Farewell to Net95?

On November 30 of last year iCraveTV began providing free Internet access to 17 Toronto television stations. Although there is some need for clarification of Canadian law, it appears that this kind of redistribution may be legal in Canada if one considers web rebroadcasting as something analogous to cable. But it is not legal in the U.S. to redistribute programming without permission from the programs' owners. It is that difference between Canadian and U.S. law that makes the iCraveTV story important and somewhat disturbing.

The Motion Picture Association of America sued iCraveTV and shut the rebroadcasting operation down. At the heart of the suit was a demonstration by the MPAA that, despite the fact that iCraveTV had put in place a simple system for restricting the service to use by Canadians, it was possible to circumvent the restrictions and access the programming from inside the US.

This case raises important issues that grow from the fact that the Internet, by design, is a worldwide network. As Lawrence Lessig pointed out in an article in the now defunct web magazine, The Industry Standard, the web's tendency to route information around barriers is one of its celebrated features: "While China could silence dissidents in real space, it could not block protests of that silencing in cyberspace." One might argue that the web is necessarily a global community, and that when the laws of different geographic communities conflict with each other, it is simply not possible to effect a wholesale imposition of one community's laws onto all of cyberspace. In short, one might argue that US laws cannot interfere with the right of Canadians to watch programs that they are legally entitled to see on the web, which is precisely what shutting down the iCraveTV site did. Such an argument might also note that, by establishing such a precedent, the US opens itself up to restrictions that might be imposed by, say, China.

Unfortunately, perhaps, the company's response to the suit was not make such arguments. The problem, from iCraveTV's standpoint, was not that the MPAA was trying to impose U.S. laws on Canadians and everyone else in cyberspace, but that the system for restricting access to Canadians was imperfect. So they set about creating a perfect tool for dividing up cyberspace along national boundaries. According to a March 13 article in the New York Times, iCraveTV is now filing a patent for its "enhanced geographical screening technology."

It is not clear yet how well iCraveTV's new screening technology might work or how hard it would be to circumvent it. But it doesn't matter. The reason that it doesn't matter is that the Digital Millennium Copyright Act (DMCA), passed by Congress in 1998, makes it illegal to even try: "No person shall circumvent a technological measure that effectively controls access to a work protected under this title" [DMCA, New Section 1201a]. It is clear that the MPAA and other organizations that lobbied for passage of the DMCA intend to use it. In the same March 13 article reporting on iCraveTV, the New York Times reports that a DVD industry group called for the arrest of a 16-year-old Norwegian boy who deconstructed and published the protection code for a DVD disk. He had purchased the disk and had a right to view the movie that it contained, but he uses Linux on his computer. He found that there was no DVD decoding software for Linux. So he wrote some and shared it with other Linux users who might want to watch movies that they owned. Even though he was only enabling access to a movie that he had a license to use, he is a criminal according to the DMCA. The case would seem to suggest that strong copyright protection is reaching too far. It also demonstrates how the backing of law makes regulation through computer code, such as iCraveTV's plan to divide the Internet into geographic zones, more absolute and complete.

Interconnected Pieces of the Lockup

Developments like this one have the ability to change the nature of the Internet in radical ways. The ability to cordon off regions of the web according to geographical boundaries ensures that access to goods or information is restricted just to people in Canada, the U.S., or perhaps just Illinois or Utah. And the DMCA stands ready to then criminalize efforts to circumvent such carving up and building of walls.

Apart from the particulars of this case, as serious as they are, it is important to see the general pattern that is at work here. The mechanism for making such a change to the Internet depends on a combination of code, business interest, and action by the government. It is a process that can change the Internet in fundamental ways. Lawrence Lessig's Code sets out the key steps of the process:

Industry groups interested in promoting the use of the Internet for e-Commerce focus on making the web "safe" for commerce. In this case the MPAA is making sure that studios can get paid when people watch movies. But the desire to impose order and control on the Internet in order to protect property is general. It typically involves concerns such as authenticating the identities of users, making debts collectible, reducing costs by routinizing and automating processes, and making transactions secure.
Technological developments implement the desired control by placing new application layers between the web user and the basic web infrastructure. Through the use of encryption and new authentication technologies, the control effected through code can in many cases reach beyond what was possible when books were distributed in paper and when music was just available in analog form. You could always (and legally) share a book by passing it around to friends. That is not necessarily the case with digital content.
The government, in response to arguments, incentives, and pressure from groups interested in promoting e-Commerce, passes laws that back up the effects of the technological constraints with the force of law.
The Internet, over time, is transformed from "a world of relative freedom to a world of relatively perfect control." [Lessig, Code, p. 23].

