Debates: MBA 624: Strategic Management of Technology and Innovation: Summer 2006

In what ways will the future be different from the past? In what ways will they be similar?

Is the past a good guide to the future? If not, what is a good guide for the future?

Do we have a new economy forming?

What will it be based on that's so different? Are networked bits so different from atoms?

Two major driving forces. Yes, networked bits are so different from atoms that we need an economics of abundance in addition to the traditional economics of scarcity.

The second is the loosening of capital markets, aka globally mobile capital, and the rise of transnational capitalism.

multinational	shared ownership - a company owned by people or companies from two or more countries
micro multinational	a multinational with under a couple dozen scattered employees
transnational	national or multinational companies which operate in a number of different countries
globalization	the development of global institutions with some independence from nation-state control; inevitably tends to undermine nationalism

Public Policy

Yes, your organization's structure and culture can have a lot to do with the organization's ability to survive, adapt, and even thrive.

However, our society's structure and culture has a lot to do with it, too. Increasingly, that society is a global network.

how laws, institutions, customs, and regulations affect incentive, the creation of new knowledge, and the possibility of profiting from it

Rule of (which) law?

We live in a globalized economy where international law should supercede national law (just as national law supercedes state law and state law supercedes local law).

We live in a globalized economy where national law (ex: US's freedom of speech; freedom of press; separation of church and state) should supercede international law or other countries' laws.

Golden Straitjacket

This was the only debate topic where I had to give thought to which side is red and which is blue. Basically, it doesn't matter, as I'll try to explain, so I couldn't use the same loose/tight dichotomy as I did with the others. This becomes the more generalized debate proposition within which the other four find their context.

In The Lexus and the Olive Tree, Thomas Friedman writes (p. 86) that one debate is over, and a winner is clear.

When it comes to the question of which system today is the most effective at generating rising standards of living, the historical debate is over. The answer is free-market capitalism. ... There can be different brands of free-market vanilla and you can adjust your society to it by going faster or slower. But, in the end, if you want higher standards of living in a world without walls, the free market is the only ideological alternative left. ...

When your country recognizes this fact, when it recognizes the rules of the free market in today's global economy and decides to abide by them, it puts on what I call the Golden Straitjacket. The Golden Straitjacket is the defining political-economic garment of this globalization era. ... If your country has not been fitted for one, it will be soon.

Golden Rules

Friedman describes the Golden Straitjacket by the rules it imposes on a country.

make the private sector the primary engine of economic growth

maintain a low rate of inflation and price stability

shrink the size of the state bureaucracy

balance the budget, if not have a surplus

eliminate import tariffs

remove restrictions on foreign investments

get rid of quotas and domestic monopolies

increase exports

privatize state-owned industries

deregulate capital markets

make the currency convertible

open industries and stock and bond markets to direct foreign ownership and investment

deregulate to promote domestic competition

eliminate government corruption, subsidies, and kickbacks

open banking and telecommunications systems to private ownership and competition

allow citizens to choose from an array of competing pension options and foreign-run pension and mutual funds

This op-ed piece in today's Buffalo News won't be available in a week or so, but it explains where Mexico is resisting the Golden Straightjacket and why that fuels the US immigration problem.

It's not that Mexico has made no progress. Its economy was once crisis-prone, inflation-ridden and heavily insulated from foreign trade. Now it has quelled inflation (about 4 percent), controlled government spending and opened up to trade. Before adoption of NAFTA in 1994, tariffs on covered imports averaged 12 percent; by 2001, they were 2 percent. In recent years, its economy has grown almost 4 percent annually.

Far from damaging the economy of the United States, offshoring should enable its companies to direct resources to next-generation technologies and ideas—if public policy doesn't get in the way.

Three Democratizations

Early in his book, Friedman writes about what caused the rise of free-market capitalism: the three democratizations, of technology, of finance, and of information. In short, the Internet let money move freely. The folks who cry "Save America's Jobs" are spitting into the wind, according to Friedman.

The venture capitalists at Parkside Partners are globalists, money movers. However, they live in the real world, where many people are fighting back. In Friedman's terms, those fighting back are more interested in their (local) olive trees than in another (global) Lexus.

Electronic Herd

You and I grew up in a world in which nations ruled and competed. Sure, there was a World Court and a United Nations and many treaties, but the nation-state was supreme. According to Friedman, those days are over. Look at the European Union. The ruler of a country has no more discretion than the governor of any one US state has in the face of the overwhelming superiority of the US Federal government. In this analogy, the Federal Government has been replaced on a global scale by what Friedman calls the Electronic Herd. Gathering in Supermarkets, this Herd has far less accountability than any nation-state ever did. At Parkside Partners, you are part of the Electronic Herd.

The Electronic Herd is made up of all the faceless stock, bond and currency traders sitting behind computer screens all over the globe, moving their money around with the click of a mouse from mutual funds to pension funds to emerging market funds, or trading from their basements on the Internet. And it consists of the big multinational corporations who now spread their factories around the world, constantly shifting them to the most efficient, low-cost producers.

This herd ... is beginning to replace governments as the primary source of capital for both companies and countries to grow. In order to thrive in today's globalization system a county not only has to put on the Golden Straitjacket, it also has to plug into this Electronic Herd.

What does this mean for our public policy debate? Friedman calls it synchronized swimming, which is why I had trouble assigning a red or a blue to these Rule of Law debate positions. According to Friedman, there is no debate.

Unfortunately, this Golden Straitjacket is pretty much "one size fit all". So it pinches certain groups, squeezes others and keeps a society under pressure to constantly streamline its economic institutions and upgrade its performance. it leaves people behind quicker than ever if they chuck it off, and it helps them catch up quicker than ever if they wear it right. It is not always pretty or gentle or comfortable. But it's here and it's the only model on the rack this historical season.

