Cyberspace Inc and the Robber Baron Age,
an analysis of PFF's "Magna Carta"
Copyright 1995 by Information Society
published in
Information Society, An International Journal
July-September, 1996
Richard K. Moore
December 1, 1995
Reference:
Cyberspace and the American Dream:
A Magna Carta for the Knowledge Age
Release 1.2 // August 22, 1994
The manifesto "Cyberspace and the American Dream: A Magna Carta for the
Knowledge Age", published by the Progress and Freedom Foundation (PFF), is a
document of considerable significance. Its very title reveals much about its
intent. Its promoters -- both alleged and concealed -- are indicative of its
propagandistic mission. Its contents have accurately prophesied the
legislative agenda and rhetoric which have unfolded subsequent to the
manifesto's publication.
Given the powerful telecommunications interests behind PFF -- and the close
ties of that organization to Speaker Newt Gingrich -- a detailed analysis of
the manifesto can provide insight into what may (unfortunately) be the most
likely scenario for the future of cyberspace.
* * *
The title invites direct comparison with the original Magna Carta, which is
defined in The Cassell Concise English Dictionary as follows:
Magna Carta - The Great Charter of English liberties,
sealed by King John on 15 June, 1215
With due respect to Cassell's, this is a misleading definition. The Magna
Carta did not grant liberties generally to "the English", but rather devolved
powers and privileges exclusively to an elite aristocracy. As shall be shown
in this article, PFF's "Magna Carta" is similarly misleading: much of its
rhetoric seems to imply a concern with individual liberties, but its substance
would devolve power and privilege exclusively to the biggest corporate players
in the telecommunications industry.
Just as the Magna Carta supported the power of the Nobles -- with each to have
autocratic power in his own domain -- so PFF's manifesto supports the power of
communications monopolies -- with each to have unregulated control over its
own cyberspace fiefdom. Rather than being a charter of liberties, the
manifesto promotes a regime of robber barons in cyberspace.
Instead of an infrastructure for public communications -- like the current
Internet, or the American highway system -- cyberspace would be developed as a
corporate owned monopoly -- priced at whatever the traffic will bear. Instead
of providing a "space" in which citizens are free to speak and associate (like
Internet), cyberspace would become a profit-machine and propaganda channel for
media conglomerates. PFF's manifesto is a formula for neo-feudalism in the
"Knowledge Age" -- it is a charter for what could aptly be dubbed "Cyberspace
Inc".
* * *
The ultimate promoters of the manifesto are concealed. Its introduction
claims:
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.
The implication would seem to be that enlightened individuals spontaneously
composed the manifesto, in the interests, presumably, of progress and freedom.
The true authorship is uncertain. According to Mark Stahlman of New Media
Associates, a scheduled speaker at an upcoming PFF conference:
The 'author' of this rambling camel-of-a-report is Frank Gregorsky.
He's a journalist working for PFF who does their newsletter. None of
the listed contributors actually did any work directly on the
document. That's why it's simply *not* coherent.
[posted to telecomreg@relay.doit.wisc.edu on Sun, 5 Feb 1995]
The "coherence" of the manifesto will be discussed in some detail below. As
for the authorship, it would appear that PFF itself must be considered the
source of the manifesto.
PFF turns out to be a typical industry-front organization. Characterized by
Mr. Stahlman as "Newt's 'think tank'", PFF is funded by a panoply of corporate
sponsors. The February 6, 1995 issue of The Nation carries an article by
David Corn, entitled "CyberNewt". Here's an excerpt;
There is nothing particularly futuristic about the funding sources
behind the P.F.F. and its conference. Telecommunications firms
subsidize the group: AT&T, BellSouth, Turner Broadcasting System, Cox
Cable Communications. Other donors to the P.F.F.'s $1.9 million bank
account include conservative foundations, Wired magazine, high-tech
firms, military contractors, and drug companies (another foundation
passion is attacking the Food and Drug Administration).
When Senator Phil Gramm spoke at the [PFF] conference luncheon, the
tables closest to the podium were reserved for corporate benefactors:
Eli Lilly, Seagram's, Phillip Morris, S.B.C. Communications (formerly
Southwestern Bell) ...
Brock N. Meeks published an article in Inter@ctive Week, dated April 28, 1995,
entitled "Freedom Foundation Faces Scrutiny". These brief excerpts from the
article outline Mr. Meeks' understanding of how PFF funds are used, and how it
seeks to hide its link to Mr. Gingrich:
...Among I@W's findings:
* PFF spent $483,000 to underwrite a college
course taught by Gingrich. ...