The issue is not whether or not it is a good thing to have some level of control supporting e-Commerce, just as we have legal support that enforces contracts. Business requires a large degree or predictability so that people making investments have reason to believe that those investments might pay off. The issue is, instead, one of finding the appropriate level of control. Before one can address that issue, however, it is necessary to come to terms with the fact that the Internet is changing and that the changes are potentially radical.

The "Nature" of the Web

One of the most dearly held beliefs about the Internet is that it is a new, more urgent version of the American West. It is a new landscape where the rules have been rewritten and that is, finally, beyond regulation by mere governments. Quoting James Boyle, Lessig describes this as "the 'libertarian gotcha': no government could survive without the Internet's riches, yet no government could control what went on there. […] It was the withering of the state that Marx had promised, jolted out of existence by trillions of gigabytes flashing across the ether of cyberspace. Cyberspace, the story went, could only be free. Freedom was its nature."

The freedom that the web provides, according to this "freedom in its nature" view, grows from the way that the web was built. Chris Locke captures this notion in the closing chapter of the Cluetrain Manifesto, a recent best selling book that announces the nailing of 95 theses about the new world of the Internet to the church door of established business,

There never was any grand plan on the Internet, and there isn't one today. The Net is just the Net. But it has provided an extraordinarily efficient means of communication to people so long ignored, so long invisible, that they're only now figuring out what to do with it. Funny thing: lawless, planless, management-free, they're figuring out what to do with the Internet much faster than government agencies, academic institutions, media conglomerates, and Fortune class corporations. [Cluetrain Manifesto, p. 175]

Lessig refers to this mythic dimension of the web, the idea that the web is lawless, planless, and set in opposition to established ways of governing and doing business, as "Net95." It is the Internet as it was when it first emerged into worldwide prominence, when, to quote the famous Peter Steiner cartoon from 1993, "On the Internet, nobody knows you're a dog." And the Internet really was like that in 1995. At the time, most Internet applications were very thin layers on top of the underlying protocols of the Internet. It was, in fact, difficult to validate identity, trace transactions, operate securely, and assert the other kinds of control required to do serious business.

Lessig argues that deciding that the Net has a fundamental, changeless "nature," when in fact the web is something wholly constructed from and driven by software code, is a serious mistake. The new layers of Internet architecture that are now being assembled to make the web a more reliable, hospitable place to do business can create a new Internet that is a very different place than Net95. These new architectural levels describe business objects and automate business transactions, protect content, authenticate user identity, enable secure transactions, and, yes, perhaps will divide the Net up geographically. As the new layers become actual or de facto standards, it will turn out that enjoying the benefits of the Internet will mean working within the constraints inherent in these new architectures. There is no reason at all to assume that the Internet of 2003 will necessarily provide Internet users with the freedom and invisibility of Net95. It will be different. The important question concerns the nature of the differences.

Rules

Lessig's background is in the area of constitutional law. In the early 90's he spent a lot of time in Central and Eastern Europe studying formerly Communist countries as they struggled to create constitutional democracies. The questions he found himself asking then revolved around the kind of constitutional framework -- the rules -- required to support sustainable liberty. This is the perspective that Lessig brings to the Internet. It is a new place with rules that are just now forming. The questions that he asks include:

what interest groups are determining the rules of this new place?
what kinds of rules seem to be emerging?
are these the kinds of rules that we would like to have?

A key thesis in Code -- in fact, the one that explains the title -- is that the shape of cyberspace, or anyplace else, is not implemented solely through laws. The structure of a society is also determined by economic factors and by architecture. As an example of the power of architectural constraints to supplant legal constraints, Lessig turns to an example from the history of racial segregation. It once was legal to place restrictive covenants in a deed that made it impossible to sell a certain piece of property to people of a particular race. When use of such covenants was struck down in 1948, communities turned to architectural barriers, erecting highways and railroad tracks as barriers to keep races separate. [Code, p. 97] Architectural constraints replaced legal constraints.