As your country puts on the Golden Straitjacket, two things tend to happen: your economy grows and your politics shrinks. That is, on the economic front the Golden Straitjacket usually fosters more growth and higher average incomes -- through more trade, foreign investment privatization and more efficient use of resources under the pressure of global competition. But on the political front, the Golden Straitjacket narrows the political and economic policy choices of those in power to relatively tight parameters. This is why it is increasingly difficult these days to find any real differences between ruing and opposition parties in those countries that have put on the Golden Straitjacket. Once your country puts on the Golden Straitjacket, its political choices get reduced to Pepsi or Coke -- to slight nuances of taste, slight nuances of policy, slight alterations in design to account for local traditions, some loosening here or there, but never any major deviation from the core golden rules. Governments ... which deviate too far from the core rules will see their investors stampede away, interest rates rise and sock market valuations fall. The only way to get more room to maneuver in the Golden Straitjacket is by growing it, and the only way to grow it is by keeping it on tight.

The only online portal dedicated to the study of clandestine and subversive radio - a field where politics, diplomacy, espionage and broadcast media collide. Clandestine broadcasting is a highly effective weapon in the arsenal of psychological warfare, which, when analyzed, can assist observers to cut through the fog of war and ascertain the strength and capabilities of opposition groups as well as actual on-the-ground military strategies. For the casual Web surfer this site may seem exotic and, at times, conspiratorial. Regular and "professional" users, however, will find an intelligence bonanza.

Most of those stations have online steams, anywhere in the world. If the world is flat, as ClandestineRadio suggests and Friedman's most recent book declares, and indeed, the Internet has flattened it, then what should the US do?

The Electronic Herd and the Supermarkets are fast becoming two of the most intimidating, coercive, intrusive forces in the world today. They leave many people feeling that whatever democracy they have at home, whatever choices they think they are exercising in their local or national elections, whoever they think they elected to run their societies, are all just illusions -- because it is actually larger, distant, faceless markets and herds that are dictating their political lives.

We will debate four public policy areas: technology, intellectual property, spectrum, and internet neutrality.

The Web was the Wild West - until the sheriff rode into town.

The most potent force shaping the future of the Internet is neither Mountain View’s Googleplex nor the Microsoft campus in Redmond. It’s rather a small army of Gucci-shod lobbyists on Washington’s K Street and the powerful legislators whose favor they curry.

After years of benign neglect, the Federal government is finally involved in the Internet — big time. And the decisions being made over the next few months will impact not just the future of the Web, but that of mass media and consumer electronics as well. Yet it’s safe to say that far more Americans have heard about flag burning than the laws that may soon reshape cyberspace.

note on August 7, after hearing the debates but not the rebuttals

On a personal topic, my bike riding is bad for the environment because I will live so much longer. Thus, if I really wanted to help the environment, I would stop riding my bike and die sooner. What would you do?

Given the current state of the automobile-driving population, particularly in the United States, first-order environmental benefits can result in high second-order environmental costs due to increased longevity of those engaging in increased physical activity. That is, the energy savings due to the use of human power for transportation may be offset by the increased energy used by living longer due to better health.

conservative / liberal

Through my lifetime, economic conservatives have favored less government, more reliance on the market (economic libertarians) to distribute society's burdens and benefits. Social traditionalists revere family, faith and old values. The economic and social wings were held together by a common enemy -- communists, then liberals, and now terrorists -- so that social traditionalists would vote against their economic best interests (the Kansas effect) and economic libertarians could still vote conservative but live liberal.

During the same time, liberals have favored more government involvement in the economy. Social liberals revere freedom and diversity although most of them use that freedom to choose family, faith, and old values. The economic and social wings were held together by a common trust in tolerance and the ability of government to distribute democracy's burdens and benefits more fairly than market forces will.

In our debates, if we simplify so that conservatives want less government and liberals want more government, then the Blue (tight controls) are the liberals and the Red (loose controls) are the conservatives. Indeed, right-wing religious and political groups favor loose control in the net neutrality debate.

From the Christian Coalition - "America's Leading Grassroots Organization Defending Our Godly Heritage"

Christian Coalition is joining a broad array of organizations, representing consumers, businesses, and all ends of the political spectrum. The Coalition is committed to working on behalf of our supporters to ensure that the Internet remains the free marketplace of ideas, products and services that it is today.

The distinction on the debate issues is not between liberal and conservative. Lawrence Lessig, for example, is about as conservative as an establishment lawyer can get. He sees it as a distinction between old and new. The Blue team represents the Old because they have business models to protect. The Red team represents the New because they have the need for low barriers to entry.

In my classes, I put it in terms of control. Not whether or not there is control, but who's in charge? Who's in control? Then the Blue team represents the incumbents and the Red team represents the new entrants and substitutes. The ins versus the outs, and organizations like the Christian Coalition feel themselves on the outside.

corporations / humans

To give corporations human characteristics is not a logical fallacy. However, it is a rhetorical device (aka personification, the pathetic fallacy) that obscures a moral distinction that MBA's need to make.

Corporations are not humans; however, they are legal entities and can thus take on many attributes that they seem to share with humans. Corporations can not be judged in moral terms, only in economic terms. They exist to return value to owners/shareholders. They do not exist to make computers or to save lives with drugs. They do not have a conscience. They do not exist to do good or bad. They exist to create the greatest difference possible between revenue and costs as soon as possible.

If you try to argue with your heart (unsupported assertions based on wishful thinking), as Amr did when he parroted the Big Pharma PR at the Bistro, you run the risk of losing every argument to those who argue with their head (facts and logical reasoning). On the other hand, you can probably convince those who also argue with their hearts, which are most folks and all PR departments when the facts don't support their argument. Those folks are not, however, running corporations, and you'll note that heads of PR hardly ever end up running a corporation. If you don't want to run a corporation, then keep arguing from the heart, not the head. It's my job to show, via the rebuttal that follows Amr's post, how silly you will look when confronted with the facts. With an MBA from Medaille, please argue from your head not your heart.

Please note that while an argument from the heart will lose the battle to an argument from the head, the argument from the heart will win the war because battles are narrow (facts and reasoning) and wars are broad, which includes lots of humans. There, the heart will tend to win because people don't want to think rationally and in any case, aren't sure how to do it.

control / anarchy

False analogy. This sets up an either/or choice on a one-dimensional line. We either have sufficient control or total anarchy, with the idea that anarchy is not a survivable condition and thus cannot be risked, leaving lots of control as the only choice. Exactly what the incumbent forces of control want you to believe.

