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PFF: Cyberspace and the American Dream:
A Magna Carta for the Knowledge Age
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Received: JANUARY 11, 1995 21:22
From: Phil Agre
To: rre@weber.ucsd.edu
Subject: "Magna Carta"
This is the so-called "Magna Carta" from Newt Gingrich's "Progress and Freedom
Foundation" that I discussed in TNO 1(12). It is formatted precisely as I
received it from PFF.
Date: 9 Jan 95 17:25:21 EDT
From: Kevin Lacobie
Subject: Your request for "Cyberspace and the American Dream"
Sorry folks, for the delay in responding to your request. A misprinted domain
name and a quite overwhelming interest in this paper have been quite taxing on
our efforts. Anyway, we wish you all a happy and prosperous New Year. Below
is a copy of the Magna Carta paper. A listserv-based discussion group will be
formed soon for this paper, and the Progress and Freedom Foundation promise
further activities in this area.
If you have any more questions about PFF, please direct them to PFF@aol.com.
If you have questions about the MagnaCarta discussion group, please direct them
to info@bionomics.org.
Kevin Lacobie
postmaster for @bionomics.org
___________________________________________________
Cyberspace and the American Dream:
A Magna Carta for the Knowledge Age
Release 1.2 // August 22, 1994
----------------------------------------
This statement represents the cumulative wisdom and innovation of many dozens
of people. It is based primarily on the thoughts of four "co-authors": Ms.
Esther Dyson; Mr. George Gilder; Dr. George Keyworth; and Dr. Alvin Toffler.
This release 1.2 has the final "imprimatur" of no one. In the spirit of the
age: It is copyrighted solely for the purpose of preventing someone else from
doing so. If you have it, you can use it any way you want. However, major
passages are from works copyrighted individually by the authors, used here by
permission; these will be duly acknowledged in release 2.0. It is a living
document. Release 2.0 will be released in October 1994. We hope you'll use it
is to tell us how to make it better. Do so by:
- Sending E-Mail to PFF@AOL.COM
- Faxing 202/484-9326 or calling 202/484-2312
- Sending POM (plain old mail) to 1250 H. St. NW, Suite 550
Washington, DC 20005
(The Progress & Freedom Foundation is a not-for-profit research and
educational organization dedicated to creating a positive vision of the
future founded in the historic principles of the American idea.)
----------------------------------------
PREAMBLE
The central event of the 20th century is the overthrow of matter. In
technology, economics, and the politics of nations, wealth -- in the form of
physical resources -- has been losing value and significance. The powers of
mind are everywhere ascendant over the brute force of things.
In a First Wave economy, land and farm labor are the main "factors of
production." In a Second Wave economy, the land remains valuable while the
"labor" becomes massified around machines and larger industries. In a Third
Wave economy, the central resource -- a single word broadly encompassing data,
information, images, symbols, culture, ideology, and values -- is _actionable_
knowledge.
The industrial age is not fully over. In fact, classic Second Wave sectors
(oil, steel, auto-production) have learned how to benefit from Third Wave
technological breakthroughs -- just as the First Wave's agricultural
productivity benefited exponentially from the Second Wave's farm-mechanization.
But the Third Wave, and the _Knowledge Age_ it has opened, will not deliver on
its potential unless it adds social and political dominance to its accelerating
technological and economic strength. This means repealing Second Wave laws and
retiring Second Wave attitudes. It also gives to leaders of the advanced
democracies a special responsibility -- to facilitate, hasten, and explain the
transition.
As humankind explores this new "electronic frontier" of knowledge, it must
confront again the most profound questions of how to organize itself for the
common good. The meaning of freedom, structures of self-government, definition
of property, nature of competition, conditions for cooperation, sense of
community and nature of progress will each be redefined for the Knowledge Age
-- just as they were redefined for a new age of industry some 250 years ago.
What our 20th-century countrymen came to think of as the "American dream," and
what resonant thinkers referred to as "the promise of American life" or "the
American Idea," emerged from the turmoil of 19th-century industrialization.
Now it's our turn: The knowledge revolution, and the Third Wave of historical
change it powers, summon us to renew the dream and enhance the promise.
THE NATURE OF CYBERSPACE
The Internet -- the huge (2.2 million computers), global (135 countries),
rapidly growing (10-15% a month) network that has captured the American
imagination -- is only a tiny part of cyberspace. So just what is cyberspace?
More ecosystem than machine, cyberspace is a bioelectronic environment that is
literally universal: It exists everywhere there are telephone wires, coaxial
cables, fiber-optic lines or electromagnetic waves.
This environment is "inhabited" by knowledge, including incorrect ideas,
existing in electronic form. It is connected to the physical environment by
portals which allow people to see what's inside, to put knowledge in, to alter
it, and to take knowledge out. Some of these portals are one-way (e.g.
television receivers and television transmitters); others are two-way (e.g.
telephones, computer modems).