In cyberspace, the architecture is implemented in software code. It is infinitely more changeable than any physical space, and the constraints that code can create are infinitely more perfect than highways and railroad tracks.

Business and Government

From the standpoint of a person or a company whose business is "content," one of the problems presented by the world of Net95 was that of getting paid for content. Back then, putting something into electronic form and making it available on the web was the same as giving it away. I was working at an industry analyst at the time, which means that I made my living by selling research at high per copy prices to small numbers of companies. The company that I worked for would often publish its most important work only on paper, because that was the only way that we could reasonably hope to get paid for it. Copyright law seemed ineffective in the face of the web. It seemed that, on the Internet, information was always free.

This situation was bad for business, and so technologists set about creating a solution. This last fall I saw a demonstration of new encryption and locking technologies from Adobe Corporation, built around PDF, that enable a publisher to deliver content so that the ability to unlock that information is tied to a particular physical device, for instance, to the serial number on your hard disk. Other companies offer solutions that achieve the same result. Such technology -- code -- makes it possible to charge for digital content without fear that most of it will be distributed for free. But it can do even more than was possible with paper publishing. A publisher can, for example, impose restrictions in code that ensure that the article cannot be printed, protecting it from photocopying and from being passed around to colleagues. With the addition of appropriate biometric devices, restriction to use on one machine could be narrowed to restriction to use by one person. Further, viewing the publication as "software" rather than a book or article, a publisher could also restrict use through a contract. Such restrictions could go well beyond copyright law, requiring for example that the material is never cited or reused in any way without the publisher's written permission. Courts have held that such contractual constraints, even if just part of a shrink wrap or "click wrap" agreement, supersede rights that would normally be available under copyright law. In short, since copyright was not working in the world of Net95, it is being replaced by rules embedded in code. Code can supersede copyright completely and can go well beyond it in terms of locking up content.

This same desire to get paid for content is what was behind the MPAA's suit of iCraveTV. The desire to build a business on the Internet is also what informed iCraveTV's response to the suit. From iCraveTV's standpoint, this is all about building the company, not about general principles of freedom and the nature of the web, so it set about the task of creating the technological fix -- the architecture implemented through code -- to once again make the web a more orderly, regulable place that is better at controlling access to property, and therefore better for e-Business.

Government is not playing a leading role in these changes to the nature of the web. The needs of e-Businesses trying to make a buck on the web appear to be the primary force behind making the web more regulable. Given the billions of dollars invested in e-Business, this is a substantial force for change, indeed. It is also a force that has government's attention and support, since it appears that what is good for e-Business is good for America. When e-Business said it needed the DMCA to criminalize reverse engineering of copyright protection schemes, the government was happy to comply.

Loss

Lessig's Code is both analytical and passionate. It is analysis that is propelled by a strong sense that something is being lost. And it is not just Net95 that is disappearing. The rush by businesses to become settlers on the frontier of the Internet, taming its wildness and making it safe for the Internet equivalent of farming and ranching, potentially rolls back freedoms and privileges that we enjoyed even before the days of Net95.

Take copyright, for example. Intellectual property is a slippery, difficult concept. When you give me your idea, you still have it. This makes for a strange kind of "property," but it is also what makes ideas such a powerful force for growth and change. The use of an idea expands without exhausting the idea. Thomas Jefferson expressed it this way:

If nature has made any one thing less susceptible than all others of exclusive property, it is the action of the thinking power called an idea, which an individual may exclusively possess as long as he keeps it to himself; but the moment it is divulged, it forces itself into the possession of every one, and the receiver cannot dispossess himself of it [...] That ideas should freely spread from one to another over the globe, for the moral and mutual instruction of man, and improvement of his condition, seems to have been peculiarly and benevolently designed by nature, when she made them, like fire, expansible over all space, without lessening their density at any point, and like the air in which we breathe, move, and have our physical being, incapable of confinement or exclusive appropriation. Inventions then cannot, in nature, be a subject of property. [from Code, p. 132]

On the other hand, it is generally understood that if writers don't get paid for they write and if inventors don't get paid for inventing, there will be less writing and inventing. Consequently, there needs to be some mechanism to ensure that authors, inventors, and others creating intellectual property have an incentive to produce it in the first place. The U.S. constitution addresses this by authorizing Congress "to promote the Progress of Science and useful Arts, by securing for a limited time to Authors and Inventors the exclusive Right to their respective Writings and Discoveries."