An alternative metaphor looks at control in a multi-dimensional continuous space, not a line with a bright separator between control and anything else, let alone anarchy. In one direction, control can slide toward anarchy. In another direction, our natural human rights are subject to certain restraints of varying intensities. We can call these restraining forces the forces of control to distinguish them from the more powerful force of freedom. I see a great difference yet still a continuum going from freedom to anarchy. Depends on the context: the time, the place, and the person.

Debate Topics

Debate	Team Red loose control	Team Blue tight control
I	Technology should be neutral / indifferent to current laws and business models.	Technology should enforce current laws and extend current business models.
II	IP (patents, copyrights) protection should be minimized.	IP (patents, copyrights) protection should be maximized.
III	Spectrum should be treated as an abundant resource and a public good.	Spectrum should be treated as a scarce resource and a private good.
IV	The public Internet should be stupid.	The public Internet should be smart.

Debate I - Technology

Technology (hardware, software, networks) should be built to be future friendly, that is, neutral / indifferent to current laws and business models (laws are local and changeable; businesses fail).

Technology (hardware, software, networks) should be built to be present friendly, that is, to enforce current laws and extend current business models (ex: 911 and rural tax for VoIP; wiretapping; DRM for media players; tiered Internet service; ... ).

notes

play your iTunes music on your computer

watch certain videos on your iPod

play your just-burned .mp3 CD on your car's CD player

watch a DVD you bought in Europe on the DVD player you bought in the US

import music from a store-bought CD into MS Movie Maker

watch last night's TV show (without the commercials) tomorrow

do much of anything with what you buy at "legal" music stores

In other words, why are there incompatibilities between hardware devices, between software formats, and between hardware and software? I know why I can't play a cassette tape on a vinyl record player -- they are made out of atoms and they don't fit together. But the music and video are all bits. They want to flow freely but they are forced into proprietary formats and DRM systems that keep them apart. Why?

Napster, Kazaa, and now Bit Torrent are showing the cracks in the music industry's attempts to have hardware and software prop up old business models. Skype is doing the same for the telephone industry. Movies and book publishing, especially textbook publishing, aren't far behind. What's next?

Digital Rights Management or DRM is an umbrella term for any of several technologies used to enforce holder desired policies for controlling access to digital data (such as software, music, movies) and hardware. In more technical terms, DRM handles the description, layering, analysis, valuation, trading, monitoring and enforcement of usage restrictions that accompany a specific instance of a digital work. In the widest possible sense, the term refers to any such management.

The term is often confused with copy protection and technical protection measures (TPM). These two terms refer to technologies that control or restrict the use and access of digital media content on electronic devices with such technologies installed.

The topic is controversial. DRM advocates say DRM technologies are necessary to allow rights holders to exercise their rights, prevent revenue loss due to illegal duplication of their copyrighted works, and enable more effective market segmentation. DRM critics argue that the phrase "digital rights management" is a misnomer and the term digital restrictions management[1] is a more accurate characterization of the functionality of DRM systems, since the mechanisms allow the enforcement of any restrictions desired by the publishers, regardless of whether those restrictions actually correspond the publisher's legal rights. They claim that transferring control of the use of media from consumers to a consolidated media industry will lead to loss of existing user rights and stifle innovation in software and cultural productions.

a United States copyright law which criminalizes production and dissemination of technology that can circumvent measures taken to protect copyright, not merely infringement of copyright itself, and heightens the penalties for copyright infringement on the Internet.

You paid good money for your CDs, and you expect to be able to play them anywhere, or transfer them to your iPod - or whatever cool gadget comes out next year. However, if the American music companies get their way, such transfers will be illegal. That's right: you won't be able to play your CDs on your music player!

What's going on here?

The Australia-US Free Trade Agreement requires new laws which prevent "circumvention of technological protection measures". Some companies want the government to go further and ban any access that the copyright owner doesn't allow. This means the music companies can decide how, when and where you listen to your music. Worse still, this law would apply to more than just CDs: games, software and movies are all included under the "technological" umbrella.

The Audio and Video Flags: Can Content Protection and Technological Innovation Coexist? | video
Hearing
U.S. House Subcommittee on Telecommunications and the Internet, June 27, 2006

Given the time and money that developing strong DRM can take (and the fact that pirates will crack the format anyway), media companies may simply settle for more basic systems that still exert "good enough" control. After all, if "hacking" can take diverse forms, so can DRM, and the content industry's victory with the DMCA shows that effective control is not simply designed in the laboratory, but in the halls of power as well.

Digital rights management (DRM) technology is rapidly becoming a concrete reality, built into the products that consumers buy and affecting the way people obtain and enjoy movies, music, books, television programs, and other digital content. It is natural that the creators and owners of content are seeking technical locks to protect that content from the piracy that digital networks have made easier than ever. At the same time, those digital locks on content will have a profound effect on how people view, watch, use, and share information - especially through the new and powerful forms of communication offered by computers and the Internet.

The "broadcast flag" - a method for protecting digital television broadcasts - has emerged as one of the first major debates over government mandates for DRM copy protections.

Remember the “Hollings bill” back from 2002? It was a bill that would essentially put a copyright cop in your consumer electronics and PCs—to ensure you didn’t do anything with content that wasn’t authorized by the content industry. The bill put copyright owners in control of innovation.

Here’s the US Senate Draft of the “Digital Content Protection Act of 2006.” Look familiar? It may go about it differently—but the DCPA is essentially the Hollings bill, only in pieces-parts.

Today, you can use any device you like with your television: VCR, TiVo, DVD recorder, home theater receiver, or a PC combining these functions and more. But if the broadcast flag mandate is passed, Hollywood and federal bureaucrats will get a veto over innovative devices and legitimate uses of recorded programming.

The mandate forces all future digital television (DTV) tuners to include "content protection" (aka DRM) technologies. All makers of HDTV receivers will be required to build their devices to watch for a "flag" embedded in programs by copyright holders.

When it comes to digital recording, it would be Hollywood's DRM way or the highway. Want to burn that recording digitally to a DVD to save hard drive space? Sorry, the DRM lock-box won't allow it. How about sending it over your home network to another TV? Not unless you rip out your existing network and replace it with DRMd routers. And forget about using open source TV tools. Kind of defeats the purpose of getting a high definition digital signal, doesn't it?

