TO THOSE who find virtue in the American ethos ofentrepreneurship, innovation, and competition, the words "we're fromthe government and we're here to help you" are scary enough. Scarierstill is, "we're from the world government and we're here to helpyou."
Unfortunately, that was the message when French President NicolasSarkozy summoned the titans of the digital world, including JeffBezos of Amazon, Mark Zuckerberg of Facebook, and Eric Schmidt ofGoogle, to discuss what the head of France Telecom described as the"necessity to find some form of global economic governance of theInternet."
The findings of the two-day discussion were presented to the G-8ministerial meeting in Deauville, France, but it looked like the fixwas in: Sarkozy's government has already moved to set prices foronline music and publishing, and to tax online advertising. One getsthe impression that he's looking for others to join in. Let's hopethat France continues to go it alone.
Proposing a global Internet regulator is consistent with theFrench instinct to regulate just about anything that threatens thestatus quo and standards of French culture, and France's existinglaws offer a preview of what Sarkozy has in mind for the rest of us.They've recently moved to let publishers control the price of onlinebook sales. Think about that - a law that doesn't protect authorswho write the books or retailers who sell them, but instead shieldsthe profits of publishers who are threatened by innovation.
In the same way, taxing online advertising penalizes newtechnology in favor of the old. No amount of rhetoric aboutinnovation and jobs changes economic facts: discriminatory taxesdistort resource allocation, discourage new investment, and make thenext generation of Facebooks less likely.
Regulating the Internet is a bad idea; regulating the Internetjust to protect outdated business models is a corruption of statepower.
The Internet's capacity to connect people, share data, anddramatically reduce distribution costs has destroyed one businessmodel after another, to consumers' benefit. The victims includemusic distribution, "phone" service, and mail. Handheld devices,which owe their popularity in large measure to broadbandconnectivity, are in the process of dismantling the consumerbusinesses for point-and-shoot digital cameras and stand-alone GPSdevices as well.
The digital economy does require standards for things likespectrum allocation, privacy, and intellectual property. But theseare challenges that the United States has already begun to address,and for which we do not require a global regulator. Despite itsflaws, the Internet works better than most parts of our economy. Thecall from France is rooted in a desire to control the development ofdynamic industries, and a deep-seated belief that civil servantsknow best.
To regulators, the path of innovation seems so clear inhindsight, that they mistakenly believe they can see the future. Theintuitive nature of successful products - cable broadband, theiPad, Google, and Facebook - make us forget that they oncerepresented significant business risks. Millions, sometimesbillions, of dollars in capital was at stake before a singleconsumer stepped forward to validate the products. And for everysuccess there are many more failures like Prodigy, GeoCities, andPets.com.
Perhaps these developments are most alarming because they come ata moment when the consumer is finally seeing the dramatic benefitsof "convergence." Every day there is less and less distinction amongservices for voice, video, and data; all three are becomingapplications riding on a channel of spectrum.
Microsoft's $8.5 billion purchase of Skype highlights the point.Microsoft, the target of a decade-long attack by European antitrustregulators, sees the integration of voice and video on the Web andis willing to pay a huge price for a technology leader. Time and themarketplace, not some bureaucrat, should determine whether it was awaste of money.
In this regard, the 1996 federal Telecommunications Act -written by the best regulators and policy makers of the day -failed miserably. Although it encouraged firms to compete indifferent business lines, it assumed that markets for voice, video,and data would remain distinct. It set unique and often cumbersomeregulations for each, and predicted that telecom markets wouldcontinue to be dominated by long-distance phone companies.(Disclosure: I am a board member at Time Warner Cable.) As a result,it was outdated the day it was signed into law.
If all goes Sarkozy's way, we may not have to worry aboutmisguided regulators in the United States. We will instead place"economic governance of the Internet" in the hands of an augustinternational body led, no doubt, by the very best French civilservants.
John E. Sununu, a regular Globe contributor, is a former USsenator from New Hampshire.
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