[ Best Oped I've read about Sarkozy's plans
to control everything and then some ]
TO THOSE who find virtue in the American ethos of entrepreneurship, innovation, and competition, the words “we’re from the government and we’re here to help you” are scary enough. Scarier still is, “we’re from the world government and we’re here to help you.”
Unfortunately, that was the message when French President Nicolas Sarkozy summoned the titans of the digital world, including Jeff Bezos of Amazon, Mark Zuckerberg of Facebook, and Eric Schmidt of Google, to discuss what the head of France Telecom described as the “necessity to find some form of global economic governance of the Internet.”
The findings of the two-day discussion were presented to the G-8 ministerial meeting in Deauville, France, but it looked like the fix was in: Sarkozy’s government has already moved to set prices for online music and publishing, and to tax online advertising. One gets the impression that he’s looking for others to join in. Let’s hope that France continues to go it alone.
Proposing a global Internet regulator is consistent with the French instinct to regulate just about anything that threatens the status quo and standards of French culture, and France’s existing laws 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 online book sales. Think about that — a law that doesn’t protect authors who write the books or retailers who sell them, but instead shields the profits of publishers who are threatened by innovation.
In the same way, taxing online advertising penalizes new technology in favor of the old. No amount of rhetoric about innovation and jobs changes economic facts: discriminatory taxes distort resource allocation, discourage new investment, and make the next generation of Facebooks less likely.
Regulating the Internet is a bad idea; regulating the Internet just to protect outdated business models is a corruption of state power.
The Internet’s capacity to connect people, share data, and dramatically reduce distribution costs has destroyed one business model after another, to consumers’ benefit. The victims include music distribution, “phone” service, and mail. Handheld devices, which owe their popularity in large measure to broadband connectivity, are in the process of dismantling the consumer businesses for point-and-shoot digital cameras and stand-alone GPS devices as well.
The digital economy does require standards for things like spectrum allocation, privacy, and intellectual property. But these are challenges that the United States has already begun to address, and for which we do not require a global regulator. Despite its flaws, the Internet works better than most parts of our economy. The call from France is rooted in a desire to control the development of dynamic industries, and a deep-seated belief that civil servants know best.
To regulators, the path of innovation seems so clear in hindsight, that they mistakenly believe they can see the future. The intuitive nature of successful products — cable broadband, the iPad, Google, and Facebook — make us forget that they once represented significant business risks. Millions, sometimes billions, of dollars in capital was at stake before a single consumer stepped forward to validate the products. And for every success there are many more failures like Prodigy, GeoCities, and Pets.com.
Perhaps these developments are most alarming because they come at a moment when the consumer is finally seeing the dramatic benefits of “convergence.” Every day there is less and less distinction among services for voice, video, and data; all three are becoming applications 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 antitrust regulators, sees the integration of voice and video on the Web and is willing to pay a huge price for a technology leader. Time and the marketplace, not some bureaucrat, should determine whether it was a waste 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 in different business lines, it assumed that markets for voice, video, and data would remain distinct. It set unique and often cumbersome regulations for each, and predicted that telecom markets would continue 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 about misguided regulators in the United States. We will instead place “economic governance of the Internet” in the hands of an august international body led, no doubt, by the very best French civil servants.
John E. Sununu, a regular Globe contributor, is a former US senator from New Hampshire.
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