The Net, Intellectual Property, and the Tragedy of the Commons

Doc Serls has a thought-provoking piece in Linux Journal about politics, intellectual property, and freedom. He has some interesting theories about conservatism with some merit, but there’s another relevent issue that needs to be added to the discussion.

Serls’ arguments are interesting and deserve some closer examination.

These companies have deep alliances with the big "content": industries (in the case of cable, they are one and the same) that want to see control extended beyond the Net, into the devices that connect to the Net, including PCs, which have also been blessedly free from regulation. Intellectual property protections have been built into consumer electronics devices for a long time. These guys see no reason why PCs, as a breed of consumer electronic device, shouldn’t be subject to the same restrictions, in the form of digital rights management (DRM), run by content providers and burned into hardware at the factory. In fact, they’re counting on the anti-circumvention provisions of the Digital Millennium Copyright Act (DMCA) to prevent any hacks around those DRM systems. Once those cripples (for which there is zero demand on the customers’ side) are in place, you can count on Dell, HP and Gateway PCs and laptops that are much less ready to run Linux.

There are two problems with this analysis. First is that the integration of media and content providers have been a disaster for businesses that have tried it. AOL/Time Warner is an example of that. The merger of these two companies was one of the worst business decisions of the century. AOL/TW is bleeding a sea of red ink, and that means that other businesses aren’t going to folllow suit. Corporate "synergy" didn’t work then, and it’s unlikely to work now.

DRM is another legitimate concern, but it’s also not going to make anyone money, and things that don’t make money don’t last long in the world of business. Remember DivX? I don’t mean the codec, I mean that self-destructing DVDs that Disney and some others tried in the early days of DVD technology. DivX was an absolute failure, because people don’t want media that expires. They want discs they can keep and collect. DivX caused the companies involved to lose their shirts on the deal, and that’s why DVDs became dominant in the media.

If DRM doesn’t offer something to the consumer, they won’t purchase DRM-enabled products. If corporations force DRM, people won’t buy. Let’s face it, the RIAA and the MPAA are desperate as hell. File sharing is a way of life now, and companies that embrace the concept, such as Apple’s briliant iTunes Music Store, will thrive, and those that try to lock down content (see Liquid Audio) won’t. Again, the market protects the needs of consumers because the market is driven by consumers. Businesses care about the bottom line, and DRM doesn’t sell.

The only way DRM can become a threat is if DRM is legislated. I totally agree with those who are against laws that would expand the Digital Millennium Copyright Act and other draconian restrictions. Of course, the truth about who is sponsoring such acts is surprising in and of itself.

Two oddly allied mentalities provide intellectual air cover for these threats to the marketplace. One is the extreme comfort certain industries feel inside their regulatory environments. The other is the high regard political conservatives hold for successful enterprises. Combine the two, and you get conservatives eagerly rewarding companies whose primary achievements consist of successful long-term adaptation to highly regulated environments.

This is a relatively fair shot. However, it isn’t "conservatives" who have been closest to media companies. As I stated in a comment earlier tells a different story from Federal Election Commission reports. In the 2002 election cycle, media companies gave $32,403,975 to the Democratic Party while they gave only $5,097,856 to the Republicans. One would think that simple self-interest would dictate that they’d give more to the party that does more for their interests – and indeed they do. Which is why Sen. Fritz Hollings (D-SC) might as well be Sen. Fritz Hollings (D-Disney). Sen. Hollings has been the single biggest opponent to intellectual property reform in the Senate – which is unsurprising as he recieves thousands of dollars in campaign contributions from media companies.

Searls also makes another interesting argument about intellectual property:

There’s also a problem with conceiving broadcast service–especially the commercial variety–as a "marketplace." Its customers and consumers are different populations. The customers of commercial broadcasting are advertisers, not viewers and listeners. In fact, commercial broadcasting mostly is an advertising business. The "content" it distributes is merely bait; the goods sold are the ears and eyeballs of “consumers”. That means commercial broadcasting’s real marketplace is Madison Avenue, not radio and TV dials. As a consumer of commercial broadcast programming, your direct influence is zero because that’s exactly what you pay. (Paying for cable or satellite service doesn’t count, because that payment is for access, not for the content itself.)

Again, there is some merit to this argument, but it also misses a critical point. Media is driven primarily by ratings. Advertising dollars are not doled out based on who the advertisers want, but what the viewers watch. (Granted, the Nielsen rating system is horrendously broken, and it ignores basic demographics, meaning that quality TV like Firefly and others get the shaft. However, the principle still holds even if the implementation does not.)

For example, Fox News isn’t popular because advertisers said they wanted to it to be. Fox News is popular because it carved out a unique niche in the media market. It’s success is based on ratings, which in turn is derived from the number of people watching. Likewise, upstarts like PAX TV are seeing their ratings climb while traditional broadcast networks are seeing an overall decrease in viewership. (Note that PAX TV is owned by CBS, and had to exploit the rule that UHF channels only count as half a channel under FCC rules in order to enter the market.)