Most of the knowledge in cyberspace lives the most temporary (or so we think)
existence: Your voice, on a telephone wire or microwave, travels through space
at the speed of light, reaches the ear of your listener, and is gone forever.
But people are increasingly building cyberspatial "warehouses" of data,
knowledge, information and _mis_information in digital form, the ones and zeros
of binary computer code. The storehouses themselves display a physical form
(discs, tapes, CD-ROMs) -- but what they contain is accessible only to those
with the right kind of portal and the right kind of key.
The key is software, a special form of electronic knowledge that allows people
to navigate through the cyberspace environment and make its contents
understandable to the human senses in the form of written language, pictures
and sound.
People are adding to cyberspace -- creating it, defining it, expanding it -- at
a rate that is already explosive and getting faster. Faster computers, cheaper
means of electronic storage, improved software and more capable communications
channels (satellites, fiber-optic lines) -- each of these factors independently
add to cyberspace. But the real explosion comes from the combination of all of
them, working together in ways we still do not understand.
The bioelectronic _frontier_ is an appropriate metaphor for what is happening
in cyberspace, calling to mind as it does the spirit of invention and discovery
that led ancient mariners to explore the world, generations of pioneers to tame
the American continent and, more recently, to man's first exploration of outer
space.
But the exploration of cyberspace brings both greater opportunity, and in some
ways more difficult challenges, than any previous human adventure.
Cyberspace is the land of knowledge, and the exploration of that land can be a
civilization's truest, highest calling. The opportunity is now before us to
empower every person to pursue that calling in his or her own way.
The challenge is as daunting as the opportunity is great. The Third Wave has
profound implications for the nature and meaning of property, of the
marketplace, of community and of individual freedom. As it emerges, it shapes
new codes of behavior that move each organism and institution -- family,
neighborhood, church group, company, government, nation -- inexorably beyond
standardization and centralization, as well as beyond the materialist's
obsession with energy, money and control.
Turning the economics of mass-production inside out, new information
technologies are driving the financial costs of diversity -- both product and
personal -- down toward zero, "demassifying" our institutions and our culture.
Accelerating demassification creates the potential for vastly increased human
freedom.
It also spells the death of the central institutional paradigm of modern life,
the bureaucratic organization. (Governments, including the American government,
are the last great redoubt of bureaucratic power on the face of the planet, and
for them the coming change will be profound and probably traumatic.)
In this context, the one metaphor that is perhaps least helpful in thinking
about cyberspace is -- unhappily -- the one that has gained the most currency:
The Information Superhighway. Can you imagine a phrase less descriptive of the
nature of cyberspace, or more misleading in thinking about its implications?
Consider the following set of polarities:
_Information Superhighway_ / _Cyberspace_
Limited Matter / Unlimited Knowledge
Centralized / Decentralized
Moving on a grid / Moving in space
Government ownership / A vast array of ownerships
Bureaucracy / Empowerment
Efficient but not hospitable / Hospitable if you customize it
Withstand the elements / Flow, float and fine-tune
Unions and contractors / Associations and volunteers
Liberation from First Wave / Liberation from Second Wave
Culmination of Second Wave / Riding the Third Wave
The highway analogy is all wrong," explained Peter Huber in Forbes this spring,
"for reasons rooted in basic economics. Solid things obey immutable laws of
conservation -- what goes south on the highway must go back north, or you end
up with a mountain of cars in Miami. By the same token, production and
consumption must balance. The average Joe can consume only as much wheat as the
average Jane can grow. Information is completely different. It can be
replicated at almost no cost -- so every individual can (in theory) consume
society's entire output. Rich and poor alike, we all run information deficits.
We all take in more than we put out."
THE NATURE AND OWNERSHIP OF PROPERTY
Clear and enforceable property rights are essential for markets to work.
Defining them is a central function of government. Most of us have "known" that
for a long time. But to create the new cyberspace environment is to create _new
_ property -- that is, new means of creating goods (including ideas) that serve
people.
The property that makes up cyberspace comes in several forms: Wires, coaxial
cable, computers and other "hardware"; the electromagnetic spectrum; and
"intellectual property" -- the knowledge that dwells in and defines cyberspace.
In each of these areas, two questions that must be answered. First, what does
"ownership" _mean_? What is the nature of the property itself, and what does it
mean to own it? Second, once we understand what ownership means, _who_ is the
owner? At the level of first principles, should ownership be public (i.e.
government) or private (i.e. individuals)?
The answers to these two questions will set the basic terms upon which America
and the world will enter the Third Wave. For the most part, however, these
questions are not yet even being asked. Instead, at least in America,
governments are attempting to take Second Wave concepts of property and
ownership and apply them to the Third Wave. Or they are ignoring the problem
altogether.
For example, a great deal of attention has been focused recently on the nature
of "intellectual property" -- i.e. the fact that knowledge is what economists
call a "public good," and thus requires special treatment in the form of
copyright and patent protection.
