"The Internet - The UN and Regulation"

Sydney M. Williams

Thought of the Day

“The Internet – The UN and Regulation”

February 24, 2012

In 1988, Ronald Reagan was in the White House; the economy was humming; stocks were in their sixth year of what would prove to be an eighteen year bull market; inflation had been halted; the bond market was six years into what would prove to be a thirty-year bull market; the Soviet Union was teetering; Eastern Europe was, like Lazarus, about to rise from the dead, and 114 countries had gathered in Geneva for the UN–sponsored International Telecommunication Union (ITU) to work out an agreement to deregulate the international telecommunications industry, a move that proved to be instrumental in allowing the internet to develop and flourish.

Now, twenty-four years later, Barack Obama is President; the economy is struggling; equities are lower than they were twelve years ago; there are incipient signs of inflation; the bond market is being artificially supported by an accommodative Federal Reserve; China and Russia are flexing their muscles; the expansion of democracies is stagnating, and next week a diplomatic process will begin to consider establishing international regulatory control over the internet by the UN-sponsored ITU through a re-writing of the 1988 Treaty.

The 1980s were a time of de-regulation. The 2010s have seen regulation tighten, especially in the U.S. healthcare and financial industries. Sitting at the center now is the fate of the internet.

A “must read” piece on this subject was an op-ed by Robert McDowell that appeared in the February 21st edition of the Wall Street Journal. Mr. McDowell is a commissioner of the FCC. His thesis, as he writes, is that a “top-down, centralized international overlay is antithetical to the architecture of the NET, which is a network of networks without international borders.”

The fact that Russia and China are the principal proponents of establishing international control should raise our suspicions. The decision as to whether regulatory controls should be imposed will be based on a majority vote of the 193 UN members, meaning that 97 countries are needed to win. Mr. McDowell estimates that the proponents, who he argues are for more energized than the dissenters, already have 90 countries lined up. Where does the United States stand in this debate? We don’t know, because, as Mr. McDowell notes, the U.S. has yet to name a leader for the treaty negotiations that begin on Monday. A final verdict is expected in December.

There is no question that the pervasiveness of the internet poses a potential threat to individual privacy. Most of our privileged information – Social Security numbers, bank account and credit card information, birth certificates, photographs, inane comments we may have made on e-mail, Facebook, YouTube, or Twitter – exists somewhere in the netherworld that is the internet. Security safeguards are critical, not only to us, but to legitimate businesses that operate on the Web; for a violation of security threatens their business. In that regard, it is self-regulating. (However, the White House is proposing a “bill of rights” for consumers, something about which I would be skeptical, as the information would still exist on line, but now would be in government’s dubious and slippery hands.) Does not our information already exist in paper files? Yes. Are there frauds operating on the internet? Of course. If government or an international entity were to control that information and use it to monitor our activities, would you feel any safer? I didn’t think so.

Since 1995, the number of people around the globe using the internet has risen from 16 million to 2.267 billion, a compounded annual growth rate of 34%; so that today more that a quarter of the world’s population spends some time on-line. The internet has changed the way we communicate, the way we bank and how we buy and sell goods. It has allowed people all over the world to get college degrees from thousands of accredited universities. It has changed the way we conduct research and it provides access to virtually any publication, at any time, anywhere in the world. It has permitted those living in virtually enslaved conditions under tyrannical leaders to let the world know what is happening. The internet has been a job creator, not a job killer. Mr. McDowell quotes a McKinsey study that found that for every job lost because of the internet, 2.6 new jobs were created.

Are there downsides? Of course. On-line games can be addictive. Child pornography is too easily accessible. People can hide behind false profiles on social networks. Hackers threaten our privacy and “phishers” prey on the vulnerable. Work that might be done domestically can be sent overseas. But every new technology involves risk. Life involves risk.

As with all technological advances, as Joseph Schumpeter so correctly pointed out seventy years ago, creative destruction is a natural process. The bottom line is that the internet has raised living standards around the world; it has lifted millions from poverty; it has given the aspirational in the developing world opportunities heretofore unknown, and it has provided the potential for liberty for millions. It has made us smarter. It has allowed voices to be heard that otherwise would have been silent. And, it has done so largely because it is unregulated. The internet requires a sense of responsibility, and it does not appeal to those who prefer dependency, or to those political leaders who prefer their subjects to be reliant rather than self-reliant. It thrives on freedom. It is a threat to tyranny. It is unsurprising that Russia and China are advocating for regulatory control. It is, however, surprising that the United States seems so cavalier about these negotiations, with the possibility that an internationally internet will be the outcome.

Next week when the talks begin in Geneva, it will behoove us to follow developments closely. Success by the proponents for international regulatory control would mean a threat to freedom, a boon to tyranny, and a step backward for the fortunes and futures of millions of people.