Doc Serls then goes into an interesting, if controversial, analysis of conservatism and why civil libertarians lost such rules as Eldred v. Ashcroft:

The gradual destruction of the Net is getting political protection by two strong conservative value systems. One values success, and the other values property. Let’s look at success first.

Liberals often are flummoxed by the way conservatives seem to love big business (including, of course, big media). Yet the reason is simple: they love winners, literally. They like to reward strength and achievement. They hate rewarding weakness for the same reason a parent hates rewarding kids’ poor grades. This, more than anything else, is what makes conservatives so radically different from liberals. It’s why favorite liberal buzzwords like "fairness" and "opportunity" are fingernails on the chalkboards of conservative minds. To conservatives, those words are code-talk for punishing the strong and rewarding the weak.

As George Lakoff explained in Moral Politics: What Conservatives Know that Liberals Don’t (University of Chicago, 1995), conservatives consider strength a "moral value". Strong is good. Weak is bad.

In street basketball there’s a rule called "make it, take it". If you score a basket, you get to keep the ball. Three-on-three basketball works the same way. So do volleyball and other sports with rules that favor achievement over fairness.

Relaxing media ownership rules is all about "make it, take it". Clear Channel and Viacom have made it. Why not let them take more? It’s simply the marketplace at work, right? Again, only in a highly regulated context.

Doc Serls is presenting a very simplistic view of conservatism. Yet there is some level of truth to this. Yes, conservatism is an ideology that celebrates strength. Conservatives do admire people who do great things – in fact, pretty much everyone admires people who do great things. We do value achievement, because achievement is the best way to advance all of society. At the same time, we believe that that the best way to make a better society is to create the situation in which all can best achieve as much as they can. We dislike systems that mandate fairness, because your idea of fairness is someone else’s idea of oppression. "Fairness" is an essentially utopian value. People aren’t equal. It’s not fair that my eyesight is so crappy that I can’t drive without glasses. It’s not fair that I grew up in the middle class while some of my friends lived a few blocks and $200,000 away. Yet that’s the way things are, and I don’t spend my life complaining about how I got a raw deal.

And this is where more regulation hurts freedom rather than expanding it. Deregulation of cable and Internet communication have produced a massive level of choice for consumers. These fully open markets have created a situation where consumers aren’t worrying about too few choices, rather they are inundated by choices. There are no less than 3 women’s channels, no less than 9 news channels, and even one channel dedicated to aviation on my cable system. Furthermore, because of deregulation myself and other consumers can get broadband cable internet, cable TV, and local and long-distance phone service from the same company at less than it would cost to purchase all three services separately. It’s a win-win system for consumers.

The problem with media ownership regulations is that they paradoxically limit media diversity. They discourage innovation by mandating that companies can essentially steal from others by forcing them to open access to technologies rather than companies developing new and potentially better technologies. They create a situation in which bureaucrats who are appointed have more control over media than consumers who represent the audience for media. Media regulations are often being used as sledgehammers by companies to smash their competitors – which is why you’re seeing media companies dumping thousands of dollars in the coffers of opponents of deregulation. That leads us to Doc Serl’s suggestion:

Markets flourish on the Net or with the help of the Net because the Net is free. That’s free as in beer, speech, liberty and enterprise. That freedom is guaranteed by the end-to-end nature of the Net, and the NEA principles it engenders: "Nobody owns it, Everybody can use it and Anybody can improve it."

This may sound a bit like communism to conservative sensibilities, unless it is made clear that the Net belongs to that class of things (gravity, the core of the Earth, the stars, atmosphere, ideas) that cannot be owned and even thinking about owning it is ludicrous.

Now, to the elections. Look at the two big political parties; both have existed largely as funding mechanisms. For proof, ask yourself, "When was the last time I went to a party meeting?" Whatever other functions they serve, the parties are fundamentally about The Money.

Of course, doing exactly that leads one to some interesting results as to who are the real friends to the media giants and who isn’t. Besides that, Serls’ forgets about a little thing called "The Tragedy of the Commons". As Nobel laureate Daniel McFadden reminds us, this concept reminds us that when nobody owns something – like a common field, human nature dictates that they’ll try to maximize their own value at the expense of everyone else:

Immigrants to New England in the 17th century formed villages in which they had privately owned homesteads and gardens, but they also set aside community-owned pastures, called commons, where all of the villagers’ livestock could graze. Settlers had an incentive to avoid overuse of their private lands, so they would remain productive in the future. However, this self-interested stewardship of private lands did not extend to the commons. As a result, the commons were overgrazed and degenerated to the point that they were no longer able to support the villagers’ cattle. This failure of private incentives to provide adequate maintenance of public resources is known to economists as "the tragedy of the commons."