Major changes in U.S. copyright and patent law during the past two decades have
broadened these protections to incorporate "electronic property." In essence,
these reforms have attempted to take a body of law that originated in the 15th
century, with Gutenberg's invention of the printing press, and apply it to the
electronically stored and transmitted knowledge of the Third Wave.
A more sophisticated approach starts with recognizing how the Third Wave has
fundamentally altered the nature of knowledge as a "good," and that the
operative effect is not technology per se (the shift from printed books to
electronic storage and retrieval systems), but rather the shift from a
mass-production, mass-media, mass-culture civilization to a demassified
civilization.
The big change, in other words, is the demassification of actionable knowledge.
The dominant form of new knowledge in the Third Wave is perishable, transient, _
customized_ knowledge: The right information, combined with the right software
and presentation, at precisely the right time. Unlike the mass knowledge of the
Second Wave -- "public good" knowledge that was useful to everyone because most
people's information needs were standardized -- Third Wave customized knowledge
is by nature a private good.
If this analysis is correct, copyright and patent protection of knowledge (or
at least many forms of it) may no longer be unnecessary. In fact, the
marketplace may already be creating vehicles to compensate creators of
customized knowledge outside the cumbersome copyright/patent process, as
suggested last year by John Perry Barlow:
"One existing model for the future conveyance of intellectual property is
real-time performance, a medium currently used only in theater, music,
lectures, stand-up comedy and pedagogy. I believe the concept of performance
will expand to include most of the information economy, from multi-casted
soap operas to stock analysis. In these instances, commercial exchange will
be more like ticket sales to a continuous show than the purchase of discrete
bundles of that which is being shown. The other model, of course, is service.
The entire professional class -- doctors, lawyers, consultants, architects,
etc. -- are already being paid directly for their intellectual property. Who
needs copyright when you're on a retainer?"
Copyright, patent and intellectual property represent only a few of the
"rights" issues now at hand. Here are some of the others:
* Ownership of the electromagnetic spectrum, traditionally considered to be
"public property," is now being "auctioned" by the Federal Communications
Commission to private companies. Or is it? Is the very limited "bundle of
rights" sold in those auctions really property, or more in the nature of a use
permit -- the right to use a part of the spectrum for a limited time, for
limited purposes? In either case, are the rights being auctioned defined in a
way that makes technological sense?
* Ownership over the infrastructure of wires, coaxial cable and fiber-optic
lines that are such prominent features in the geography of cyberspace is today
much less clear than might be imagined. Regulation, especially price
regulation, of this property can be tantamount to confiscation, as America's
cable operators recently learned when the Federal government imposed price
limits on them and effectively confiscated an estimated $___ billion of their
net worth. (Whatever one's stance on the FCC's decision and the law behind it,
there is no disagreeing with the proposition that one's ownership of a good is
less meaningful when the government can step in, at will, and dramatically
reduce its value.)
* The nature of capital in the Third Wave -- tangible capital as well as
intangible -- is to depreciate in real value much faster than industrial-age
capital -- driven, if nothing else, by Moore's Law, which states that the
processing power of the microchip doubles at least every 18 _months_. Yet
accounting and tax regulations still require property to be depreciated over
periods as long as 30 _years_. The result is a heavy bias in favor of "heavy
industry" and against nimble, fast-moving baby businesses.
Who will define the nature of cyberspace property rights, and how? How can we
strike a balance between interoperable open systems and protection of property?
THE NATURE OF THE MARKETPLACE
Inexpensive knowledge destroys economies-of-scale. Customized knowledge permits
"just in time" production for an ever rising number of goods. Technological
progress creates new means of serving old markets, turning
one-time monopolies into competitive battlegrounds.
These phenomena are altering the nature of the marketplace, not just for
information technology but for all goods and materials, shipping and services.
In cyberspace itself, market after market is being transformed by technological
progress from a "natural monopoly" to one in which competition is the rule.
Three recent examples:
* The market for "mail" has been made competitive by the development of fax
machines and overnight delivery -- even though the "private express statutes"
that technically grant the U.S. Postal Service a monopoly over mail delivery
remain in place.
* During the past 20 years, the market for television has been transformed
from one in which there were at most a few broadcast TV stations to one in
which consumers can choose among broadcast, cable and satellite services.
* The market for local telephone services, until recently a monopoly based on
twisted-pair copper cables, is rapidly being made competitive by the advent of
wireless service and the entry of cable television into voice communication. In
England, Mexico, New Zealand and a host of developing countries, government
restrictions preventing such competition have already been removed and
consumers actually have the freedom to choose.
The advent of new technology and new products creates the potential for _
dynamic competition_ -- competition between and among technologies and
industries, each seeking to find the best way of serving customers' needs.
Dynamic competition is different from static competition, in which many
providers compete to sell essentially similar products at the lowest price.
