11.6 Get Policy Right

As the business model of journalism has fractured, some big news organizations, their corporate parents and a host of well-meaning observers have latched onto an alarming, anti-capitalistic notion: government (read: taxpayer) help. In 2009 and 2010, the Federal Trade Commission held several workshops entitled “How Will Journalism Survive the Internet Age?,” whose stated purpose was “to explore how the Internet has affected journalism.”

This seemed to indicate that the nation’s scam artists, monopolists and market-riggers had all gone into hibernation, during the worst economic crisis since the Great Depression. How else could the FTC have the breathing room it needs to intercede in an arena where its role is, at best, unclear?

The FTC justified its intervention in a Federal Register Notice that observed, in a promising start, that the Internet has created unparalleled possibilities. The commission could have stopped there, and not bothered to hold the workshop. It could have recognized that we’re in the early days of a transition from one set of business models (most of which have not been very competitive) to an emerging, hyper-competitive sphere.

But the commission staff and many speakers found much to fret about, spurred in large part by the newspaper industry’s incessant whining. (Could it also have been influenced by the fact that the FTC chairman is married to a Washington Post opinion writer? No, this obviously had absolutely no bearing on anything.) Chief among the threats was the erosion of the advertising-based business model.

The FTC notice, quoting several economists, asserted bizarrely that “public affairs reporting may indeed be particularly subject to market failure.”

Market failure? What about the market failure—which, as far as I can tell, never got any attention from a succession of FTC people during the past half-century—that resulted in the the media monopolies and oligopolies that dominated that period? Their public affairs journalism was, for the most part, a modest spinoff of the extortionate advertising prices they charged when they had near-absolute market power to charge anything they wished. Only when there’s real competition, it seems, does the FTC get interested.

We do not need government subsidies aimed specifically at journalism. That’s not to say taxpayers should stay entirely clear of Internet deployment; in fact, a policy leading to widespread, open broadband access for all Americans is the single place where government intervention in media makes sense, with free speech implications as well as financial ones.

As noted earlier in this volume, we should remember the indirect subsidies of low postal rates for print publications, giveaways of publicly owned airwaves (spectrum) to broadcasters, the odious “Newspaper Preservation Act” granting partial antitrust immunity to community newspapers, and a variety of other special favors the news business has received over the years. Some of those were targeted directly at news organizations; others were more general and defensible.

On the table now are such fixes as changing the copyright laws to make life more difficult for online aggregators, changing antitrust laws to give journalism-related businesses even more antitrust immunity, direct subsidies and more. All are terrible ideas.

There’s only one subsidy that makes sense; only one that wouldn’t put government meddling squarely into the practice of journalism—an inevitable result of the direct subsidies being pushed by well-meaning but misguided media thinkers. It’s a subsidy for bandwidth: getting true broadband Internet access to as many people as possible, as some other nations in Europe and Asia have done.

The precedent in this case is the right one. Taxpayer-assisted infrastructure—especially the postal system and low rates for sending publications—helped create the newspaper business, and enabled a lot of other commerce. Let’s bring that logic forward to the early 21st century, and enable high-speed Internet access for all Americans, and a communications infrastructure for all competitors.

Networking Market Failure Looms

As it is, we’re moving toward a market failure of frightening proportions in digital networking, as the telecom industry clamps down, or threatens to, on people’s ability to use Internet connections as they see fit. We’re moving toward a media business consolidation that would terrify any real champion of open markets: a cable-phone duopoly.

This brings up the topic of network neutrality: the idea that carriers should not discriminate against one content provider in favor of another.

All Internet service providers already manage their network traffic in some ways, such as spam filtering. One reason I worry about new rules enforcing neutrality is the law of unintended consequences. If we allow the carriers to make special deals to favor the content of companies that pay more for special access to end users, rather than letting you and me decide what we want to use, we’re heading for major trouble.

The danger signs are growing that we’re moving fast toward a world where the carriers cut deals with favored providers. They’ve made it clear that they want to do that, and they insist they have the right. If they win this battle, you can write off the kind of robust and diverse media/journalism ecosystem we’ve been discussing in this book—because upstarts will tend to be frozen out by the mega-players.

This is why it was so worrisome when Google and Verizon, the huge phone and Internet company, announced in August 2010 some principles about network access that could, if enacted, be the end of any hope of network neutrality.

They paid lip service to net neutrality, but then offered several caveats. Neutrality would apply only to the “wireline” portion of the Internet, such as DSL and cable connections, and only to what we have now. Their proposal would, they said, promote the expansion of new services that would go beyond anything we have today. Supposedly, these new services could not be designed to be end runs around net neutrality; they would have to be genuinely new.

What’s the problem, then? It’s this: We cannot trust Verizon or other carriers, or Google for that matter, to follow through in ways that are truly in the interest of the kind of open networks the nation needs.

If Google CEO Eric Schmidt was telling the truth when he said his company’s overwhelming focus will remain on the public Internet—for example, promising that YouTube will remain there—that’s great. I have no reason to disbelieve him, and Google’s track record to date is strong on this issue. But plans change, managements change, and corporate strategies change.

Meanwhile, Google and Verizon went backwards in a big way, arguing that data services provided by mobile-phone companies shouldn’t be subject to neutrality rules, given the constrained bandwidth on current mobile networks. As Susan Crawford, professor at Cardozo Law School of Yeshiva University in New York and an expert on all things Internet, explains: “That’s a huge hole, given the growing popularity of wireless services and the recent suggestion by the [FCC] that we may not have a competitive wireless marketplace.”

For Verizon’s part, the acceptance of what sounded like fairly serious neutrality rules on current wire-line networks was welcome. But I see the rest as a Trojan Horse. Verizon and other carriers have every incentive, based on their legacies, to push network upgrade investments into the parallel Internet, not the public one.

With one exception, the carriers have all but abandoned their push to bring to the U.S. the kind of wired-line bandwidth that other nations—Japan, South Korea, France and Sweden come immediately to mind—enjoy. Verizon has all but stopped building out its fast fiber-optic network to homes, leaving Comcast as the provider that is most ardently boosting connection speeds via its cable lines. (Even Comcast’s fast speeds are nothing special next to what carriers in those other nations have provided, not to mention initiatives elsewhere as the U.S. falls further behind.)

So when Verizon CEO Ivan Seidenberg said “We have to be flexible,” my immediate thought was “Uh-oh.”

The right way forward is to have sufficient bandwidth that all of us, citizens and corporations alike, can do pretty much anything we choose using public networks—a true broadband infrastructure is the basis for all communications.

Instead, the game is on by powerful corporations to create a parallel Internet that’s just another version of television. Let’s hope they won’t get away with it.

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