Larry Lessig’s latest article in Newsweek is very disappointing, a pre-dot-bomb retread that backs down from all his recent progressive thinking. It’s so dated, one wonders if it was written in the last ten years, or if someone just found this article now and decided to print it. Regardless, here is my review:

“When was this written? 1995? 1998? Are you sure this was written by Larry Lessig, not George Gilder? If this is what it purports to be, then it helps explain why Larry is a very good teacher, but he should never be let closer to a telecom network than the handset.

First of all, Verizon did not ‘build it after all…’ and neither did AT&T or Qwest, or anyone else. You built it, and so did I. All these networks were built out of regulated rate-of-return funds sourced from the local telephone networks, or from USF funds, or other similar sources. Sometimes they were a direct donation from the federal or state government. Bruce Kushnik’s and Om Malik’s books offer a good recitation of the recent history here, but a good deal of the infrastructure was built decades ago and is still in use. In fact, state and federal regulator can’t get the incumbents to give up use of these old, customer paid-for networks and infrastructure because it is so lucrative for the incumbents. The latest scheme: state and federal video franchising legislation lets incumbents, in many cases, build new high-speed fiber networks (think U-Verse, FIOS, etc.) and charge off the costs to the local telephone rate-of-return regulated monopoly.

Next, Larry incorrectly addresses the poor quality of regulation and the culture of corruption as the structure of regulation itself. This is Larry’s continuing intellectual sin. I thought he had left it behind in the last few years, but apparently it came back like a nasty rash, this time harder to cure. Strong scrubbing with disinfectant might help.

The structural problem with regulation in the United States is the people doing it! Other countries that have imitated our institutions, but peopled them with smart and honest regulators, have not sustained the same problems with agency capture, political gamesmanship, and know-nothing decisions. For example, does anyone ask why the members or chair of the SEC, FCC, FTC, or other agencies are chosen on a partisan political basis? WTF? I’m shocked, shocked, that politics is going on here! (“Capitan Reynaud, are you Democrat or Republican?”) And this same structural disease is repeated throughout our state and local institutions. Obama received 365 electoral votes: that does mean we get four FCC seats and they get one? When there are only 25 Republicans in the Senate, are we still going to require that they receive an equal share of appointments in the government?

The most disappointing part of Larry’s article, and the least supportable legally or economically, is pulling out the old tar baby of government regulation and giving it a few boots in the name of innovation. As Larry and many others have noted, the Internet, computers, transistors, most drugs, interstate highways, airports, and just about every other major innovation or modern infrastructure project is the child of regulation. Regulation, strong regulation from humorless experts, is what gave the world the GSM system, digital radio DRM/DB (except in the US: did you know your radio won’t work outside the US in a couple of years?), 100 MB Internet for $20/month, fuel efficient cars, safe airplanes, retro-viral drugs to help fight AIDs, Medicare and Medicaid, and so on.

Larry’s opinions carry a lot of weight. But, he has done incalculable damage with this piece in Newsweek. It will be hauled out again and again by the bitlords and modern Gilded Age Robber Barons to justify their rapacity and greed.

Finally, let me say that I whole-heartedly endorse the idea of getting rid of the FCC. However, the new agency would be much larger, better funded, with a much broader reach and depth. It would combine the FCC and the NTIA, and would also subsume our participation in the ITU and UN (currently spread around Commerce, State, and the Pentagon). It would include the parts of the USPTO regulating recording devices and digital media. It would include a large research arm ala the NIH to sponsor research and conduct research directly. It would have its own administrative law courts to regulate competition and intellectual property law within its ambit. In other words, it would be Ofcom. It would be a cabinet level office, and the agency would be professionalized ala Justice and Defense. Martin and Powell politicized the FCC, but that is not structural, its personal. The new agency would have a large enforcement arm with offices in the major states, aimed primarily at consumer protection (not incumbent protection), and it would issue far reaching regulations of national effect on all aspects of this sector. ”