The radio broadcast flag is gaining momentum. House Representative Mike Ferguson (R-N.J.) is introducing legislation that would establish a broadcast flag for audio and also change the way in which the music industry licenses radio itself. The Audio Broadcast Flag Licensing Act of 2006, H.R. 4861, is quite a shocker. Or maybe not, depending on what brand of cynicism you like with your afternoon tea.

The bill would require all manufacturers of electronics to get approval from the FCC for any device that would enable the recording of digital radio.

Colleges Offer Music Downloads, But Their Students Just Say No; Too Many Strings Attached ...

The on-campus service at Penn State will give students free access to unlimited streams of music or access to "tethered" downloads that can only be used on a few PCs, and which will expire when the student stops subscribing to Napster. Students will have to pay full price--99 cents per song--if they want to keep a permanent download or burn the song to a CD.

As CEO of the Motion Picture Association of America, my principal concern is protecting the magic of the movies. So why should I care about a so-called broadcast flag regulation?

The answer is simple. I want to make certain that the American people will continue to have the opportunity to see our movies and television shows on free television in the digital age.

The digital era presents great opportunities and great challenges. The opportunities come with the high-quality, high-resolution pictures that greatly enhance the viewing pleasure of the consumer. The challenges lie in protecting that content so that it is not stolen and resold or rebroadcast by video pirates.

Without proper protections, it will be increasingly difficult to show movies, television shows or even baseball games on free television.

Broadcast flag technology protects the content of our shows from redistribution over the Internet.

ABC HAS HELD DISCUSSIONS ON the use of technology that would disable the fast-forward button on DVRs, according to ABC President of Advertising Sales Mike Shaw, with the primary goal to allow TV commercials to run as intended.

"I would love it if the MSOs, during the deployment of the new DVRs they're putting out there, would disable the fast-forward [button]," Shaw said.

While MSOs risk losing some of their DVR customers if fast-forwarding were blocked, Shaw said the cable operators--who are beefing up their own local ad sales operations--"are in the same business we're in." "They've got to sell ads too," he said. "So if everybody's skipping everybody's ads, that's not a long-term business model for them either."

Shaw also threw cold water on the idea that neutering the fast-forward option would result in a consumer backlash. He suggested that consumers prefer DVRs for their ability to facilitate on-demand viewing and not ad-zapping--and consumers might warm to the idea that anytime viewing brings with it a tradeoff in the form of unavoidable commercial viewing.

If a new idea from Philips catches on, the company may not be very popular with TV viewers. The company's labs in Eindhoven, The Netherlands, has been cooking up a way to stop people changing channels to avoid adverts or fast forwarding through ads they have recorded along with their target programme.

The secret, according to a new patent filing, is to take advantage of Multimedia Home Platform - the technology behind interactive television in many countries around the world. MHP software now comes built into most modern digital TV receivers and recorders. It looks for digital flags buried in a broadcast, and displays messages on screen that let the viewer call up extra features, such as additional footage or information about a programme.

Philips suggests adding flags to commercial breaks to stop a viewer from changing channels until the adverts are over. The flags could also be recognised by digital video recorders, which would then disable the fast forward control while the ads are playing.

Abstract

An apparatus and method is disclosed for preventing a viewer from switching from a channel when an advertisement is being displayed on the channel. The apparatus and method comprises an advertisement controller in a video playback device that (1) prevents a viewer of a direct (non-recorded) broadcast from switching channels when an advertisement is displayed, and (2) prevents a viewer of a recorded program from fast forwarding the recorded program in order to skip past advertisements that were recorded with the program. A viewer may either watch the advertisements or pay a fee in order to be able to change channels or fast forward when the advertisements are being displayed.

Debate II - Intellectual Property

IP (patents, copyrights) protection should be minimized. It should be limited to commercial rights for as short a time as possible.

IP (patents, copyrights) protection should be maximized. It should be extended to as many rights as possible and as long as possible.

notes

The exclusive right granted to a patentee in most countries is the right to prevent others from making, using, selling, offering to sell or importing the claimed invention. The rights given to the patentee do not include the right to make, use, or sell the invention themselves.

Does Bill Gates consider it "stealing"? This blog entry quotes a Wall Street Journal interview with Bill Gates.

Current copyright law goes too far.

The protections given corporate copyright owners are out-of-whack with consumer expectations.

So everyone ignores the law. Everyone?

Wall Street Journal: You watch physics lectures and Harlem Globetrotters [on YouTube]?

Bill Gates: This social-networking thing takes you to crazy places.

WSJ: But those were stolen, correct?

Bill Gates: Stolen's a strong word. It's copyrighted content that the owner wasn't paid for. So yes.

Software is an algorithm. Until ten years ago, you couldn't patent a software algorithm. Now you can, as long as it does work for you. Then it's actually the work that you're patenting.

The history of intellectual property protection and software has an anomaly that brings strong reactions to software patents.

We didn't patent VisiCalc at Software Arts because you really couldn't patent software prior to 1981, and VisiCalc was shown to the public in 1979.

The full potential of the NII will not be realized if the legal protections that extend to education, information and entertainment products and their use in the physical environment are not available when those works are disseminated via the NII. Creators and other owners of intellectual property rights will not be willing to put their investments and their property at risk unless appropriate systems are in place -- both in the U.S. and internationally -- to permit them to set and enforce the terms and conditions under which their works are made available in the NII environment.

comic book about the legal barriers documentary filmmakers in particular must hurdle, or simply avoid

An EFF Initiative To Protect Innovation and Free Expression

Tired of bogus software patents? So are we! To combat these annoying and often dangerous legal weapons, EFF has launched the Patent Busting Project to take down some of worst offenders.