Static competition is good, because it forces costs and prices to the lowest
levels possible for a given product. Dynamic competition is better, because it
allows competing technologies and new products to challenge the old ones and,
if they really are better, to replace them. Static competition might lead to
faster and stronger horses. Dynamic competition gives us the automobile.
Such dynamic competition -- the essence of what Austrian economist Joseph
Schumpeter called "creative destruction" -- creates winners and losers on a
massive scale. New technologies can render instantly obsolete billions of
dollars of embedded infrastructure, accumulated over decades. The
transformation of the U.S. computer industry since 1980 is a case in point.
In 1980, everyone knew who led in computer technology. Apart from the
minicomputer boom, mainframe computers _were_ the market, and America's
dominance was largely based upon the position of a dominant vendor -- IBM, with
over 50% world market-share.
Then the personal-computing industry exploded, leaving older-style
big-business-focused computing with a stagnant, piece of a burgeoning total
market. As IBM lost market-share, many people became convinced that America had
lost the ability to compete. By the mid-1980s, such alarmism had reached from
Washington all the way into the heart of Silicon Valley.
But the real story was the renaissance of American business and technological
leadership. In the transition from mainframes to PCs, a vast new market was
created. This market was characterized by dynamic competition consisting of
easy access and low barriers to entry. Start-ups by the dozens took on the
larger established companies -- and won.
After a decade of angst, the surprising outcome is that America is not only
competitive internationally, but, by any measurable standard, America dominates
the growth sectors in world economics -- telecommunications, microelectronics,
computer networking (or "connected computing") and software systems and
applications.
The reason for America's victory in the computer wars of the 1980s is that
dynamic competition was allowed to occur, in an area so breakneck and pell-mell
that government would've had a hard time controlling it _even had it been
paying attention_. The challenge for policy in the 1990s is to permit, even
encourage, dynamic competition in every aspect of the cyberspace marketplace.
THE NATURE OF FREEDOM
Overseas friends of America sometimes point out that the U.S. Constitution is
unique -- because it states explicitly that power resides with the people, who
delegate it to the government, rather than the other way around.
This idea -- central to our free society -- was the result of more than 150
years of intellectual and political ferment, from the Mayflower Compact to the
U.S. Constitution, as explorers struggled to establish the terms under which
they would tame a new frontier.
And as America continued to explore new frontiers -- from the Northwest
Territory to the Oklahoma land-rush -- it consistently returned to this
fundamental principle of rights, reaffirming, time after time, that power
resides with the people.
Cyberspace is the latest American frontier. As this and other societies make
ever deeper forays into it, the proposition that ownership of this frontier
resides first _with the people_ is central to achieving its true potential.
To some people, that statement will seem melodramatic. America, after all,
remains a land of individual freedom, and this freedom clearly extends to
cyberspace. How else to explain the uniquely American phenomenon of the hacker,
who ignored every social pressure and violated every rule to develop a set of
skills through an early and intense exposure to low-cost, ubiquitous computing.
Those skills eventually made him or her highly marketable, whether in
developing applications-software or implementing networks. The hacker became a
technician, an inventor and, in case after case, a creator of new wealth in the
form of the baby businesses that have given America the lead in cyberspatial
exploration and settlement.
It is hard to imagine hackers surviving, let alone thriving, in the more
formalized and regulated democracies of Europe and Japan. In America, they've
become vital for economic growth and trade leadership. Why? Because Americans
still celebrate individuality over conformity, reward achievement over
consensus and militantly protect the right to be different.
But the need to affirm the basic principles of freedom is real. Such an
affirmation is needed in part because we are entering new territory, where
there are as yet no rules -- just as there were no rules on the American
continent in 1620, or in the Northwest Territory in 1787.
Centuries later, an affirmation of freedom -- by this document and similar
efforts -- is needed for a second reason: We are at the end of a century
dominated by the mass institutions of the industrial age. The industrial age
encouraged _conformity_ and relied on _standardization_. And the institutions
of the day -- corporate and government bureaucracies, huge civilian and
military administrations, schools of all types -- reflected these priorities.
Individual liberty suffered -- sometimes only a little, sometimes a lot:
* In a Second Wave world, it might make sense for government to insist on the
right to peer into every computer by requiring that each contain a special
"clipper chip."
* In a Second Wave world, it might make sense for government to assume
ownership over the broadcast spectrum and demand massive payments from citizens
for the right to use it.
* In a Second Wave world, it might make sense for government to prohibit
entrepreneurs from entering new markets and providing new services.
* And, in a Second Wave world, dominated by a few old-fashioned, one-way media
"networks," it might even make sense for government to influence which
political viewpoints would be carried over the airwaves.
All of these interventions might have made sense in a Second Wave world, where
standardization dominated and where it was assumed that the scarcity of
knowledge (plus a scarcity of telecommunications capacity) made bureaucracies
and other elites better able to make decisions than the average person.
But, whether they made sense before or not, these and literally thousands of
other infringements on individual rights now taken for granted make no sense at
all in the Third Wave.