* PFF spent $148,000 to underwrite The Progress
Report, Gingrich's weekly cable talk show carried
on his own National Empowerment Television. ...
The PFF links to Gingrich and his own political
action committee, called GOPAC, have drawn the
interest of the Ethics Committee and the IRS, which
is "reevaluating" PFF's nonprofit status,
according to an IRS source.
The PFF link to Gingrich's rising political
currency has proved lucrative. From March 1993 to
March 1994 the group raised $611,000. During the
remainder of 1994, when it became clear that the
Republicans stood a good chance to capture both the
House and the Senate for the first time in 40
years, an additional $1.07 million poured into PFF
coffers, according to its financial records. ...
The latest PFF tax returns do not make any link to
GOPAC or Gingrich. Any such linking would violate
IRS tax exemption rules. However, Eisenach is on
record acknowledging that he did the basic
groundwork of setting up PFF while running GOPAC.
The money trail apparently goes from media/telecommunications conglomerates,
to PFF, and finally to Mr. Gingrich's projects, which seem to be heavily
focused on propaganda ventures. Small wonder that PFF's manifesto, and Mr.
Gingrich's legislative agenda, promote excessive deregulation of the
telecommunications industry, and pave the way for monopolistic control.
Evidently the Lords of Cyberspace Inc are to include the likes of AT&T,
BellSouth, Turner Broadcasting System, and Cox Cable Communications. Mr.
Gingrich's famous pledges to "empower the individual" and "provide laptops
for ghetto dwellers" should be seen for what they are: a shallow populist
veneer covering a corporate-pandering agenda.
* * *
The text of PFF's manifesto is an artful piece of propaganda. Clouded in
cyber-jargon, illogical in its flow of argument, and disjoint in its
presentation -- it does superficially appear to be a "rambling camel-of-a-
report", as Mr. Stahlman observes. But beneath the deceptive rhetoric -- if
one digs patiently -- there can indeed be found a coherent set of proposals
for the commercial exploitation of cyberspace.
The rhetoric is grandiose. It talks about the original American experience,
characterized as daring pioneers conquering a new land -- based on the
principles of individual initiative and freedom. Cyberspace is described as a
similar frontier, and a rallying cry is raised to reaffirm freedom for the
individual -- especially from government control. The preservation of the
American heritage itself, the manifesto argues, hangs in the balance: freedom
for the individual in cyberspace must be protected!
But the manifesto makes no mention whatever of protections for _individual_
freedoms. There's no discussion, for example, of guaranteeing freedom of
expression or of protecting privacy. In addition, there's no discussion of
preserving the viability of Internet mailing lists and bulletin boards --
which have proven to be cyberspace's equivalent of "freedom of association"
and "freedom of the press".
What the manifesto does discuss -- at great length -- is the protection of
freedoms for _telecommunications & media conglomerates_: freedom to form
monopolies, freedom to set arbitrary price rates and structures, freedom to
control content, and freedom from fair taxation, through special accounting
procedures. This is a formula which harks back to the robber-baron capitalism
of the late nineteenth century, when railroad, oil, and steel monopolies ran
roughshod over America's economy and political system.
Hence the rhetoric of PFF's manifesto is aimed at accomplishing a clear
propaganda mission. It aims to stir up sentiment for freedom of the
individual, and then to deftly shift the ground under the manifesto's
audience. The pro-freedom sentiment is subtly transferred from the
_individual_ to the _corporation_, not explicitly, but by deceptive turns of
phrase. "The corporation" is subtly equated to the "the individual", so that
"deregulation of conglomerates" _seems_ to be synonymous with "freedom for the
individual".
Implementation of the manifesto's agenda would not lead to individual freedom
at all. It would lead to subjugation of the individual by corporate media
monopolies. The right to access services, the price of the services, the
definition of what services would be provided, the content of "news" and
entertainment -- these would all be decided entirely by media conglomerates,
based on their business interests and political agendas. Neither individuals
nor their elected representatives would have any say over how cyberspace is to
be developed or used, under PFF's charter for Cyberspace Inc.
Most of the remainder of this article is devoted to examining representative
excerpts of the manifesto text, in order to substantiate and illustrate the
summary analysis above. At the end there's a brief discussion of the
relationship between the manifesto and the current legislative agenda in
Washington.
* * *
In its Preamble, the manifesto sets forth its grandiose characterization of
cyberspace as the next frontier of the American Dream:
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.
In the first section, "The Nature of Cyberspace", the emphasis on cyberspace
as a delivery media for information products is introduced:
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.