It is that reason why ownership matters. Gravity and sunlight are provided by God – Internet connectivity is not. The Net is not free, it requires immense amounts of power and resources to create. If no one owns the Net, no one has the desire or the will to improve it. Instead, the Net is a marketplace, and like any marketplace the same concepts of ownership are crucial to its success. An NEA form of organization is more likely to have Everyone using and Nobody improving. Instead, a situation in which companies agree in the free market to use interoperable standards like XML and 802.11 for their own benefit is how the Internet came to flourish and how it will continue to grow.

There’s no such thing as a free lunch, and the only way in which any market, whether it is TV, radio, or the Internet is if they have the ability to gain profit from it. The only way to gain profit is to provide a service or product that people want to buy. That’s the basis for every market system, and the rules of the market are as critical and unavoidable as the rule of gravity. It is only through a system of property rights that the tragedy of the commons can be avoided. The interests of the net lie not with more regulation and a system of common organization but a vigorous system of property rights that ensures that both content providers and consumers have the ability to maximize their value in a free market system.

2 thoughts on “The Net, Intellectual Property, and the Tragedy of the Commons

  1. A predictably pro-corporate analysis from Jay.

    If corporations force DRM, people won’t buy.

    If the people have no choice, do you really think they’ll stop buying things with DRM? I don’t, and the evidence agrees – people buy DRM when they don’t have a choice.

    The worst part about DRM + DMCA is that it makes it illegal to access materials that were encrypted to protect copyright – but whose copyright has subsequently expired. Currently the law makes no provision for the circumvention of encryption on materials that are no longer copywritten.

    Deregulation of cable and Internet communication have produced a massive level of choice for consumers.

    Not really. There’s a thousand channels, sure – but they’re all controlled by a decreasing number of media providers. Around where I live there’s no cable competition – just Mediacom. I’m not familiar with any area of the Twin Cities where you have a choice about who to get for cable. Deregulation was supposed to prevent these monopolies, but exactly the opposite seems to have happened. As a result people have seen their cable bills rise and rise over the years.

    If no one owns the Net, no one has the desire or the will to improve it.

    Of course, you’re ignoring the vast history of the net, where the people who had no stake in it did exactly what you say they wouldn’t – improved it. The Net was a government project, or did you forget? Only in the past 3-4 years has the infrastructure of the net become largely corporate. And as it does, the corporate ability to decide exactly what internet surfers are able to see or not see becomes a very real danger to the people of the world.

  2. On the issue of the DMCA, I agree that it’s a bad law. However, I still hold that unless the government mandates DRM that no one would willingly buy a crippled product – which is why DivX went under like a rock. In other words, corporations aren’t the problem – it’s the government who can create a distorted market and reduce customer choice.

    As for deregulation, you’re right, it has the biggest effect in urban markets. I despise Mediacom too, but their monopoly is aided by regulation. Because of some of the high barriers to entry it means that potential competitors can’t enter the market and be successful.

    The real problem with the rural cable market is that there’s simply not a big market. It’s a basic function of economics – it takes a lot of resources to build a wide-area cable network.

    However, technology helps the situation somewhat – satellite service is going down in price, and the defection of cable customers to satellite will force rural companies to be more competitive.

    Of course, you’re ignoring the vast history of the net, where the people who had no stake in it did exactly what you say they wouldn’t – improved it. The Net was a government project, or did you forget? Only in the past 3-4 years has the infrastructure of the net become largely corporate.

    Actually, the net didn’t take off until 1994 or so when the first ISPs happened. Before that it was limited to only a handful of universities and corporations. Furthermore, the infrastructure of the net has been corporate for some time – UUNet, BBN, Sprint, AT&T, and other major backbone providers have taken over from the original ARPAnet for years now.

    The actual physical backbone of the Internet isn’t like software development. It costs money for bandwidth, it’s not free like Doc Serls argues. If people can’t make money off it somehow, it goes away. The basic rules of economics apply to the Internet, which is why dot coms no longer get VC funding like it grew on trees. Routers, fiber-optic lines, and the expertise to run them take money, and unless the companies that run them are allowed to profit from them, they’ll simply close down.

    And as it does, the corporate ability to decide exactly what internet surfers are able to see or not see becomes a very real danger to the people of the world.

    It isn’t corporations that are making those decisions – it’s government. If a corporation decides to make Internet filtering non-voluntary, subscribers can go elsewhere. If the government does it, you’re almost entirely screwed. (See Iran, China, and Saudi Arabia.)

    Remember, when a corporation makes a bad decision, you have the choice to buy from them or not. If you don’t like Wal-Mart don’t buy from there. If they censor their CDs, you have any number of other options from Target to

    If the government makes that same decision, you’re screwed. You have no choice, and you can go to jail for doing otherwise.

    It’s this very simply dichotomy that clearly shows why the biggest threat to our civil liberties doesn’t come from corporations but from government – especially governments that think that they know what’s good for everyone.

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