What the New Congress Can Do For the Technology Sector
This week the Consumer Electronics Show will eat Las Vegas whole, and it's an awesome thing to behold.
Here's hoping that the affiliated Tech Policy Summit--with some participants' eyes cast nervously toward Washington--helps ensure policymakers don't devour the technology sector's promise with ill-conceived intervention (your Wayne will be a panelist there).
Telecommunications, the Internet, gawk-worthy consumer electronics and frontier technologies like biotech and nanotechnology face challenges fending off predatory regulations like those that slammed health care, energy and financial services in 2010. The new Congress being sworn in today should in turn swear to fend off the assault.
The list of tech-bashing antics is long: antitrust adventurism; net neutrality mandates; a National Broadband Plan (why not a National Elevator Plan instead?); schemes to regulate online behavioral advertising; technology subsidies with federal chains attached; inappropriate compulsory licensing; costly environmental restrictions (on everything from Edison's incandescent bulb to cellphone "e-waste" to cheap energy); and complexity in employer access to skilled foreign workers.
Meanwhile, the past decade's wave of financial regulations makes it harder to raise capital. The latest insults? Thanks to Dodd-Frank, banks are passing regulatory fees along to corporate borrowers, and the SEC is going to "define" what "venture capital" is. Hello, paperwork!
There is little Washington leaves alone, yet it blames free enterprise when anything goes wrong and enacts even more regulations on top of the old.
House Republicans' promises of new pro-Constitution rules changes are great; emphasizing enumerated powers and that whole "necessary-and-proper" thing before legislating would be a welcome old-school reform. But subsequent reforms to deliberately limit regulators' ability to intervene in markets are needed also, such as requiring a congressional vote on all $100 million-plus agency regulations before they are binding on the private sector.
Even the Internet, despite its freewheeling reputation, faced regulatory impulses from the get-go. These have included porn, spam, marketing to children, Internet gambling, online privacy, mandatory copy protection technology (and its opposite, compulsory licensing of digital content) and cybersecurity mandates, thanks to the ascendance of the homeland security culture.
The "deregulatory stimulus" the tech sector requires would freeze regulations and purge decades of old ones. Meanwhile, rejecting the current manias threatening industry will best serve Consumer Electronics (as well as Consumer Everything Else). Consider a few threats:
Demands for forcibly dictating terms of pricing and access for somebody else's property (the essence of net neutrality) have affected other industries: electricity, instant messaging, the Windows desktop, iTunes exclusivity, the Google search, IBM's right to exclusively license its operating system, the old telecom local and long distance battles that are largely thankfully moot, and more.
The proper perspective is to recognize that humanity's great leap was Internet networking technology and its availability to all conceivable future wireline and wireless networks--not necessarily only the capital "I" Internet as it happens to exist and be fought over today. I'll leave this alone here (but not here) other than to say competition in the creation, financing and building of future infrastructure (of all kinds, not just Net) is as important as competition in the goods, services and content sold today over the 2011 model. We're at the dawn of custom network and content creation for future generations.
Government compulsion can prop up an "inferior" early-21st Century implementation of a magnificent technology, undermining robust infrastructure and content wealth creation generations hence.
On competition policy and antitrust activism
When the multimedia Internet was new, pretty much everybody except Microsoft's enemies thought that things moved on "Internet time" and that smokestack-era antitrust retained little relevance.
But like other regulations, antitrust transfers wealth and lends itself to exploitation rather than consumer welfare, so global high-tech interventionism persists. The XM-Siriusmerger stewed for over a year; Intel was hit with largest-ever E.U. fine; IBM is somehow back under antitrust scrutiny; as of course are Google and the Comcast-NBC Universal merger; and satellite company mergers got blocked, as did even a Blockbuster-Hollywood Video merger.
Regrettable, but unsurprising since Washington thinks "intense mints," "premium ice cream" and "jarred pickles" are monopolizable markets. That's antitrust for you, which also regards it a crime if your prices are higher, lower or the same as anybody else's.
Misbehaving companies answer to competitors, business partners, shareholders, consumers (who themselves are shareholders), advertisers, Wall Street and global upstarts. Government interference distorts free enterprise by undermining this discipline, rewards rivals and creates a self-perpetuating parasitic antitrust pressure group society. Meddlesome conditions imposed before allowing firms like Comcast and NBC to merge result in company and industry structures that would not exist under true capitalism, relieve competitors of the necessity to react on behalf of consumers, and undermine customer-centric enterprise as a phenomenon.
On privacy regulation
Confidentiality is a value in the marketplace, even a form of wealth in its own right, and government rather than Internet commerce is its enemy. To continually improve, privacy must remain a competitive feature. Expecting salvation from the same government that pines for a National ID card and created the TSA that wants to check out your package is just weird, to put it in technical terms. Nor will federal legislation likely preempt state privacy laws and simplify things, as some hope; nor will it deal with non-commercial information harvesting where the worst identity theft lives.
Both exhibitionists and hermits populate cyberspace, and markets must grapple with disparate preferences regarding appropriate behavioral advertising, integration of biometrics, opt-in vs. opt-out policies, treatment of online information relative to offline, and appropriately handling sensitive and non-sensitive information.
Most business transactions occur between strangers, and more and more transactions are online. Government should enforce evolving privacy contracts, but not dictate the terms of information sharing in commerce and credit and thereby create a false sense of security. In fact, government could primarily aid privacy by ending the practice of blurring its public, compulsory databases with those voluntarily amassed in the commercial sector.
Proposals for regulation of the technology sector are a grave threat, and it's more than unfortunate that the tech sector is getting increasingly comfortable with D.C. and the lobbying game. In contrast, Consumer Electronics Association boss Gary Shapiro's pulling off the world's biggest consumer tech trade show is, in the first instance, a reminder that what the technology sector and consumers need is not regulation and subsidies, but to be left alone to get even bigger.
But even more than that, America's wealth-creating sector needs the renewed certainty that can only come from stricter, more formal limitations on Washington's future ability to manipulate technology and enterprise with unchecked regulation. That's where the new Congress comes in. Knowing that one's business ventures aren't going to be upended out of the blue by some transitory politician or unaccountable bureaucracy is the foundation of a wealthier, healthier America.