As is typical throughout the manifesto, the substance is hidden within fluff
rhetoric. The operative phrases in this paragraph, confirmed by the rest of
the manifesto, are "land of knowledge" and "exploration". Cyberspace is to be
primarily a source of "knowledge" -- meaning commercial media products -- and
the role of the _consumer_ will be to "explore" it -- meaning to navigate the
purchasing options.
This first section also introduces the theme that government is inconsistent
with cyberspace pioneering:
[Cyberspace] 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.)
As you might expect, nowhere does the manifesto acknowledge that Internet was
established due to government initiative and sponsorship. And interestingly
enough, the word "Internet" occurs only twice in the manifesto, and the
Internet precedent is seldom cited as a source of models for how cyberspace
might evolve. Also, the authors are evidently blind to the possibility that
_corporations_ might be "redoubts bureaucratic power".
The next section, "The Nature and Ownership of Property", introduces a number
of complex topics regarding ownership of hardware infrastructure, intellectual
property, and the electromagnetic spectrum. This section also introduces the
issue of pricing regulation, and touches on preferential taxation.
The main propaganda theme, intentionally confusing the individual with
corporations, is introduced at this point:
At the level of first principles, should ownership be public
(i.e. government) or private (i.e. individuals)?
The hook is set here, favoring private over government ownership -- in the
name of the individual. But in all that follows, it is the corporation that
is granted privileges, not the individual. As part of the same deceptive
dichotomy, "public/government" is everywhere equated to central bureaucracy,
with no acknowledgement that any kind of regulation could ever be useful, nor
that any kind of public agency, even if highly decentralized, could possibly
be beneficial. And there is no hint that individuals might ever need to be
protected from corporations, or that government might play some role in such
protection.
The ownership of hardware infrastructure is mentioned, but not discussed. It
is patently obvious, evidently, to both the authors and the presumed readers,
that this level of infrastructure is to be privately owned. State operated
telecommunications systems are so far beyond the pale as to be unimaginable.
Again the precedent of Internet (until very recently supported by a public
backbone network) is conspicuously absent from the manifesto.
The discussion of intellectual property is interesting, and appears to have
some merit. Patents and copyrights are described as being a "public good"
approach to intellectual property, outdated and cumbersome in the age of
cyberspace:
Third Wave customized knowledge is by nature a private good.
The manifesto's favored approach to intellectual property is described in a
quotation from John Perry Barlow:
"One existing model for the future conveyance of intellectual
property is real-time performance... In these instances, commercial
exchange will be more like ticket sales to a continuous show...
The other model, of course, is service... Who needs copyright when
you're on a retainer?"
Apparently the model is that authors would sell their services or their rights
to a commercial distributor, who would then charge the consumer on a "pay per
view" basis.
Dealing with copyrights in electronic media has indeed proven to be a thorny
problem. Journalists have complained about not being remunerated by
electronic republishing services; rap musicians have allegedly "sampled"
previous material without payment; copyrighted articles are forwarded around
Internet on a free basis. New mechanisms are needed, and the private sector
_is_ likely to be a creative source of solutions, such as metering
technologies.
This model makes no mention of royalties. Many authors would prefer
royalties, based on distributor revenues, rather than being forced to sell
their services or works on a fixed-price basis. This is a time-honored
practice in pre-electronic media, and a fully accountable and enforceable
royalty scheme would be a desirable part of any cyberspace solution for
intellectual property.
With regard to ownership of the electromagnetic spectrum, ominous questions
are raised, but a specific agenda is not developed. Existing channel
auctioning practices are criticized as being too limiting. Perhaps PFF's
corporate backers are seeking outright permanent ownership of this presumably
public resource:
...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?...
Thus far, the manifesto has "established" that private ownership of
infrastructure, intellectual property, and the electromagnetic spectrum should
be strengthened and extended, with the root justification hanging on the thin
thread of deception equating corporation with individual. Next, the specter
of evil regulation is raised:
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... 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.
Thus the manifesto proposes that every aspect of cyberspace is to be corporate
owned, and that no price regulation should be imposed. If adequate measures
were taken to insure healthy competition, this formula _might_ serve the
public welfare. But the monopoly proposals, to be discussed further on, make
this a dangerous formula indeed. Note above the use of the phrase "one's
ownership", reinforcing the confusion of individual and corporate identity.
Notice also, there was no discussion of the consumer complaints that led to
the regulation, nor of the immense profits that the cable operators continue
to reap subsequent to the "confiscation".