Regulation of intellectual property is therefore a balancing act. On the one hand, society benefits when ideas are spread and shared. On the other hand, there needs to be some constraint on the sharing so that people have sufficient incentive to produce new ideas and new intellectual value. The part of copyright law known as "fair use" reflects this balancing of interests. Despite the fact that the article that you are reading is copyrighted, fair use guarantees that you can except it and use parts of it as you wish, whether I want you to or not.

Lessig argues that all of this changes when the intellectual property is delivered in what many might view as a rational e-Business scenario, as an encrypted digital document that is delivered with a click wrap license agreement. The combination of software code and contract arrangements replaces the role formerly filled by copyright law. As author, I can now limit your ability to excerpt my work, limit the duration of your access to it, meter your use of it, charge by your volume of use, require certification of your identity before you use it, and place other constraints on use that eliminate the rights you once had under fair use.

Some of the pioneers, developers, and would-be real estate agents of the Internet frontier might argue that my interpretation of fair use as an attempt to balance two public goods, the rapid spread of information and the incentive to produce more, is just that -- an interpretation -- and a fallacious one to boot. They might assert that fair use was simply an acknowledgment of the practical limits on enforcing copyright when most information was on paper. With digital information, it is possible to meter and control use of information much more precisely and less expensively, and we should take advantage of this new technology to more perfectly protect the exclusive right of authors guaranteed by the Constitution.

In his closely argued, important, outspoken, funny, and sometimes exhausting book, Shamans, Software, and Spleens, James Boyle undertakes a study of the legal issues surrounding four legal puzzles, with the goal of using the common themes arising from this study to illuminate our understanding of intellectual property and the rights, value, and ownership attached to information. He refers to such desire to more perfectly protect information as "an exponentially expanding intellectual land grab."

Land grabs are a familiar metaphor for Internet businesses. My own consulting company, Fastwater, consistently counsels its clients engaged in Internet business about the critical importance of first mover advantage. When we work with companies building B2B net marketplaces, we talk about establishing critical mass and locking up the market before competition is established. So what is wrong with an intellectual land grab that perfects control over information and its distribution? Why wouldn't we applaud technology that allows us to carve up the Internet into geographical areas, as iCraveTV hopes to do, guaranteeing that people get only the information that they are authorized to receive?

Is this Good for Business?

As individual citizens we might be concerned about the loss of the benefits that emerge from vigorous fair use, or we might be concerned about the loss of privacy that comes with the current thrust of e-Business. But we are business people as well as citizens. Why wouldn't we view all of this in the same light that Scott McNealy viewed privacy when, speaking last year, he said "You have zero privacy anyway. Get over it." As encryption, authentication, and metering technologies become mature and widely available, why not simply admit that control over information will become more perfect? Sure, certain good things about Net95, such as free, worldwide access to high quality news and information may be diminished. But get over it. It was also tough to build a real business around Net95. Of course there will be an intellectual land grab. Of course Bill Gates has been acquiring content for a long time now. The key thing for a business is to get in on the land grab now. Controlling information is going to make some people a lot of money. You're a fool if you're not one of them.

Such an argument sounds smart. But it can also look shortsighted. Consider the question of why Internet applications have, for the past five years, been at the center of one of the most explosive and sustained periods of productivity and economic growth in the past century. Assuredly, the answer is complex. But, equally surely, it had something to do with the broad availability of free information about how to build such applications and about how fast ideas and know-how have spread on the Internet. The same kind of explosive, fertile growth, had it been based around EDI or a proprietary system such Microsoft's short-lived attempt in the early 90's to replace HTTP and HTML with their own browsing and viewing technology (codenamed "Blackbird"), is simply inconceivable.

