I believe the true value of broadband access lies in the empowerment that broadband access creates in the individual. The universe revolves around her and not the other way around.

The internet, at least for those with capital, is about bending the four-dimensional characteristics of space time and enhancing her sovereignty; creating a self-sufficient lifestyle for her. High value individuals don’t see the platforms upon which they move through space and time as flat or linear. The platform is geodesic; a curved line that provides the shortest distance between two points. In this case, between capital and the products and services that capital can acquire. The closer broadband technology brings her to sources of goods and services, the tighter her enclosure around her. She is not creating inclusiveness, or a bigger tent. In actuality, her tent becomes tighter, filled with other high value resources including friends and business associates. Creating a sovereignty blocks out the noise that the internet is becoming increasingly known for.

I would argue further that as her capital and value grows the more space-time bends around her. She creates a gravitational pull attracting even more resources, income, and opportunities. Those who argue for equality and democracy on the internet overlook this important value element. High value, capital holding consumers on the internet bend space-time toward them and high value content and service deliverers will point their commercial starships in the direction of high value.

How should policy react? It can either acknowledge the individual’s use of broadband to create a sovereign individual while transmitting her consumer energy into her tight commercial space or it can regulate her relationship with the points of commercial light within her internet space and risk forcing her to engage with value deficient “black holes” that threaten to reduce her incentive to engage in e-commerce or change her engagement in such a way that the value she receives and transmits is reduced. Policy should opt for protecting her choice for engaging with the value providers of her choice.

Happy anniversary, World Wide Web. Now, let’s go back to 1988

On 12 March 1989, Tim Berners-Lee publishes a proposal to link hypertext with transmission control protocol, the basis for the world wide web. On 6 August 1991, he launches the first web page. Prior to his proposal, the internet was pretty much a niche hideout for academics and military researchers. Berners-Lee’s proposal helped introduce ‘democracy’ to the original dark web of interconnected computers.

Democratizing digital information via open network architectures unleashed the digital demons that Mr Berners-Lee would like to see regulated today. We went from a relatively simpler system where Dr James Haywood Rolling Jr could send Dr Marshall Shepherd samples of research that could add artistic flavor to the otherwise drab depiction of weather patterns, to the current system where an 18-year old dressed in psychedelic garb can do the booty clap in front of a smartphone and send the images live from Accra. Using this information, the Digital Daemons, i.e. #Facebook#Google, and #Twitter, can create profiles based on every ‘like’ the booty clapper receives and market services and products to consumers.

Closer inspection of the history of the world wide web and Mr Berners-Lee’s criticism of today’s social media/social network companies exposes a downside of the premise that the Digital Daemons are negatively impacting global connectivity via the internet. Mr Berners-Lee is concerned that the one-half of the planet currently not connected to the internet may be at a disadvantage culturally and economically and that connecting to the Flying Spaghetti Monster that is the world wide web may be the developing world’s salvation.

Ironically, it is that arrogant premise that the world needs to be connected to a single standard that drove European colonial expansion across the globe and spawned a global financial system anchored by the Bank of International Settlements, the World Bank, and the International Monetary Fund to replace the colonizer when Europe entered its post-World War II decline. Whether he realizes it or not, Mr Berners-Lee’s liberal position on digital connectivity is steeped in the European DNA for conquest.

If Mr Berners-Lee and other progressives are so bloody concerned about the negative impact the Digital Daemons are having on access to and distribution of information, they should push for an internet that existed pre-1989 where communities of value-based information exchangers created their own databases, and protocols and criteria for membership in these groups. Ironically, under that type of scenario, application of net neutrality rules based on Title II of the Communications Act would be valid because the administrators and owners of the databases could more easily be defined as consumers of telecommunications in some type of corporate form.

Sometimes you have to go back to your past to find a solution to a current dilemma. Happy Anniversary, World Wide Web.

Free Press and Public Knowledge are getting a taste of big tent progressive politics

Brian Fung of The Washington Post put out a great piece this morning describing a growing rift between two factions on the progressive side of the net neutrality debate. Grass roots groups such as Free Press and Public Knowledge believe that supporters of the Federal Communications Commission’s 2015 Open Internet Order should aggressively push the Congress to overturn the Commission’s 2017 repeal of the Order.

Corporate supporters of the Commission’s Open Internet Order such as Facebook and Google are taking a more centrist approach. While they apparently still support applying net neutrality rules based in Title II of the Communications Act of 1934, they are now signaling that a bi-partisan Congressional approach via a new law would help resolve the net neutrality dispute once and for all.

Based on Mr Fung’s writing, the big tent has a few holes in the tarp, as meetings hosted by the Internet Alliance and attended by both net neutrality factions are growing in the number of attendees and an increasingly diverse level of issues are sprouting. Free Press and Public Knowledge are finding the hard way a couple important lessons about any corporations true mission and that diversity is an empty narrative.

First, the corporate mission. I hesitate to say that the good people at Free Press and Public Knowledge are naive (but I wouldn’t hesitate to say that their 4 million pro net  neutrality followers are), but both groups seem to have fallen for Google’s and Facebook’s silly mission statements about doing no evil and connecting the world for connection sake.

