From: Duncan Frissell <frissell@panix.com>
Date: Fri, 22 Oct 93 13:08:18 PDT
To: CYPHERPUNKS@toad.com
Subject: Net Regulation
Message-ID: <199310222007.AA07683@panix.com>
MIME-Version: 1.0
Content-Type: text/plain


I know that this was a long time ago but I've been cut off from cyberspace 
for *days* (months in net time) while PANIX was down.

S >From: smb@research.att.com
S >Or  -- envision, if you will, an ukase that the FCC will regulate the
S >Internet, and that anyone who wants to connect will have to agree to an 
S >acceptable use policy that includes the requirement that all mail be
S >digitally signed, both by the individual and by the site, and that
S >mailers enforce this requirement.  Can't happen?

Since the Internet is an international entity, it is probably not subject 
to FCC regulation.  Even if domestic accounts are somehow regulated, it is 
no problem to telenet from my regulated account, (or make a long distance 
phone call) to Demon Internet Services in London and access my account 
there automatically downloading encrypted mail and news files.  As most of 
the comments on the Bell Atlantic/TCI merger suggest, there is little 
appetite even in the Clinton Administration for telecommunications 
reregulation.  Such a move would seem to run counter to the domestic and 
international trends in telecoms policy.  If the Bundesposte has had to 
surrender *its* monopoly, I doubt if mere US regulatory authorities can 
prevail in the winds that are blowing now.  Further, such rules do not now 
govern private networks and setting up a secure, encrypted "enterprise 
network" is simple and cheap these days.

The regulators will have enough on their plate trying to chase down all 
those people downloading porno from Zimbabwae and setting up their very 
own private "virtual" phone companies to compete with the licensed 
monopolies.  Each node on a network can be a network of its own as large 
or larger than the network of which it is a part.

S >Nor do I think that ``offshore data havens'' will help.  Apart from
S >the fact that most major governments are basically in accord on the
S >question of who makes the rules (them, not the people -- or did you
S >see any governments denouncing Clipper?  I saw lots of endorsements), 
S >there is a potent weapon that can be used:  mandatory disconnection
S >from the net for any country that doesn't co-operate enough.

The Feds can't even keep *me* off the nets (without arresting me), how can 
they keep a whole country off the nets.  Shutting off the nets would be 
the equivalent of shutting down the phone system (since those will both 
soon be the same thing).  You couldn't do that to one of the OECD 
countries at this point.  It would be an Act of War.  It would also cause 
a total financial panic since everyone would worry about other shutoffs 
and investors involved in the shutoff country would engage in a run to 
cash.  Global liquidity depends on a microsecond by microsecond flow of 
data.  This flow is bound to increase as time goes on.  There is not
even an international authority capable of imposing that sort of ban.  It 
would also be technically difficult since the nets are topologically 
complex.

S >Wanna place any bets on creating a whole new
S >anonymity structure?) For that matter, international bandwidth is a
S >matter for diplomats as well as technicians; permission to create new
S >circuits will simply be withheld.  If you doubt me, try placing a
S >call to Cuba, or to the former USSR.  After your Nth ``circuits busy"
S >message, don't bother asking why the long distance carriers haven't
S >installed more trunks, when there's obviously a demand for them.

That was then.  This is now.  There is a guy in Havana right now selling 
satellite dishes.  Thousands of Russian computers a month are joining 
Internet since the links were opened up a few months ago.  With all of the 
dark fiber now going into the ground/ocean and data compression and 
multiplexing continuing to improve, I doubt that the regulators will have 
much effect on bandwidth allocation which is a child of scarcity.  When 
lines are expensive, you can support expensive central switching and large 
monopolies.  When virtual "lines" are nearly free, even force majure can't 
cope with 5 billion people shopping 'till they drop for cheap telecoms.  

S >Cryptographic technology is an enabling mechanism for various social
S >changes.  It by no means makes them inevitable.  Don't delude 
S >yourself on that; the political will to do something is more important
S >when various alternatives exist.  

I've always considered the "action at a distance" capabilities of the nets 
to be more important than encryption per se.  Since governments are 
geographically-based entities, technologies which enable us to weaken the 
bonds of place reduce the ability of states to exact a "monopoly rent" 
based on their control of certain land areas.

S >And throughout the centuries, governments have had no trouble stripping
S >hated minority groups of their assets, without any need for computers.

True.  Computers, and jet travel, and other things don't make the 
government enormously more powerful than it's ever been but they *do* make 
us vastly more powerful than *we've* ever been.  Louis XIV and Slick Willy 
could both destroy a village "so that no stone was standing upon a stone" 
but we are not bound to the soil like the peasants of 18th century France.

S >If you want a Brave New Digital World, it isn't sufficient to build
S >the tools.  You also have to convince people that it's a good idea.
S >Oh, the online world is coming; no doubt about that.  But people have
S >to be convinced that privacy and the like is in their interests, that
S >it will solve problems that *they* will have. 

I think that a 30% to 50% increase in income via elimination of effective 
tax liability is quite an inducement.  The artificial profitability of 
untaxed over taxed income has been enough to support thousands of offshore 
financial subsidiaries of all the world's banks for years now.  This when 
they have had to pay substantial costs associated with offshore 
operations.  When the Bank of the Internet brings offshore banking as 
close as your terminal, such "arbitrage" between taxed and untaxed 
transactions will grow explosively.

S >Equally important, they have to be convinced that it will not create
S >new problems, to their perception (and the perception may have little
S >to do with reality.  500 -- nay, 500,000 -- channels of digital
S >information to the home will do nothing to educate those who prefer to
S >learn about the world from McData Services, or from
S >CBS/NBC/ABC/Fox/AP/UPI.  

What's this got to do with the price of Yak butter in Ulan Bator?  What 
does it matter what other people think in the fibersphere (thanks George) 
in which everyone who wants to controls their own switching capabilities. 
 In which there is no effective central control and no way to prevent 
communication between or among any individuals or groups that want to 
communicate.

"Early adopters" such as ourselves will develop the fibersphere and lots 
of others will follow.  As soon as they discover that they can make "free" 
LD video calls anywhere on earth, see any pictures, play any games, find 
work, "sex", and all things imaginable and unimaginable many more will 
come.  What they will find is freedom.  They will not be convinced by a 
close reading of "Human Action," they will *live* it.  Freedom is what you 
get when human interactions cannot be blocked.  

And don't tell me that we still have to live in the physical world.  If 
90% of the GWP (including *almost all* the money) consists of non-physical 
goods and services on the nets, government control over the remaining 10% 
is not statistically significant.  Since "unbundling" of services from 
physical goods is already going on and will be accelerated as people 
discover the tax consequences of non-physical services performed on the 
nets, large chunks of the GWP are bound to transfer to the nets.  Look at 
the explosion in the forex market on the nets (tripled in size since 1986) 
once it "slipped the surly bonds of earth." 


S >            --Steve Bellovin

Duncan Frissell

"Prediction -- The global information/communications phenomenon as 
highlighted by this week's Bell Atlantic-TCI merger will be at least as 
big in its impact on human society as the Industrial Revolution.  You 
heard it here first." -- John McLaughlin "The McLaughlin Group" NBC Sunday 
17 October 1993
--- WinQwk 2.0b#1165