For a century, those who lean ideologically in favor of freedom have found
themselves at war not only with their ideological opponents, but with a time in
history when the value of conformity was at its peak. However desirable as an
ideal, individual freedom often seemed impractical. The mass institutions of
the Second Wave required us to give up freedom in order for the system to
"work."
The coming of the Third Wave turns that equation inside-out. The complexity of
Third Wave society is too great for any centrally planned bureaucracy to
manage. Demassification, customization, individuality, freedom -- these are the
keys to success for Third Wave civilization.
THE ESSENCE OF COMMUNITY
If the transition to the Third Wave is so positive, why are we experiencing so
much anxiety? Why are the statistics of social decay at or near all-time highs?
Why does cyberspatial "rapture" strike millions of prosperous Westerners as
lifestyle _rupture_? Why do the principles that have held us together as a
nation seem no longer sufficient -- or even wrong?
The incoherence of political life is mirrored in disintegrating personalities.
Whether 100% covered by health plans or not, psychotherapists and gurus do a
land-office business, as people wander aimlessly amid competing therapies.
People slip into cults and covens or, alternatively, into a pathological
privatism, convinced that reality is absurd, insane or meaningless. "If things
are so good," Forbes magazine asked recently, "why do we feel so bad?"
In part, this is why: Because we constitute the final generation of an old
civilization and, at the very same time, the first generation of a new one.
Much of our personal confusion and social disorientation is traceable to
conflict _within us_ and within our political institutions -- between the dying
Second Wave civilization and the emergent Third Wave civilization thundering in
to take its place.
Second Wave ideologues routinely lament the breakup of mass society. Rather
than seeing this enriched diversity as an opportunity for human development,
they attach it as "fragmentation" and "balkanization." But to reconstitute
democracy in Third Wave terms, we need to jettison the frightening but false
assumption that more diversity automatically brings more tension and conflict
in society.
Indeed, the exact reverse can be true: If 100 people all desperately want the
same brass ring, they may be forced to fight for it. On the other hand, if each
of the 100 has a different objective, it is far more rewarding for them to
trade, cooperate, and form symbiotic relationships. Given appropriate social
arrangements, diversity can make for a secure and stable civilization.
No one knows what the Third Wave communities of the future will look like, or
where "demassification" will ultimately lead. It is clear, however, that
cyberspace will play an important role knitting together in the diverse
communities of tomorrow, facilitating the creation of "electronic
neighborhoods" bound together not by geography but by shared interests.
Socially, putting advanced computing power in the hands of entire populations
will alleviate pressure on highways, reduce air pollution, allow people to live
further away from crowded or dangerous urban areas, and expand family time.
The late Phil Salin (in Release 1.0 11/25/91) offered this perspective: "[B]y
2000, multiple cyberspaces will have emerged, diverse and increasingly rich.
Contrary to naive views, these cyberspaces will not all be the same, and they
will not all be open to the general public. The global network is a connected
'platform' for a collection of diverse communities, but only a loose,
heterogeneous community itself. Just as access to homes, offices, churches and
department stores is controlled by their owners or managers, most virtual
locations will exist as distinct places of private property."
"But unlike the private property of today," Salin continued, "the potential
variations on design and prevailing customs will explode, because many
variations can be implemented cheaply in software. And the 'externalities'
associated with variations can drop; what happens in one cyberspace can be kept
from affecting other cyberspaces."
"Cyberspaces" is a wonderful _pluralistic_ word to open more minds to the Third
Wave's civilizing potential. Rather than being a centrifugal force helping to
tear society apart, cyberspace can be one of the main forms of
glue holding together an increasingly free and diverse society.
To: rkm
From: rkmoore@iol.ie (Richard K. Moore)
Subject: fwd: Magna Carta (2/2)
Cc:
Bcc: lazlo@igc2.igc.apc.org (Allen Hopper), Charles Crawford
X-Attachments:
THE ROLE OF GOVERNMENT
The current Administration has identified the right goal: Reinventing
government for the 21st Century. To accomplish that goal is another matter,
and for reasons explained in the next and final section, it is not likely to
be fully accomplished in the immediate future. This said, it is essential that
we understand what it really means to create a Third Wave government and begin
the process of transformation.
Eventually, the Third Wave will affect virtually everything government does.
The most pressing need, however, is to revamp the policies and programs that
are slowing the creation of cyberspace. Second Wave programs for Second Wave
industries -- the status quo for the status quo -- will do little damage in the
short run. It is the government's efforts to apply its Second Wave modus
operandi to the fast-moving, decentralized creatures of the Third Wave that is
the real threat to progress. Indeed, if there is to be an "industrial policy
for the knowledge age," it should focus on removing barriers to competition and
massively deregulating the fast-growing telecommunications and computing
industries.