Michael Weisman, JD, LLM

> Reboot the FCC
> We’ll stifle the Skypes and YouTubes of the future if we don’t
> demolish the regulators that oversee our digital pipelines.
> By Lawrence Lessig | Newsweek Web Exclusive
> Dec 23, 2008
> Economic growth requires innovation. Trouble is, Washington is
> practically designed to resist it. Built into the DNA of the most
> important agencies created to protect innovation, is an almost
> irresistible urge to protect the most powerful instead.
> The FCC is a perfect example. Born in the 1930s, at a time when the
> utmost importance was put on stability, the agency has become the
> focal point for almost every important innovation in technology. It is
> the presumptive protector of the Internet, and the continued regulator
> of radio, TV and satellite communications. In the next decades, it
> could well become the default regulator for every new communications
> technology, including, and especially, fantastic new ways to use
> wireless technologies, which today carry television, radio, internet,
> and cellular phone signals through the air, and which may soon provide
> high-speed internet access on-the-go, something that Google cofounder
> Larry Page calls “wifi on steroids.”
> If history is our guide, these new technologies are at risk, and with
> them, everything they make possible. With so much in its reach, the
> FCC has become the target of enormous campaigns for influence. Its
> commissioners are meant to be “expert” and “independent,” but they’ve
> never really been expert, and are now openly embracing the political
> role they play. Commissioners issue press releases touting their own
> personal policies. And lobbyists spend years getting close to members
> of this junior varsity Congress. Think about the storm around former
> FCC Chairman Michael Powell’s decision to relax media ownership rules,
> giving a green light to the concentration of newspapers and television
> stations into fewer and fewer hands. This is policy by committee,
> influenced by money and power, and with no one, not even the
> President, responsible for its failures.
> The solution here is not tinkering. You can’t fix DNA. You have to
> bury it. President Obama should get Congress to shut down the FCC and
> similar vestigial regulators, which put stability and special
> interests above the public good. In their place, Congress should
> create something we could call the Innovation Environment Protection
> Agency (iEPA), charged with a simple founding mission: “minimal
> intervention to maximize innovation.” The iEPA’s core purpose would be
> to protect innovation from its two historical enemies˜excessive
> government favors, and excessive private monopoly power.
> Since the birth of the Republic, the U.S. government has been in the
> business of handing out “exclusive rights” (a.k.a., monopolies) in
> order to “promote progress” or enable new markets of communication.
> Patents and copyrights accomplish the first goal; giving away slices
> of the airwaves serves the second. No one doubts that these monopolies
> are sometimes necessary to stimulate innovation. Hollywood could not
> survive without a copyright system; privately funded drug development
> won’t happen without patents. But if history has taught us anything,
> it is that special interests˜the Disneys and Pfizers of the world˜have
> become very good at clambering for more and more monopoly rights.
> Copyrights last almost a century now, and patents regulate “anything
> under the sun that is made by man,” as the Supreme Court has put it.
> This is the story of endless bloat, with each round of new monopolies
> met with a gluttonous demand for more.
> The problem is that the government has never given a thought to when
> these monopolies help, and when they’re merely handouts to companies
> with high-powered lobbyists. The iEPA’s first task would thus be to
> reverse the unrestrained growth of these monopolies. For example, much
> of the wireless spectrum has been auctioned off to telecom monopolies,
> on the assumption that only by granting a monopoly could companies be
> encouraged to undertake the expensive task of building a network of
> cell towers or broadcasting stations. The iEPA would test this
> assumption, and essentially ask the question: do these monopolies do
> more harm than good? With a strong agency head, and a staff absolutely
> barred from industry ties, the iEPA could avoid the culture of
> favoritism that’s come to define the FCC. And if it became credible in
> its monopoly-checking role, the agency could eventually apply this
> expertise to the area of patents and copyrights, guiding Congress’s
> policymaking in these special-interest hornet nests.
> The iEPA’s second task should be to assure that the nation’s basic
> communications infrastructure spectrum˜ the wires, cables and cellular
> towers that serve as the highways of the information economy˜remain
> open to new innovation, no matter who owns them. For example, “network
> neutrality” rules, when done right, aim simply to keep companies like
> Comcast and Verizon from skewing the rules in favor of or against
> certain types of content and services that run over their networks.
> The investors behind the next Skype or Amazon need to be sure that
> their hard work won’t be thwarted by an arbitrary decision on the part
> of one of the gatekeepers of the Net. Such regulation need not, in my
> view, go as far as some Democrats have demanded. It need not put
> extreme limits on what the Verizons of the world can do with their
> network˜they did, after all, build it in the first place˜but no doubt
> a minimal set of rules is necessary to make sure that the Net
> continues to be a crucial platform for economic growth.
> Beyond these two tasks, what’s most needed from the iEPA is benign
> neglect. Certainly, it should keep competition information flowing
> smoothly and limit destructive regulation at the state level, and it
> might encourage the government to spend more on public communications
> infrastructure, for example in the rural areas which private companies
> often ignore. But beyond these limited tasks, whole phone-books worth
> of regulation could simply be erased. And with it, we would remove
> many of the levers that lobbyists use to win favors to protect today’s
> monopolists.
> America’s economic future depends upon restarting an engine of
> innovation and technological growth. A first step is to remove the
> government from the mix as much as possible. This is the biggest
> problem with communication innovation around the world, as too many
> nations who should know better continue to preference legacy
> communication monopolies. It is a growing problem in our own country
> as well, as corporate America has come to believe that investments in
> influencing Washington pay more than investments in building a better
> mousetrap. That will only change when regulation is crafted as
> narrowly as possible. Only then can regulators serve the public good,
> instead of private protection. We need to kill a philosophy of
> regulation born with the 20th century, if we’re to make possible a
> world of innovation in the 21st.
> Lessig is a professor at Stanford Law School and the author of five
> books, including most recently “Remix: Making Art and Commerce Thrive
> in the Hybrid Economy.”