Next is raised the issue of property depreciation. The precedent of
microchips is used to claim that cyberspace investments should be depreciated
rapidly. Current capital depreciation practices are denigrated:
...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.
The comparison with microchips and small entrepreneurial ventures is patently
absurd. Cyberspace Inc is aiming to consolidate ownership of existing
infrastructures, and to deploy new cable, fiber, and coax. These are long-
range hardware investments by big players, and the above argument for
accelerated depreciation make no sense. Such inappropriate tax treatment
would amount to yet another giveaway to rich corporations, at the expense of
the oft-touted individual. Perhaps small, risk-taking, nimble companies
_should_ enjoy more rapid depreciation, but not these corporate giants, aiming
as they are to exploit already proven technologies .
In the next section, "The Nature of the Marketplace", the principle of
"dynamic competition" is discussed. The principle is very simple, essentially
that new kinds of products should be allowed to capture markets from outmoded
products, just as the automobile replaced the horse and buggy. The manifesto
attempts to present the idea as if it were a major breakthrough in economic
theory. It then issues a rallying cry for bold new directions:
The challenge for policy in the 1990s is to permit, even
encourage, dynamic competition in every aspect of the cyberspace
marketplace.
What the manifesto fails to mention is that the American communications
industry is already experiencing _dramatic_ dynamic competition. Cable,
cellular, satellite, telephone, and broadcast modalities are increasingly
overlapping, evolving, competing, shifting markets around, and bringing down
prices. By a strange twist of logic, as we shall see later, the _concept_ of
dynamic competition will be used as an argument for increased monopoly control
over markets -- for reducing the _actual_ dynamic competition that is working
so well today.
The next section, "The Nature of Freedom", develops several threads. It
presents a revisionist version of U.S. and Internet history; it continues the
blurring of individual and corporate interests; it continues the demonization
of government; it restates the corporate goal of gaining outright ownership of
the electromagnetic spectrum; it hints at the monopolist agenda.
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.
Broadcast license fees (hardly massive, by the way) are paid by corporate
broadcasters, not citizens. Having laid its propaganda groundwork, the
manifesto now freely interchanges individualist and corporate terms with
Orwellian impunity. By an incredible stretch of doublethink, handing over the
public airwaves to corporate ownership is to be a victory for the individual!
In a Second Wave world, it might make sense for government
to prohibit entrepreneurs from entering new markets and
providing new services.
In a single sweeping revisionist fantasy, America's remarkable record of
supporting innovative entrepreneurs vanishes from history! And the manifesto
would have us swallow the premise that billion-dollar telecommunications and
media giants are poor, struggling entrepreneurs.
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."
In yet another revisionist fantasy, America's world-famous history of freedom
is discounted. And once again individual freedom is praised, as if that had
some connection to the corporate agenda being espoused.
The next section, "The Essence of Community", proclaims the notion of
distributed communities -- long common on Internet -- as if they were a bold
new idea:
No one knows what the Third Wave communities of the future
will look like... 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.
Why does "no one know"? Why aren't Internet lists and newsgroups cited as
living prototypes for distributed communities of the future? Such frequent
and glaring omission of the Internet precedent is disturbing. Just as the
American pioneer (so often praised by the manifesto) saw the New World
(falsely) as a virgin land ready for exploitation, so the manifesto seems to
see cyberspace as an empty frontier, yet to be explored and developed. Are
the "natives" of this frontier -- today's extensive Internet culture -- to be
similarly decimated and pushed onto bleak reservations? Just as the Magna
Carta metaphor reveals much about the manifesto's robber-baron objectives,
perhaps the darker implications of the pioneering metaphor should be taken
seriously as well.
Given the monopoly-priced environment proposed by the manifesto (in the next
section), the kind of informal, citizen-oriented virtual communities popular
on Internet are highly unlikely to be viable. PFF's notion of distributed
communities (called "cyberspaces") seems to resemble today's internal
corporate networks, as described in a quote from Phil Salin:
"...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."
Those groups which can afford to pay the monopolist prices -- such as
corporations and well-funded associations -- can enjoy the benefits which
today are affordable to millions of individuals and groups. Perhaps nowhere
else in the manifesto is the pro-individualist rhetoric so clearly revealed to
be the lie that it is. Instead of promoting individual freedom in cyberspace,
existing freedoms and privileges are likely to be taken away. The ominous
precedent implicit in the "pioneer" metaphor threatens to recur as cyberspace
is cleared for commercial development.