Boyle argues that the social justification underlying strong protection of intellectual property grows from a romantic view of the role the author of the information, idea, or invention -- a viewpoint he refers to as "author talk" and "author vision." Speaking of this view of information, he writes, "Precisely because the system is built around the idea of originality, it tends to undervalue the importance of sources, of the public domain." Looking ahead, assuming that privatization and control of information continues along the path that it is currently following, Boyle see the possibility of "a new, highly stratified class system -- a world broadly divided between manipulators of information and 'sources.' In a society where one group compiles, modifies, redesigns, and commodifies information gleaned in part from the genes, consumption patterns, and culture of the rest of the population, the rhetoric of justification and entitlement bids fair to be based on author talk."

But it is this stratification and concentration of power over information that actually makes the system stagnant and "bad for business" if your business happens to revolve around starting and growing companies. Quoting Boyle again:

If there is a class structure that comes with the author-vision I described, it will not be one in which authors, programmers, artists and engineers inherit the earth. In fact, one of the truly remarkable things about the author vision of entitlement is how indifferent it is to the needs or interests of actual authors or creators. Imagine the young software engineer, trying to start a new software company in the approved iconoclastic, entrepreneurial manner. He finds that many of the programming tools he wants to use have already been patented by large companies, some of which now make more money from litigating patent claims than they do from actually producing something new. [Shamans, p. 178]

Clearly, this kind of stagnant business environment would be bad for start ups and aggressive, growing companies. It would be very much like the environment for software development and investment in the late 80's and early 90's, before the world of Net95 blew apart the stranglehold that a small number of companies then had on the market for new applications.

One of the more original thinkers concerned with the question of what makes business environments vibrant and conducive to innovation is Virginia Postrel, who pulled together a survey of her thinking in her 1998 book, The Future and Its Enemies. Postrel observes that terms like "liberal" and "conservative," "right" and "left" do not usefully differentiate between courses of action when dealing with questions that look into the future. Is it inherently liberal or inherently conservative to lobby for strong protection of intellectual property, create architectures to guarantee such protection, and minimize fair use? The question is difficult (perhaps nonsensical) because we are using the wrong lens to try to resolve differences in viewpoint.

Postrel replaces liberal and conservative with two new categories: "stasists" and "dynamists." Critically, for our purpose in thinking about the future of the Net, the difference between stasists and dynamists revolves around notions of regulation and control. Both stasists and dynamists can embrace technology and look toward the future -- in other words, neither camp is necessarily backwards looking -- but they approach the future in different ways. Stasists "are 'for the future,' but only if someone is in charge of making it turn out according to plan. They greet every new idea with a 'yes, but,' followed by legislation, regulation, and litigation." [Future, p. 16] (Lawrence Lessig would add that regulation could be implemented either as computer law or as code -- regulation is the goal, the particular means are a matter of convenience.) Dynamists, on the other hand, approach the future more as something that will evolve from a series of trial and error experiments. They are more comfortable with diverse, competing, decentralized processes that occasionally produce unpredicted outcomes -- that are surprising. It is not that dynamists are against rules completely, but that they prefer rules that "maintain sources of competition and new ideas" and that are neutral and transparent in their effects. [Future, p. 47]. Dynamists believe that progress is messy. They also believe that society receives the greatest benefit, and moves forward most quickly, not by designing and engineering the outcome, but by letting it emerge from a chaos of competing activities.

The evolution of Internet applications and of e-Business since the dawn of Net95 could serve as a case study of the dynamist agenda in action. Postrel notes, however, that dynamism, by definition, threatens the stasist agenda, and so stasists will predictably try to impose control and order on a dynamist environment. Further, she is concerned that this is a battle that tends to favor stasists just because of the nature of the parties. "While dynamism requires many private virtues, including the curiosity, risk taking, and playfulness that drive trial-and-error progress, its primary public virtues are those of forbearance: of inaction, of not demanding a public ruling on every new development." Stasists, on the other hand, "reflexively respond to any experiment by seeking centralized, usually political action." [Future, p. 212] Part of her motivation for writing her book was to make dynamists more conscious of themselves as a group, and more conscious of what they have to lose. "As a political matter, then, dynamists rally not to guarantee themselves security or to impose their ideas on others, but to defend their own ventures from being wiped out."