Just as more bands have been realizing the power of offering instant concert recordings to their fans, you knew the industry would somehow figure out a way to kill this new, growing business model. Submitted by someone anonymously, comes this story, that tells us that some company actually had a patent on making instant recordings of concerts for sale - and radio giant Clear Channel has now purchased that patent. Of course, now that they have it, they're cracking down on many bands that want to offer such recordings. They claim they want to be "artist" friendly, but are looking at it from a business perspective - meaning stamping out the competition and selling licenses to any bands that want to offer immediate recordings to their fans. It's amazing how the industry continuously finds ways to use intellectual property protections to harm new business models, rather than to let them help grow the overall industry. Of course, once again, you have to wonder what exactly is patentable here: it's basically a CD burner. Why does selling concerts via a CD burner immediately after the show need a special patent?

Friendster said Thursday that it has received a patent that covers online social networks, one the company had applied for long before its decline and recent recapitalization.

The U.S. patent, which was awarded June 27, is extremely general, and would seem to cover the activities of many other sites, especially those like LinkedIn that allow people to connect within a certain number of degrees of separation.

Naming Friendster founder Jonathan Abrams, who has left the company, as inventor, the patent refers to a “system, method, and apparatus for connecting users in an online computer system based on their relationships within social networks.”

“It’s way too early to say” whether the company would pursue licenses and litigation from its competitors, Friendster President Kent Lindstrom told RedHerring.com. “We’ll do what we can to protect our intellectual property.”

Though the Friendster patent could be challenged in either the patent system or the courts, opponents would face an uphill battle. “Once the patent is issued there is a presumption of validity that follows with it,” said attorney Bill Heinze of Thomas, Kayden, Horstemeyer & Risley.

A simple idea blinds us, and under the cover of darkness, much happens that most of us would reject if any of us looked. So uncritically do we accept the idea of property in ideas that we don’t even notice how monstrous it is to deny ideas to a people who are dying without them. So uncritically do we accept the idea of property in culture that we don’t even question when the control of that property removes our ability, as a people, to develop our culture democratically. Blindness becomes our common sense. And the challenge for anyone who would reclaim the right to cultivate our culture is to find a way to make this common sense open its eyes.

So far, common sense sleeps.

The Stanford University law professor and cyberadvocate redefines the parameters of the Internet.

Amid the chorus of techies and Web heads proclaiming that cyberspace is inherently immune to regulation, a lone voice has consistently insisted quite the opposite. Indeed, Stanford University law professor Lawrence Lessig has written that the Internet is rapidly succumbing to a triad of ill-considered law, restrictive technology, and commercial monopolization that threatens its very existence as a platform for freedom, innovation, and growth.

When Rights Collide: Principles to Guide the Intellectual Property Debate
by Clyde Wayne Crews Jr. and Adam Thierer
Cato Institute, June 2001

Debate III - Spectrum

The electromagnetic spectrum should be treated as an abundant resource and a public good by the law and the markets.

The electromagnetic spectrum should be treated as a scarce resource and a private good by the law and the markets.

notes

Debates III and IV are similar. If we use spectrum for part of the path from one computer to another on the Internet, should this spectrum be neutral, too? We'll leave that specific concern for Debate IV.

	(David) driving forces -->	<-- restraining forces (Goliath)
Open source	a software commons brings the benefits of Moore's Law to software and provides more rapid progress	every bit of knowledge carries a toll paid to some corporation controlling it	Intellectual Property
Open networks	the Internet is a commons that accelerates all knowledge by distributing it to everyone	a network's favored content gets a "fast lane" and monopoly rents can be demanded	Proprietary Networks
Open spectrum	unlicensed frequencies like those used by 802.11 are a commons that brings the Internet into the air faster than wires ever will	all frequencies are sold by the government and controlled by single companies	Auctioned spectrum
Electronic Frontier Foundation	Technologies are transforming our society and empowering us as speakers, citizens, creators, and consumers. When our freedoms in the networked world come under attack, the EFF is the first line of defense. ... defending free speech, privacy, innovation, and consumer rights. ... championed the public interest in every critical battle affecting digital rights.	to educate policymakers, opinion leaders and the public about issues associated with technological change, based on a philosophy of limited government, free markets and individual sovereignty.	Progress & Freedom Foundation

On Treating Spectrum As A Commons
Four skeptics will review and criticize a proposal to treat spectrum as a commons.

On Treating Spectrum as Property
Four skeptics will review two property based proposals for regulating spectrum.

In this moot court “property” and “commons” proponents will debate which architecture most effectively promotes efficiency and innovation.

Each economic era has a resource that drives wealth creation. In the agricultural era it was land; in the industrial era, it was energy. Today the American people collectively own the most valuable resource of the emerging information economy: the airwaves, also known as the radio frequency spectrum. As the world goes wireless, access to the airwaves is the oil of the information age; indeed, economists estimate the commercial value of existing licenses in the U.S. at over $750 billion.

Aren’t you tired of being a society that sits on a couch, facing forward, listening to what people with money have to say? ...

We take this for granted. You can't just start up your own radio station because you might be interfering with, say, the batch of spectrum used to dispatch emergency vehicles. Besides, if everyone started up a radio station, the signals would be overlapping right, left, up and down. So, we need a centralized chokepoint to divide up the spectrum rationally.

Except put that in the past tense. New technology can do real-time negotiation of spectrum, seeking the optimal wavelength the way Internet routers seek the best next hop. Assigning fixed bandwidth necessarily means wasting bandwidth, like keeping cars locked into assigned lanes even if the result is bumper-to-bumper traffic in one lane and empty lanes on either side of it.

In effect, we can do to spectrum what the Internet has done to networks. By putting all the intelligence on the edges, the network can support maximum innovation. In the words of David Isenberg, a stupid network supports more innovation than a smart one.

We build and finance public infrastructure in a public way using public funds with the goal of benefiting economic, social, and cultural development in our communities. So why not do the same with the Internet, which is an information infrastructure? Well we did that, didn't we, with the National Information Infrastructure program of the 1990s, which was intended to bring fiber straight to most American homes? About $200 billion in tax credits and incentives went primarily to telephone companies participating in the NII program. What happened with that? They took the money, that's what, and gave us little or nothing in return.

But just because the highway contractor ran off with the money without finishing the road doesn't mean we can go without roads. It DOES mean, however, that we ought not to buy another road from that particular contractor.