Google and Facebook created and maintained dominant positions in internet search and social networking by first optimizing their business models to maximize shareholder value, a lesson the lawyers at Free Press and Public Knowledge failed to remember from the business associations classes in the second year of law school. “Russiagate” has raised the ire of Congress and Google, Facebook, and other social networking and internet portal companies are gathering their wagons around their revenue streams and profit centers from potential government attacks. They cannot afford any regulatory volatility that will arise from the uncertainty of how net neutrality principles will be applied to broadband access providers. They are realizing that compromise legislation passed in the immediate term is good for long term growth.

While Google and Facebook play in the “attention economy”, Free Press and Public Knowledge play in the “agitation economy.” To stay relevant as a grass roots advocate leader, they must tear up the astro turf regularly. Settling the net neutrality tennis match via a bi-partisan bill means 4 million pairs of eye balls not looking their way because the show will be over. Nothing else to see here. Problem solved.

As for diverse voices, that narrative does not work. The bigger your tent, the further off course the original message drifts. Sooner or later the money bags step up and start setting priorities and those priorities will place those with the least coin ahead of the pack. The 4 million three huggers are going to have internet access no matter their personal beef with their broadband access provider. Most have access to two or three providers whether wireless or wireline. Facebook and Google cannot take comfort in any certainty. As big as they are in digital space, the wilderness is huge and there is always a young predator getting ready to spring out with new technology and the hunger and thirst to match.

Facebook and Google’s profit motives and needs are no different than the broadband access providers Free Press and Public Knowledge rail against. Facebook and Google will take control of the circus under the big tent and call for some grown up behavior that protects their revenues and profits.

 

Will Congress regulate.@facebook like a public utility? Given its potential benefit to partisan politics, probably not. #socialmedia

The Wall Street Journal’s Holman Jenkins, Jr. posted an article last Friday about Facebook’s apparent maturity as a business given its focus on regulatory issues such as the potential of Congress to regulate the social media company like a public utility. Mr Jenkins points out that Facebook’s fear of regulation, a fear shared by other “tech” companies, comes from the attention that large companies draw to themselves as the result of centralization of power. In this case, Facebook is perceived as one of the few central nodes of power in the digital space (along with fellow FANGs; Amazon, Netflix, and Google). Issue is, does Facebook have a monopoly status that justifies “public utility” regulation. My answer is no.

The classic argument for regulating a firm as a public utility is that the public has an interest in benefiting from the use of the public’s rights-of-way including the efficiencies that flow from making such uses exclusive to one firm in a given territory. Electric and water utilities quickly come to mind when we discuss public utilities and rights-of-way. Would you rather see your streets and driveways dug up to provide multiple pipes from multiple water or electricity suppliers or would you rather one supplier who is forced to comply with a pricing model that creates a competitive price and rate of return on the assets used by the utility to produce a good? For the most part, society has settled for the latter. We don’t like the idea of having an excess number of utility lines running overhead or into our residences for aesthetic or safety reasons.

Does Facebook fall into this public utility model? No, it does not. According to Facebook, the company makes almost all of its revenue from the sale of advertisement. Facebook uses its algorithms to identify potential viewers of content or purchasers of services for its advertisers and display ads these ads to content viewers and services purchasers in exchange for an advertising fee. Ad services, including the delivery of advertisements to consumers, by Facebook’s admission is a competitive business. Unlike electricity transmission and distribution, ad delivery is not a monopolized industry. As Mr Jenkins points out in his piece, ads are ads, digital or otherwise, and Facebook is no where near dominating a $540 billion advertising industry.

Even if Facebook had a monopoly on the delivery of advertisements or advertisement services, would a regulator risk creating a state action by regulating Facebook’s advertising services? Bearing in mind that the latest buzz around Facebook ads was spawned by the delivery of advertisement messaging produced by Russian nationals allegedly designed to disrupt and defraud the American electorate, would Congress require that Facebook vet the firm generating advertisement content? Would Congress risk the overturn of legislation requiring Facebook vet advertisers if found violating the First Amendment?

I think that even advertisers confident that their messaging does not violate the public interest would think twice about placing advertisements on Facebook’s platform. More important, from the perspective of the regulator, an administrative agency would not to create the risk of creating First Amendment violations and having to defend those violations in court. As the U.S. Supreme Court held in Edenfield v. Fane:

“The commercial market place, like other spheres of our social and cultural life, provides a forum where ideas and information flourish. Some of the ideas and information are vital, some of slight worth. But the general rule is that the speaker and the audience, not the government, assess the value of the information presented. Thus, even a communication that does no more than propose a commercial transaction is entitled to the coverage of the First Amendment.” 113 S.Ct. 1792, 1798 (1993)

Finally, political parties may not want to impede the returns to electioneering that social media has been providing for the past decade. According to the Brookings Institution, since the 2008 national elections, political parties have been determining how best to convert the amplification and engagement created by social media during a campaign season into two-year and four-year governance.  Political parties have been encouraged to use social media in a number of ways including the following:

  • Acknowledging that the electorate is using social media as a “trust filter” of political news and information;
  • Realizing that politicians have decreasing control over debate topics and that control is shifting to social networks;
  • Making continued use of social media platforms to directly engage constituents;
  • Using social media platforms as “virtual surveys” of constituent sentiment and gauging feedback from the surveys; and
  • Leveraging ordinary citizens’ use of social media to persuade the electorate.