The next section, "The Role of Government", re-iterates previously stated
corporate objectives -- no price regulation, corporate ownership of spectra,
new definition of intellectual property, favored tax treatment -- and
proclaims a new objective: enabling total monopoly control over communications
markets.
Much is made of the distinction between one-way and two-way communications,
the implication apparently being that phone companies are better prepared to
develop cyberspace than cable operators:
"...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..."
The claim is made that the multimedia future depends on greater collaboration
between phone and cable companies:
...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. ...That is why obstructing such collaboration
-- in the cause of forcing a competition between the cable
and phone industries -- is socially elitist.
Next, it is claimed that dynamic competition requires that regulated-monopoly
mechanisms (which govern today's RBOCs and cable companies) should be
abolished. Price and entry regulation are to be replaced by new anti-trust
law:
Antitrust law is the means by which America has...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.
...price/entry regulation of telecommunications services...
should therefore be replaced by antitrust law as rapidly as
possible.
The obvious likely consequences of such an agenda are conspicuously not
discussed by the manifesto. If entry regulation is removed, and phone/cable
collaboration is encouraged, then the obvious alternatives for collaboration
would be interconnection, joint venture, and acquisition. Given the multi-
billion dollar capital reserves of the phone companies, the best business
opportunity would presumably be for phone companies to simply acquire cable
companies, thus establishing total monopolies over wires coming into the home.
Anti-trust law would be largely irrelevant to this scenario. To begin with,
anti-trust enforcement seems to be a thing of the past -- especially with the
Republican radicals in Congress. More important, perhaps, is the current
anti-trust stance toward the RBOCs: partitioning them into separate turfs
seems to be the most that anti-trust enforcers demand. Within their turfs,
they're allowed be as monopolistic as they can get by with.
If price-regulation is removed, then we would be left with _totally_
unregulated telecommunications monopolies in each RBOC region -- controlling
phone, television, multimedia, and messaging services, and charging whatever
the traffic will bear. Hence the appropriateness of this article's title:
"Cyberspace Inc and the Robber Baron Age". America's total communications
infrastructure would be divided into feudal fiefdoms, and the economic regime
would resemble the railroad cartels of the nineteenth century.
All the manifesto's rhetoric about individual freedom and dynamic competition
is deception -- the agenda is totally anti-competitive, anti-individual, and
anti-free-enterprise. A century's progress in achieving dynamic, competitive,
and diverse communications industries -- based on appropriate and non-stifling
regulation -- would be thrown out the window all at once.
The final section of the manifesto, "Grasping The Future", is mostly devoted
to reiterating the grandiose rhetorical visions of the mythical "Third Wave".
The phrase "grasping the future" is an apt conclusion to the manifesto: the
conglomerates behind PFF are indeed grasping at the future with both hands,
ready to pocket monopolistic windfall profits, presumably enhanced by favored
tax advantages.
* * *
Despite the strongly adversarial attitude this article has taken toward the
"Magna Carta", not all of the points made in that manifesto are considered by
this author to be wrong-headed. Creative initiatives to the problems posed by
cyberspace are indeed needed, and the manifesto offers some constructive ideas
in that regard. A pay-per-view model of intellectual property may have merit
-- if original authors are fairly and accountably compensated, and if non-
commercial material is also accommodated at reasonable cost. Close
collaboration among existing installed bases of coax, cable, and satellite may
be desirable -- if appropriately regulated with respect to price and common-
carrier status. And new paradigms and visions for understanding the meaning
of communications in the "information age" are needed -- but with more honesty
about the metaphors to be embraced and how they actually map onto cyberspace
realities.
What _is_ highly objectionable in the manifesto is the deceptive manipulation
of libertarian/individualist sentiment, the ignoring of the Internet precedent
and the lessons to be learned from that, the absence of provisions for freedom
of communication and privacy for individuals, the discounting of the proven
constructive role for appropriate regulation, and the disguised corporate
power-grab inherent in the proposed package of polices.
This is not the place to analyze or even enumerate the plethora of competing
legislative proposals currently before Congress regarding telecommunications.
Suffice it to say that the agenda promulgated by the "Magna Carta" is finding
widespread expression in that legislation. This fact -- along with the
manifesto's close connection to the communications industry and to Speaker
Gingrich -- indicates that the "Magna Carta" should be taken very seriously,
as regards both its agenda, and the kind of rhetoric and deception employed.
The "Magna Carta" provides a rare insight into the threat facing America's
future from corporate power grabbers, and simplifies the task of seeing
through the propaganda smokescreen being employed by legislators and industry
spokespeople.