One further point should be made at the outset: Government should be as strong
and as big as it needs to be to accomplish its central functions effectively
and efficiently. The reality is that a Third Wave government will be vastly
smaller (perhaps by 50 percent or more) than the current one -- this is an
inevitable implication of the transition from the centralized power structures
of the industrial age to the dispersed, decentralized institutions of the
Third. But smaller government does not imply weak government; nor does arguing
for smaller government require being "against" government for narrowly
ideological reasons.
Indeed, the transition from the Second Wave to the Third Wave will require a
level of government _activity_ not seen since the New Deal. Here are five
proposals to back up the point.
1. The Path to Interactive Multimedia Access
The "Jeffersonian Vision" offered by Mitch Kapor and Jerry Berman has propelled
the Electronic Frontier Foundation's campaign for an "open platform" telecom
architecture:
"The amount of electronic material the superhighway can carry is dizzying,
compared to the relatively narrow range of broadcast TV and the limited number
of cable channels. Properly constructed and regulated, it could be
open to all who wish to speak, publish and communicate. None of the interactive
services will be possible, however, if we have an eight-lane data superhighway
rushing into every home and only a narrow footpath coming back out. Instead of
settling for a multimedia version of the same entertainment that is
increasingly dissatisfying on today's TV, we need a superhighway that
encourages the production and distribution of a broader, more diverse range
of programming" (New York Times 11/24/93 p. A25).
The question is: What role should government play in bringing this vision to
reality? But also: Will incentives for the openly-accessible, "many to many,"
national multimedia network envisioned by EFF harm the rights of those now
constructing thousands of non-open local area networks?
These days, interactive multimedia is the daily servant only of avant-garde
firms and other elites. But the same thing could have been said about
word-processors 12 years ago, or phone-line networks six years ago. Today we
have, in effect, universal access to personal computing -- which no political
coalition ever subsidized or "planned." And America's _networking_ menu is in a
hyper-growth phase. Whereas the accessing software cost $50 two years ago,
today the same companies hand it out free -- to get more people on-line.
This egalitarian explosion has occurred in large measure because government has
stayed out of these markets, letting personal computing take over while
mainframes rot (almost literally) in warehouses, and allowing (no doubt more by
omission than commission) computer networks to grow, free of the kinds of
regulatory restraints that affect phones, broadcast and cable.
All of which leaves reducing barriers to entry and innovation as the only
effective near-term path to Universal Access. In fact, it can be argued that a
near-term national interactive multimedia network is impossible unless
regulators permit much greater collaboration between the cable industry and
phone companies. The latter's huge fiber resources (nine times as extensive as
industry fiber and rising rapidly) could be joined with the huge asset of
57 million broadband links (i.e. into homes now receiving cable-TV service) to
produce a new kind of national network -- multimedia, interactive and (as costs
fall) increasingly accessible to Americans of modest means.
That is why obstructing such collaboration -- in the cause of forcing a
competition between the cable and phone industries -- is socially elitist. To
the extent it prevents collaboration between the cable industry and the phone
companies, present federal policy actually thwarts the Administration's own
goals of access and empowerment.
The other major effect of prohibiting the "manifest destiny" of cable preserves
the broadcast (or narrowband) television model. In fact, stopping an
interactive multimedia network perpetuates John Malone's original formula --
which everybody (especially Vice-President Gore and the FCC) claims to oppose
because of the control it leaves with system owners and operators.
The key condition for replacing Malone's original narrowband model is true
bandwidth abundance. When the federal government prohibits the interconnection
of conduits, the model gains a new lease on life. In a world
of bandwidth scarcity, the owner of the conduit not only can but must control
access to it -- thus the owner of the conduit also shapes the content. It
really doesn't matter who the owner is. Bandwidth scarcity will require the
managers of the network to determine the video programming on it.
Since cable is everywhere, particularly within cities, it would allow a closing
of the gap between the knowledge-rich and knowledge-poor. Cable's broadband
"pipes" _already_ touch almost two-thirds of American households (and are
easily accessible to another one-fourth). The phone companies have broadband
fiber. A hybrid network -- co-ax plus fiber -- is the best means to the next
generation of cyberspace expansion. What if this choice is blocked?
In that case, what might be called cyberspace democracy will be confined to the
computer industry, where it will arise from the Internet over the years, led by
corporate and suburban/exurban interests. While not a technological calamity,
this might be a _social_ perversion equivalent to what "Japan Inc." did to its
middle and lower classes for decades: Make them pay 50% more for the same
quality vehicles that were gobbling up export markets.
Here's the parallel: If Washington forces the phone companies and cable
operators to develop supplementary and duplicative networks, most other
advanced industrial countries will attain cyberspace democracy -- via an
interactive multimedia "open platform" -- before America does, despite this
nation's technological dominance.
Not only that, but the long-time alliance of East Coast broadcasters and
Hollywood glitterati will have a new lease on life: If their one-way video
empires win new protection, millions of Americans will be deprived of the tools
to help build a new interactive multimedia culture.