I suggest that this is exactly the situation faced today by most businesses that would like grow and thrive on the frontier of the Internet. The intellectual land grab that is underway now will primarily benefit a very small number of players. For the majority of businesses, they will not only have little to show from the land grab, but will also be faced with a new, more regulated, less dynamic Internet that will no longer be able to unpredictable experiments, rapid innovation and growth.

What to do?

One answer is to deny that this is happening and, like a graffiti artist working against the dominant culture, proclaim that "Net95 Lives!" This particular response concerns me greatly because it closes peoples' eyes to important changes that really are happening. Access to information is more subject to regulation though code, and if necessary through law, than it used to be. Restricting use to authorized, authenticated users is easier than it used to be. Alliances such as the recent one between Microsoft and Xerox to form ContentGuard, a company that will offer digital rights management software, are becoming a common feature of the landscape. Some of these developments are good news, as they enable new kinds of e-Business. But it is also important to be able to see that regulation and control through code, backed up by laws and courts, is not automatically, necessarily a good thing. Just as fair use in copyright law tried to strike a balance between providing broad access to information and providing sufficient incentives to authors, so must we keep our eyes open to finding such a balance on the Internet.

Taking action to redirect the shaping of the Internet as it matures, moving it away from the kind of dividing up and control exemplified by the iCraveTV case, requires remembering that the thrust behind the current direction comes from a combination of business and government. Businesses develop new technologies that make the Internet more regulable and hospitable to property interests, offering better ways to protect content, more efficient ways to collect and use information about customers, and so on. If the matter stopped there, we wouldn't have a problem, because there are other companies that would offer better ways to crack protection, defeat information collection, and so on. This is the dynamist view of Internet evolution. What changes this picture is that the companies interested in regulation have been successful in getting the government to lock in and protect their position with laws. The DMCA, with its criminalization of attempts to defeat copyright protection, is a perfect example, as the DVD interests demonstrated in their prosecution of the Norwegian boy who wanted to watch his DVD movie on a Linux machine.

The solution to this problem is not simply keeping the government out of the Internet. We very much need the government there to protect personal privacy and to guarantee that there is a free dissemination of ideas along with sufficient incentives for authors to write and for inventors to invent. As Lessig says, "Liberty in cyberspace will not come from the absence of the state. Liberty there, as anywhere will come from a state of a certain kind. We build a world where freedom can flourish not by removing from society any self-conscious control; we build a world where freedom can flourish by setting it in a place where a particular kind of self-conscious control survives." [Code, p. 5]

Lessig argues that despite the visibility of the courts in high profile lawsuits (such as the very recent copyright ruling against MP3.com that could potentially involve $120 Billion in damages for copyright infringement), it is the legislature that will be the place for debating and developing the rules and questions emerging from cyberspace. But he is pessimistic about the legislature's ability, or will, to come to grip with the issues. Part of that pessimism grows from a sense that citizens and interest groups have only the most cynical expectations of what Congress can and will do and a strong impulse to avoid involvement by government. "It is the age of the ostrich. We are excited by what we cannot know. We are proud to leave things to the invisible hand. We make the hand invisible by looking the other way." [Code, p. 234]

It is time for business people, particularly business people who are building small and medium sized businesses that will depend on the Internet for growth opportunities, to stop looking the other way. The first step toward this goal is to realize that the "e-Business community" is not, in fact, a homogenous group that shares one set of interests. You should think hard about whether the industry leaders and the venture capitalists with time to act as political advisors and lobbyists really speak for you and your company. Was the software business a good place for small companies when, in the late 80s, it was dominated by a small number of dominant players who had locked up the market for office productivity, operating systems, and development tools? How did that compare with the relatively chaotic, unregulated Internet environment of the late 90's? Will the Internet be a good place for your growth when it is more controlled, and when those controls are backed by the force of law?

The answers to such questions are not black and white, but they are very important.

Books mentioned in this article:
	Code by Lawrence Lessig
	The Cluetrain Manifesto by Rick Levine, Christopher Locke, Doc Searls, and David Weinberger
	Shamans, Software, and Spleens by James Boyle
	The Future and Its Enemies by Virginia Postrel

You should also see:
	CyberRegs by Bill Zoellick. This is the book that Bill wrote after writing this article, as a more complete exploration of the problems and issues.