The obvious answer is for regular folks like you and me to own our own last mile Internet connection. This idea, which Frankston supports, is well presented by Bill St. Arnaud in a presentation you'll find among this week's links. (Bill is senior director of advanced networks with CANARIE, which is responsible for the coordination and implementation of Canada's next generation optical Internet initiative.) The idea is simple: run Fiber To The Home (FTTH) and pay for it as a community of customers -- a cooperative. The cost per fiber drop, according to Bill's estimate, is $1,000-$1,500 if 40 percent of homes participate. Using the higher $1,500 figure, the cost to finance the system over 10 years at today's prime rate would be $17.42 per month.

What we'd get for our $17.42 per month is a gigabit-capable circuit with no bits inside - just a really fast connection to some local point of presence where you could connect to ANY ISP wanting to operate in your city.

"It's honest funding," says Frankston. "The current system is like buying drinks so you can watch the strippers. It is corrupt and opaque. We should pay for our wires in our communities just like we pay for the wires in our homes."

The effect of this move would be beyond amazing. It would be astounding. No more arguments about Net Neutrality, for one thing, because we'd effectively be extending our ownership and control of the wires all the way to the ISP interconnect. Of course you'd still have to buy Internet service, but at NerdTV rates the amount of bandwidth used by a median U.S. broadband customer would be less than $2.00 per month. Though with that GREAT BIG PIPE most of us would be tempted to use a lot more bandwidth, which is exactly the point.

There would be a community-financed Internet revolution and this time, because it would be locally funded and managed, very little money would be stolen. Dark fibers would be lighting up all over America, telco capital costs would plummet, and a truly competitive market for Internet services would emerge. In 2-3 years whatever bandwidth advantage countries like Korea have would be erased and we'd be back on track building even more innovative online industries.

This would be a real marketplace not a fake one. Today's system is a fake because it depends on capturing the value of the application -- communications -- in the transport and that would no longer be possible because with the Internet the value is created OUTSIDE the network.

The Spectrum Should Be Private Property: The Economics, History, and Future of Wireless Technology
by B.K. Marcus
Ludwig von Mises Institute, October 29, 2004

Is the radio spectrum a unique resource that belongs to the public, or can it be privately owned like any other good or service? Most people assume that public ownership is axiomatic—a starting point rather than the historical consequence of special interests pretending to misunderstand economics.

This is wholly incorrect. And given the mass clamor for wireless services, the full-scale privatization of this resource is essential. In this essay, I will review, from a Rothbardian perspective, the history, economics, and potential future of American wireless technology, and explain why we must abandon current policy.

Debate IV - Net Neutrality

Loose | The owners of the wires, fibers, cables, and spectrum (the pubic Internet) should treat all bits the same. It is an end-to-end network with no central services.

Tight | The owners of the wires, fibers, cables, and spectrum (the pubic Internet) should be able to provide (and charge for) differentiated services for different content.

notes

A Senate committee on Wednesday rejected a proposal that would have required broadband providers to give their competitors the same speeds and quality of service as they give to themselves or their partners. The vote was an 11-11 tie.

The Senate Commerce, Science and Transportation Committee's 11-11 vote means the net neutrality amendment will not be added to a wide-ranging broadband bill as it goes to the Senate floor. The amendment, offered by Senators Olympia Snowe, a Maine Republican, and Byron Dorgan, a North Dakota Democrat, would have prevented broadband providers such as AT&T Inc. and Comcast Corp. from charging extra based on the type of content transmitted by Internet-based companies. ...

E-commerce companies pushing for net neutrality rules are "enormous" companies that want to profit from delivering multimedia content over networks broadband providers have built, said Senator Ted Stevens, an Alaska Republican and chairman of the committee.

"These people who argue they ought to be able to drop all this stuff on the Internet maybe ought to build their own network," Stevens said.

Battle lines drawn over Net neutrality
Ranks are joined on either side of traffic prioritization issue

Experts debate merits of tiered Net traffic
Bill McCloskey and Jon Taplin take differing positions on Net neutrality

Net neutrality lobbying intensifies
Tech companies and consumer groups continue their efforts to strengthen Net neutrality provisions in broadband bill

Think tank forum: Net neutrality equals property theft
Progress and Freedom Foundation criticized Net neutrality bills, which would prohibit broadband providers from blocking or slowing services to competing services such as VoIP

Net neutrality debate makes for strange allies
Christian Coalition, rockers Moby and R.E.M. voice support of Net neutrality bill

Verizon offers rebuttal on Net neutrality
Proposed legislation will 'shut the door' to new services, Verizon exec says

Network neutrality is a theory of network design closely related to the end to end principle. Under this principle, a neutral network is a dumb network, merely passing packets, insensitive to the needs of applications generating and consuming those packets. By contrast, an intelligent network distinguishes between the types of data carried on the network and treats each one appropriately according to service requirements and network state.

Stephen Burke, president of Comcast Cable, predicts: "The television industry is going to change more in the next five years than it has in the last 20." Comcast says it's now ready to roll out next-generation services that require abundant bandwidth and two-way communications. These include: video e-mail services; video-on-demand (VOD) programming that goes far beyond movies; an Internet portal-like screen that subscribers can call up on their PC, TV or phone to access voicemail, e-mail and faxes; and extensive offerings of high-definition local TV station broadcasts. "We have a vision for the company to not be a commodity provider," says Comcast CEO Brian Roberts.

The dark lords of the CTIA show were the executives of Verizon Wireless, who strutted about the event in black suits, arrogantly asserting that they would, could, and should control all data markets on their network. You can't sell data services (like ringtones) to a Verizon customer except through Verizon. All programs must be rewritten, to Verizon's specifications, in Qualcomm's Brew, and before they are marketed they must be approved by Verizon Wireless executives.

Consumers don't know this. They generally don't care. There is no reason why they should, since data represents barely 2% of the total cellular market.

But this is going to change. ...

What's coming is an explosion in cellular data, an explosion which Verizon is standing in the way of. They announced what they called "Mobile Web 2.0" recently but it is in fact a proprietary offering. It's like calling AOL the Internet.

This means that customers are being trapped inside a walled garden of Verizon Wireless's making.

CEO Edward Whitacre talks about the AT&T Wireless acquisition and how he's moving to keep abreast of cable competitors. ...

