WHY GOVERNMENTS WANT TO REIN THE INTERNET?

What do Rapidhare, Facebook, Wikipedia, Blogger, Google, Reddit, Napster, Twitter, YouTube, Flickr, Craigslist and Ebay have in common, apart from being successful internet based ventures? An average netizen will not face much difficulty in figuring out that the common strain running through these companies is their identical business model. These companies provide an online platform to their users (at no cost) thus facilitating sharing of user content or aiding user transactions or assisting social and career networking amongst users. The revenue models of these companies get irrigation from advertisement revenues flowing from the coffers of marketers who come flocking in seduced by the hope of catching a few unsuspecting eyeballs for their offerings. The services to end users are provided virtually free of cost to build clientele or in web-talk - user base. Its legitimate business, these companies abide by all rules governing them or at least hire the best legal counsels to ensure their excursions into grey areas are well defended and well justified.

So why are governments, which have hitherto taken pride in being considered proponents of free trade and free will, suddenly trying to pull an 'iron curtain' stunt against these companies? There may be a number of motives behind the targeting such companies by governments, but here we will only look at those motives of which have discernible economic undertones.

Let's take a look at the following three market hypothesis (which constitute the core of arguments forwarded by most Governments) and see whether they actually lead to a case against these companies.

1.Markets, even free ones, must be subject to laws of the land.

2.Markets must protect, by design, the right to intellectual property of innovators.

3.Markets must prevent monopolistic practices and ensure fair degree of competition.

Lets take the first hypothesis, 'Markets , even free ones, must be subject to law of the land'. A market in its broadest sense is a set of rules providing the framework for buyers and sellers to interact with each other for economic gain. Without rules markets cannot exist. A market without rules (and agents to enforce them) is a jungle where only the mighty prevail. Moreover, markets are merely a subset of a larger ecosystem called society and therefore they suffer from the same deficiencies which plague societal systems and hence need similar approaches to ensure their efficient functioning. People who think markets can  be left totally free of legislative and judicial control do so out of their sheer ignorance or on account of biased assumptions. This dosnt mean markets cannot be free, its just that there are limits to market freedom which the society can absorb without endangering its delicate fabric.

New age IT companies have created online market ecosystems which given their 'World Wide' nature create obstacles in their regulation. Matters like enforcement of contract, breach of trust, theft, profanity, character assasination, fraud, indecency, piracy which are so easy to control in the physical world, are extremely difficult to address in the virtual space. Although most service providers do not themselves indulge in such offences, they benefit when users throng in large numbers to their platforms to get a taste of the freedom which these platforms provide. Lets move to our next hypothesis.

'Markets must protect, by design, the right to intellectual property of innovators'. - An interesting thing about intellectual property is that while the innovator incurs huge costs in terms of time, resources and effort expended, the costs of copying it and disseminating the same to millions of online users is, relatively speaking, NIL. Should societies protect the right of innovators over their intellectual property? The answer to this is a Yes and a No. Yes when the time, resources and effort towards the innovation is expended/incurred by the innovator himself/itself. No when either one, part or all of time, resources and effort towards the innovation in question is expended/incurred/subsidised by a public entity out of the time, resources or effort meant for promoting public interest. All said innovators need incentive in the form of promises from world governments for protection of their right over their intellectual property. In the absence of this incentive there is a high probability of innovators abandoning their persuit for innovative products and services.

There are a large number of  instances where society and innovators have both benefited immensly from piracy. However, such occurrance have been considered exceptions and therefore kept outside the scope of this discussion. Also, it is worth noting that atleast 90% of items for which intellectual property rights are awarded by governments are of highly dubious nature i.e. they can hardly be termed as 'innovation' by any yardstick. But again here we are concerning ourselves with the remaining 10% who really bring path breaking innovation and are severly affected if their IP is stolen by pirates. Its their motivation and wellbeing which should concern us.

Coming to our last hypothesis, 'Markets must prevent monopolistic practices and ensure a fair degree of competition'. Forget capitalistic vices resulting from monopolistic forces which threaten to destroy market mechanism, monopolies create huge systemic risks which can at times do irrepairable damage to the economy. OK agreed, systemic risks from IT monopolies are not as high as those arising in the case Banking or Financial services industry but the IT driven 'SECURITY' and 'PRIVACY' risks are systemic risks too. If News Corp could do it, what prevents google from following its footsteps?. Every day private intimate moments of thousands of unsuspecting people end up on the website of a 'content aggregator' and attracts millions of 'eyeballs', not to mention the ripple effect on society of the ever growing number of .xxx sites. A single search using 'XXX' is enough to provide enough content and information to a user to qualify for a phd in indecent sciences. What if the user happens to be your 10 year old son or daughter? If this isnt a systemic risk, I dont know what is.

Is there such thing as excessive freedom, frankly speaking I dont know. But what I do know is more often than not freedom tends to get misused. Its the responsibility of governments and citizens alike to prevent such misuse from happening. And if some governments are taking appropriate steps to rein the menace, they are doing the right thing.

YF - Think