A contrived competition between phone companies and cable operators will not
deliver the two-way, multimedia and more civilized tele-society Kapor and
Berman sketch. Nor is it enough to simply "get the government out of the way."
Real issues of antitrust must be addressed, and no sensible framework exists
today for addressing them. Creating the conditions for universal access to
interactive multimedia will require a fundamental rethinking of government
policy.
2. Promoting Dynamic Competition
Technological progress is turning the telecommunications marketplace from one
characterized by "economies of scale" and "natural monopolies" into a
prototypical competitive market. The challenge for government is to encourage
this shift -- to create the circumstances under which new competitors and new
technologies will challenge the natural monopolies of the past.
Price-and-entry regulation makes sense for natural monopolies. The tradeoff is
a straightforward one: The monopolist submits to price regulation by the state,
in return for an exclusive franchise on the market.
But what happens when it becomes economically desirable to have more than one
provider in a market? The continuation of regulation under these circumstances
stops progress in its tracks. It prevents new entrants from introducing new
technologies and new products, while depriving the regulated monopolist of any
incentive to do so on its own.
Price-and-entry regulation, in short, is the antithesis of dynamic competition.
The alternative to regulation is antitrust. Antitrust law is designed to
prevent the acts and practices that can lead to the creation of new monopolies,
or harm consumers by forcing up prices, limiting access to competing products
or reducing service quality. Antitrust law is the means by which America has,
for over 120 years, fostered competition in markets where many providers can
and should compete.
The market for telecommunications services -- telephone, cable, satellite,
wireless -- is now such a market. The implication of this simple fact is also
simple, and price/entry regulation of telecommunications services -- by state
and local governments as well as the Federal government -- should therefore be
replaced by antitrust law as rapidly as possible.
This transition will not be simple, and it should not be instantaneous. If
antitrust is to be seriously applied to telecommunications, some government
agencies (e.g. the Justice Department's Antitrust Division) will need new types
of expertise. And investors in regulated monopolies should be permitted time to
re-evaluate their investments given the changing nature of the legal conditions
in which these firms will operate -- a luxury not afforded the cable industry
in recent years.
This said, two additional points are important. First, delaying implementation
is different from delaying enactment. The latter should be immediate, even if
the former is not. Secondly, there should be no half steps. Moving from a
regulated environment to a competitive one is -- to borrow a cliche -- like
changing from driving on the left side of the road to driving on the right: You
can't do it gradually.
3. Defining and Assigning Property Rights
In 1964, libertarian icon Ayn Rand wrote:
"It is the proper task of government to protect individual rights and, as part
of it, formulate the laws by which these rights are to be implemented and
adjudicated. It is the government's responsibility to define the
application of individual rights to a given sphere of activity -- to define
(i.e. to identify), not create, invent, donate, or expropriate. The question of
defining the application of property rights has arisen frequently, in the wake
of oil rights, vertical space rights, etc. In most cases, the American
government has been guided by the proper principle: It sought to protect all
the individual rights involved, not to abrogate them." ("The Property Status
of the Airwaves," Objectivist Newsletter, April 1964)
Defining property rights in cyberspace is perhaps the single most urgent and
important task for government information policy. Doing so will be a complex
task, and each key area -- the electromagnetic spectrum, intellectual property,
cyberspace itself (including the right to privacy) -- involves unique
challenges. The important points here are:
First, this is a "central" task of government. A Third Wave government will
understand the importance and urgency of this undertaking and begin seriously
to address it; to fail to do so is to perpetuate the politics and policy of the
Second Wave.
Secondly, the key principle of ownership by the people -- private ownership --
should govern every deliberation. Government does not own cyberspace, the
people do.
Thirdly, clarity is essential. Ambiguous property rights are an invitation to
litigation, channeling energy into courtrooms that serve no customers and
create no wealth. From patent and copyright systems for software, to challenges
over the ownership and use of spectrum, the present system is failing in this
simple regard.
The difference between America's historic economic success can, in case after
case, be traced to our wisdom in creating and allocating clear, enforceable
property rights. The creation and exploration of cyberspace requires that
wisdom to be recalled and reaffirmed.
4. Creating Pro-Third-Wave Tax and Accounting Rules
We need a whole set of new ways of accounting, both at the level of the
enterprise, and of the economy.
"GDP" and other popular numbers do nothing to clarify the magic and muscle of
information technology. The government has not been very good at measuring
service-sector output, and almost all institutions are incredibly bad at
measuring the productivity of _information_. Economists are stuck with a set of
tools designed during, or as a result of, the 1930s. So they have been
measuring less and less important variables with greater and greater precision.
At the level of the enterprise, obsolete accounting procedures cause us to
systematically _overvalue_ physical assets (i.e. property) and _undervalue_
human-resource assets and intellectual assets. So, if you are an inspired young
entrepreneur looking to start a software company, or a service company of some
kind, and it is heavily information-intensive, you will have a harder time
raising capital than the guy next door who wants to put in a set of beat-up old
machines to participate in a topped-out industry.