Q: How concerned are you about Internet upstarts like Google, MSN, Vonage, and others?

A: How do you think they're going to get to customers? Through a broadband pipe. Cable companies have them. We have them. Now what they would like to do is use my pipes free, but I ain't going to let them do that because we have spent this capital and we have to have a return on it. So there's going to have to be some mechanism for these people who use these pipes to pay for the portion they're using. Why should they be allowed to use my pipes?

The Internet can't be free in that sense, because we and the cable companies have made an investment and for a Google or Yahoo! (YHOO ) or Vonage or anybody to expect to use these pipes [for] free is nuts!

Why should they be allowed to use "his pipes"? Because they pay their ISP for bandwidth, just like you and I do. And because for decades, the telephone companies have been regulated as neutral carriers or common carriers. Unlike other companies, that invested in new technologies without a guaranteed return, the telephone company was guaranteed a return in exchange for being regulated as a common carrier. Now they want to leverage that investment by no longer acting as a neutral carrier.

Lawmakers in the House of Representatives will try this week to figure out how, if at all, to regulate the growing voice-over-IP services that let users bypass the traditional phone system.

Wednesday's hearing of the House subcommittee on telecommunications and the Internet comes only three weeks after the Senate Commerce Committee wrestled with a similar conundrum: how to avoid smothering VOIP in red tape while preserving safeguards to protect public safety, help law enforcement and subsidize telecom services in rural areas.

Two companion bills in the House and Senate, both named The VOIP Regulatory Freedom Act of 2004, intend to address the issue by protecting VOIP services from overzealous regulation. ...

Despite past suspicion of VOIP services, even the United States Telecom Association, or USTA, now favors mostly unregulated VOIP. Why? Because incumbent phone companies are getting into the VOIP business themselves, and don't want to live under the kind of rules they face in the heavily regulated traditional phone business.

If Congress and other lawmakers decide to treat the Internet like telecommunications by passing net neutrality regulations, disallowing the reform of barriers to entry in cable and allowing for government-run muni WiFi, then Netizens should brace for the worst. The Internet, as we know it, will be over. ...

There are two potential futures for communications technologies in America. If Congress and other lawmakers decide to treat the Internet like telecommunications by passing net neutrality regulations, disallowing the reform of barriers to entry in cable and allowing for government-run muni WiFi, then Netizens should brace for the worst. The Internet, as we know it, will be over. If government gets involved in making decisions that properly belong in the marketplace, the innovation and freedom that have come to be associated with the Net will fade away.

On the other hand, legislators can choose a more prudent course. They can refuse to micromanage the Net with neutrality regulations, pass cable franchise reform to allow freer entry by new competitors in the cable market, and discourage governments from unfairly competing with the private sector using tax dollars. Such actions will place America on a better path that reaffirms freedom and innovation. Entrepreneurs will be turned loose to create new technological wonders.

The Economics of Net Neutrality: Why the Physical Layer of the Internet Should Not Be Regulated
by Christopher S. Yoo
Progress and Freedom Foundation, July 2004

The rigid application of the end-to-end argument embodied in the major network neutrality proposals envisions promoting innovation at the network’s edge to the exclusion of innovation in the network’s core. While effective in promoting deployment of the applications that currently dominate the Internet, such as e-mail and web browsing, this approach is ill suited to the more demanding types of applications that are emerging today. It also runs the risk of introducing a regulation-induced bias in favor of certain types of applications and against others.

Why the Intelligent Network was once a good idea, but isn't anymore. One telephone company nerd's odd perspective on the changing value proposition.

World of Ends
What the Internet Is and How to Stop Mistaking It for Something Else.
by Doc Searls and David Weinberger

The Nutshell

1. The Internet isn't complicated
2. The Internet isn't a thing. It's an agreement.
3. The Internet is stupid.
4. Adding value to the Internet lowers its value.
5. All the Internet's value grows on its edges.
6. Money moves to the suburbs.
7. The end of the world? Nah, the world of ends.
8. The Internet's three virtues:
a. No one owns it
b. Everyone can use it
c. Anyone can improve it
9. If the Internet is so simple, why have so many been so boneheaded about it?
10. Some mistakes we can stop making already

An amendment to require network neutrality -- the idea that all content moving across the Internet would not be prioritized for delivery on the basis of fees -- was defeated Wednesday in a U.S. Senate committee. ...

"Without a clear policy preserving the neutrality of the Internet and without tough sanctions against those who would discriminate, the Internet will be forever changed for the worse," said Senator Ron Wyden (D-Ore.).

According to this article, the Telecom bill may be out of committee, but it won't come to the whole Senate for a vote until September. This interim is a terrific time for us to participate in the national conversation.

This issue is hot at the moment, though concerns about tiered services have been voiced for the past decade. Now that the phone companies have enough dark fiber in the ground for streaming video, they can deliver TV as we used to know it in order to compete with the cable companies, who have plenty of room in their coaxial cables for voice traffic.

Do two monopolies, a duopoly -- telecom and cable -- make for genuine competition?

Do those monopolies own the fiber and cable in such a way that they can do anything they want to with it? Or has the monopoly they've been granted given them an obligation to be neutral carriers? Over the last thirty years, cable has been regulated as an information service and could do whatever it wanted to with their cables. If it wanted to run company A's content but not company B's content, no problem. The cable companies negotiated franchises municipality by municipality. For most of the 20th century, however, the telephone company was a regulated monopoly that was a common carrier or neutral carrier. That meant that they had to provide the same phone service to whoever wanted it. They could charge more for more usage, which they did when Internet companies started using lots of bandwidth. But they could not connect me to company A when I called company B.

In the old world, cable TV was considered totally different from voice calls. However, the new world of the internet makes them all packets of bits. The cable TV industry thus added broadband internet access and VOIP services as and when they wanted to. The telephone companies, however, were still constrained to be neutral carriers. They wanted to offer "TV" over their fiber, so they laid the fiber, but they have left 99% of it dark because, as common carriers, they would have to open the 99% to other companies, some of which may compete with them. So the fiber has stayed dark.

Then in August 2005, the FCC leveled the playing field between the two incumbents. They voted to end regulations requiring incumbent telecommunications carriers to share their DSL broadband connections with competitors.