It is 2018 and Congress should view social media that has greater benefits as an electioneering tool if it is not regulated. From a regulatory perspective, there is no economic or legal justification for regulating social media as a public utility.

How we long for the switchboard operator and virtual spilled tea

During the tumultuous 1960s, someone reminded DARPA that the network of connected computers it created could not be turned on its own people. The guys and gals of the agency had an “a-ha” moment in the late 1980s and decided to pass it off to private sector agents who could then, via an open source technology and a consumerist market narrative, invite the nerds from Bellvue and Arkham to create an insidious surveillance mechanism that you now call the internet.

Getting Americans, who once had a distrust of the CIA and FBI for violating their privacy rights, to spill almost all their personal beings into a computer via digital bulletin boards at first was no simple feat. The first drawing board blew up during the 2000-2001 recession. Amazon was one of the very few consumer-centric companies to survive the downturn. The internet was apparently dead ….until 11 September 2001.

The internet found its two-fold purpose. In private hands under the guise of “democratic openness”, “free speech”, “innovation”, and “market capitalism”, well-off college students would drop out of their undergrad and graduate programs and do the surveillance bidding of government by creating search portals and social media alluring enough to get unsuspecting consumers to look up information they once obtained from newspapers, the barber shop, grocery stores, and Friday night tea parties in exchange for the handing over of their personal (and typically mundane, boring) information.

The second portion of its purpose would be turned outward. Making up for the lack of human intel on the ground in the Middle East, the internet could be used to leverage messaging campaigns to spur revolt, as countries such as Egypt and Libya can attest to.

One has to wonder if the chickens have come full circle to roost as the vanguard of domestic surveillance, i.e. social media, now see its faculties leveraged by Russia as The Great Bear seeks pay back for the dent in its Middle East influence, due in part to the democracy narrative spread by the FANGs.

Yes. Life was simpler when Ruth Buzzy ran the switch board and encyclopedias, radio, television, and tea time gave you all the information you needed .

I don’t see a knowledge economy. I see a knowledge industry.

The term “knowledge economy” gets thrown around a lot. When you combine the term with other terms such as “artificial intelligence” and “machine learning”, you can be left with the impression that unless you have an engineering degree or know how to code, then you will be left to wonder the streets of dystopia, meandering through blithe in search of value or meaning. The knowledge economy, based on how it is presented, sounds like a place carved out for the information elite. I don’t take the dreaded scenario seriously because the knowledge economy does not exist. This acknowledgment is important because embracing this position provides a platform for creating social policy that effectively distributes knowledge as what it is: a capital input.

The United States has gone from an agrarian economy to an industrial economy to a services economy. The labels imply that for some type of output, crops, that there are rules for the extraction, packaging, and distribution of capital necessary for producing an end product, food, and for packaging and distributing to its final destination, the end-user. Once it is consumed, it is either gone immediately or depreciating to zero value over some period of time. There is some range of exclusivity involved in its consumption. We cannot say that for knowledge.

Knowledge results from a combination of information and experience. It is about “knowing how” to do something. It is an awareness of a process behind creating some result. While the “know how” could be protected by the laws of intellectual property, acquiring information, “the noise” and human experience garnered from deciphering through the noise to find a valuable nugget of information, cannot be constrained. The rules of economy are designed to bring society closer to some certainty over how resources will be extracted and distributed, but the open environment around knowledge makes strict rules useless.

Public policy can craft rules that make packaged knowledge exclusive to the creator and owner i.e, copyrights for artistic work or patents protecting applied scientific processes, but there are different paths to creating knowledge resulting sometimes in creating similar but not same packages. Knowledge protection is limited.

For this reason, knowledge can be built upon, expand. There is really no final consumption. Knowledge is reused, modified, improved over time. Rules of economics are not as applicable as they were in agrarian or industrial society.

Knowledge is more input than it is final product. This is why, to me, the term “knowledge economy” is weak. Knowledge has been an input during each of America’s economic phases. America’s increased reliance on information and communications technology over the past fifty years doesn’t mean that “knowledge” gets to claim its own economy.

Markets can be made for knowledge. A consultant takes her insights, advice, and publications into the knowledge market where she hopes she receives an offer that compensates her for the time spent creating the knowledge product and/or presenting the knowledge product.

As for the consumer of the knowledge product, he is taking a gamble that any action plan, output or final product generated by the knowledge creates positive value or profit. The more information the consultant and the purchaser have on the forecasted value of returns on the knowledge, the more accurate the market price for the knowledge.

If anything, we may be in a “learning economy” where consumers are also becoming producers either of their own content or more durable products. The knowledge industry is one of its platforms where knowledge as input is bought and sold.