On the tax side, the same thing is true. The tax code always reflects the
varying lobbying pressures brought to bear on government. And the existing tax
code was brought into being by traditional manufacturing enterprises and the
allied forces that arose during the assembly line's heyday.
The computer industry correctly complains that half their product is
depreciated in six months or less -- yet they can't depreciate it for tax
purposes. The U.S. semiconductor industry faces five-year depreciation
timetables for products that have three-year lives (in contrast to Japan, where
chipmakers can write off their fabrication plants in one year). Overall, the
tax advantage remains with the long, rather than the short, product life-cycle,
even though the latter is where all design and manufacturing are trending.
It is vital that accounting and tax policies -- both those promulgated by
private-sector regulators like the Financial Accounting Standards Board and
those promulgated by the government at the IRS and elsewhere -- start to
reflect the shortened capital life-cycles of the Knowledge Age, and the
increasing role of _intangible_ capital as "wealth."
5. Creating a Third Wave Government
Going beyond cyberspace policy per se, government must remake itself and
redefine its relationship to the society at large. No single set of policy
changes that can create a future-friendly government. But there are some
yardsticks we can apply to policy proposals. Among them:
_Is it based on the factory model, i.e. on standardization, routine and
mass-production_? If so, it is a Second Wave policy. Third Wave policies
encourage uniqueness.
_Does it centralize control_? Second Wave policies centralize power in
bureaucratic institutions; Third Wave policies work to spread power -- to
empower those closest to the decision.
_Does it encourage geographic concentration_? Second Wave policies encourage
people to congregate physically; Third Wave policies permit people to work at
home, and to live wherever they choose.
_Is it based on the idea of mass culture -- of everyone watching the same
sitcoms on television -- or does it permit, even encourage, diversity within a
broad framework of shared values_? Third Wave policies will help transform
diversity from a threat into an array of opportunities.
A serious effort to apply these tests to every area of government activity --
from the defense and intelligence community to health care and education --
would ultimately produce a complete transformation of government as we know it.
Since that is what's needed, let's start applying.
GRASPING THE FUTURE
The conflict between Second Wave and Third Wave groupings is the central
political tension cutting through our society today. The more basic political
question is not who controls the last days of industrial society, but who
shapes the new civilization rapidly rising to replace it. Who, in other words,
will shape the nature of cyberspace and its impact on our lives and
institutions?
Living on the edge of the Third Wave, we are witnessing a battle not so much
over the nature of the future -- for the Third Wave will arrive -- but over the
nature of the transition. On one side of this battle are the partisans of
the industrial past. On the other are growing millions who recognize that the
world's most urgent problems can no longer be resolved within the massified
frameworks we have inherited.
The Third Wave sector includes not only high-flying computer and electronics
firms and biotech start-ups. It embraces advanced, information-driven
manufacturing in every industry. It includes the increasingly data-drenched
services -- finance, software, entertainment, the media, advanced
communications, medical services, consulting, training and learning. The people
in this sector will soon be the dominant constituency in American politics.
And all of those confront a set of constituencies made frightened and defensive
by their mainly Second Wave habits and locales: Command-and-control regulators,
elected officials, political opinion-molders, philosophers mired in
materialism, traditional interest groups, some broadcasters and newspapers --
and every major institution (including corporations) that believes its future
is best served by preserving the past.
For the time being, the entrenched powers of the Second Wave dominate
Washington and the statehouses -- a fact nowhere more apparent than in the 1993
infrastructure bill: Over $100 billion for steel and cement, versus one lone
billion for electronic infrastructure. Putting aside the question of whether
the government should be building electronic infrastructure in the first place,
the allocation of funding in that bill shows the Second Wave
swamping the Third.
Only one political struggle so far contradicts the landscape offered in this
document, but it is a big one: Passage of the North American Free Trade
Agreement last November. This contest carried both sides beyond partisanship,
beyond regionalism, and -- after one climactic debate on CNN -- beyond
personality. The pro-NAFTA coalition opted to serve the opportunity instead of
the problem, and the future as opposed to the past. That's why it constitutes a
standout model for the likely development of a Third Wave political dialectic.
But a "mass movement" for cyberspace is still hard to see. Unlike the "masses"
during the industrial age, this rising Third Wave constituency is highly
diverse. Like the economic sectors it serves, it is demassified -- composed of
individuals who prize their differences. This very heterogeneity contributes to
its lack of political awareness. It is far harder to unify than the masses of
the past.
Yet there are key themes on which this constituency-to-come can agree. To start
with, liberation -- from Second Wave rules, regulations, taxes and laws laid in
place to serve the smokestack barons and bureaucrats of the past. Next, of
course, must come the creation -- creation of a new civilization, founded in
the eternal truths of the American Idea.
It is time to embrace these challenges, to grasp the future and pull ourselves
forward. If we do so, we will indeed renew the American Dream and enhance the
promise of American life.