The FCC, in a 4-0 vote, removed rules that allowed competitors such as Earthlink to offer DSL over lines owned by the four giant incumbent telecom carriers, often called the Baby Bells. ... Some consumer advocates and telecom observers predicted that the FCC's decision could kill off DSL service from small ISPs when the DSL network-sharing rules end in a year.

The FCC's decision Friday puts DSL regulation on an equal footing with cable modem service after the U.S. Supreme Court in June rejected a challenge to an earlier FCC decision allowing cable companies to close off their networks to competitors.

So now that the historic agreement to exchange common carrier status for protected monopoly status is over, the telephone companies want to leverage the advantage they gained during those decades by tiering Internet service. Now they can make all that dark fiber pay off.

Tiered Internet service means that some bits get fast-lane priority -- let's say for ABC's or CBS's prime time shows or for Verizon's "partners". And other bits -- let's say for your video or a start-up that may compete with one of Verizon's "partners" -- get the slow lane. While there's no denying that Verizon has the responsibility to its stockholders to try to pull that off, there's also an argument that they got to their position of power by accepting the terms of a regulated monopoly. And now that they're unregulated, they want to leverage that power to raise the barriers to entry for competition that will threaten them or their partners.

How would you get to be a partner of Verizon? I suspect you'll need lots of money just to be able to sit at the table to talk about it.

The thousands of startup visionaries living in the Northwest might want to find their passports, because creating new business models in the U.S. will become much more complicated, and expensive. In the rest of the developed world, it won't be a problem, because every developed country has a strong network-neutrality law in place, extending not just to the Internet, but also to mobile networks, cable TV and television. Stevens' bill puts the U.S. out of step with the rest of world, a world that is fast passing us in productivity, the knowledge economy and broadband connectivity. ...

Every other major developed country has strong network-neutrality laws in place, far stronger than anything the Congress is considering in any of the many amendments to Stevens' bill.

Because these countries have strong laws, keeping the networks open to competition and free for any budding startup to use, they have far surpassed the U.S. on the information highway. They have faster networks, lower fees and more-advanced services like IPTV, distance learning, and remote medical and security monitoring. Their networks are more reliable and secure, because reliability, security and speed are built in.

High-speed Internet access is rapidly evolving from a Web-surfing luxury into an everyday necessity. But the development of broadband technology remains stunted by market uncertainty and mind-numbing bureaucracy. This special series identifies the crucial elements of any policy agenda aimed at building a national broadband network.

The giant phone and cable companies are trying to take control of the Internet away from the public and convert it into their own private, corporate network.

The SavetheInternet.com Coalition is a real grassroots alliance of organizations, citizens, businesses and bloggers that have banded together to protect Internet freedom.

The Coalition believes that the Internet is a crucial engine for economic growth and free speech. We are working together to urge Congress to preserve Network Neutrality, the First Amendment for the Internet that ensures that the Internet remains open to innovation and progress.

From its beginnings, the Internet has leveled the playing field for all comers. Everyday people can have their voices heard by thousands, even millions of people. The SavetheInternet.com Coalition -- representing millions of Americans from all walks of life -- is working together to ensure that Congress passes no telecommunications legislation without meaningful and enforceable Network Neutrality protections.

Christian Coalition of America announced its support for the effort to amend pending telecom legislation in Congress in order to prevent the large phone and cable companies from discriminating against web sites.

Roberta Combs, the President of Christian Coalition of America said, "Christian Coalition is joining a broad array of organizations, representing consumers, businesses, and all ends of the political spectrum. The Coalition is committed to working on behalf of our supporters to ensure that the Internet remains the free marketplace of ideas, products and services that it is today."

The logic of the tiered-access approach is simple: broadband companies do the work of providing Internet access, so they should be able to charge what they can for it. Telecom executives say that the revenue from tiered access would let them invest more in adding bandwidth and improving download speeds, and argue that Web sites are parasites taking, as A.T. & T.’s chairman, Edward E. Whitacre, Jr., put it, a “free ride” on the pipes the broadband companies own. But these companies have pipes into people’s homes in the first place only because of a long history of government regulation, and people want to use those pipes only because of all the value the so-called parasites have created. And it’s that value which tiered access—even if it does improve the Internet’s infrastructure—will put in harm’s way. The Internet has become a remarkable fount of economic and social innovation largely because it’s been an archetypal level playing field, on which even sites with little or no money behind them—blogs, say, or Wikipedia—can become influential. If the Internet turns into a zone of tiered access, it will be harder for noncommercial sites or startup companies to compete with bigger firms.

The effect of this move would be beyond amazing. It would be astounding. No more arguments about Net Neutrality, for one thing, because we'd effectively be extending our ownership and control of the wires all the way to the ISP interconnect. Of course you'd still have to buy Internet service, but at NerdTV rates the amount of bandwidth used by a median U.S. broadband customer would be less than $2.00 per month. Though with that GREAT BIG PIPE most of us would be tempted to use a lot more bandwidth, which is exactly the point.

There would be a community-financed Internet revolution and this time, because it would be locally funded and managed, very little money would be stolen. Dark fibers would be lighting up all over America, telco capital costs would plummet, and a truly competitive market for Internet services would emerge. In 2-3 years whatever bandwidth advantage countries like Korea have would be erased and we'd be back on track building even more innovative online industries.

This would be a real marketplace not a fake one. Today's system is a fake because it depends on capturing the value of the application -- communications -- in the transport and that would no longer be possible because with the Internet the value is created OUTSIDE the network.

On the outskirts of every agony sits some observant fellow who points.
- Virginia Woolf

Public Policy Debates

MBA 624 - Strategic Management of Technology and Innovation - Summer 2006

Do we have a new economy forming?

Public Policy

Rule of (which) law?

Golden Straitjacket

Golden Rules

Three Democratizations

Electronic Herd

note on August 7, after hearing the debates but not the rebuttals

conservative / liberal

corporations / humans

control / anarchy

Debate Topics

Debate I - Technology

notes

Debate II - Intellectual Property

notes

Debate III - Spectrum

notes

Debate IV - Net Neutrality

notes