From: rkmoore@iol.ie (Richard K. Moore)
Date: Wed, 25 Jan 95 06:00:39 PST
To: cypherpunks@toad.com
Subject: Magna Carta Analyzed (2/2)
Message-ID: <199501251359.NAA14098@GPO.iol.ie>
MIME-Version: 1.0
Content-Type: text/plain





Detailed Analysis of PFF's Magna Carta - Part 2 of 2

By: Richard K. Moore
    20 January, 1995


-----------------------------------------------------
[
[
[  This next section is the heart of the story.
[  Evil "government" is to be vanquished by brother
[  "private property" -- watch as the two masks
[  ("individual" and "communications provider")
[  switch back and forth faster than the mind can see.
[

THE ROLE OF GOVERNMENT

The current Administration has identified the right
goal: Reinventing government for the 21st
Century....This said, it is essential that we
understand what it really means to create a Third Wave
government and begin the process of transformation.

...The most pressing need...is to revamp the policies
and programs that are slowing the creation of
cyberspace...if there is to be an "industrial policy
for the knowledge age," it should focus on removing
barriers to competition and massively deregulating the
fast-growing telecommunications and computing
industries...

...the transition from the Second Wave to the Third
Wave will require a level of government _activity_ not
seen since the New Deal....

[  A nice-sounding vision for cyberspace is pulled in
[  from the New York Times:

"The amount of electronic material the superhighway
can carry is dizzying, compared to the relatively
narrow range of broadcast TV and the limited number of
cable channels.  Properly constructed and regulated,
it could be open to all who wish to speak, publish and
communicate. None of the interactive services will be
possible, however, if we have an eight-lane data
superhighway rushing into every home and only a narrow
footpath coming back out. Instead of settling for a
multimedia version of the same entertainment that is
increasingly dissatisfying on today's TV, we need a
superhighway that encourages the production and
distribution of a broader, more diverse range of
programming" (New York Times 11/24/93 p. A25).

[
[  The individualist aspects of this vision play no
[  further part in our story. The sole item adopted
[  by PFF seems to be the requirement for
[  symmetric  bandwidth. Could this be establishing a
[  pecking order between telcos and cable-operators,
[  giving the edge to the telcos with their more
[  symmetric architectures? ... an open question.
[
[  We now come to an amazing shift of ground in our
[  story. Its almost Khafka'esque or even
[  Ionesco'esque in its blatant reversal of
[  established story line.
[
[  What they're going to do is passionately espouse
[  the creation of a gigantic monopoly among the
[  telcos and cable operators to build and operate
[  cyberspace. Even though "dynamic competition" was
[  the rallying cry up to this point, we're now to
[  learn that "contrived competition between phone
[  companies and cable operators" "will not deliver
[  the two-way, multimedia and more civilized tele-
[  society Kapor and Berman sketch."
[

...reducing barriers to entry and innovation [is] the
only effective near-term path to Universal Access.  In
fact, it can be argued that a near-term national
interactive multimedia network is impossible unless
regulators permit much greater **collaboration**
between the cable industry and phone companies. The
latter's huge fiber resources...could be joined with
the huge asset of 57 million broadband links...to
produce a new kind of national network -- multimedia,
interactive and (as costs fall) increasingly
accessible to Americans of modest means.

That is why obstructing such collaboration -- in the
cause of forcing a competition between the cable and
phone industries -- is *socially elitist*. To the
extent it prevents collaboration between the cable
industry and the phone companies, present federal
policy actually thwarts the Administration's own goals
of access and empowerment...

...If Washington forces the phone companies and cable
operators to develop supplementary and duplicative
networks, most other advanced industrial countries
will attain cyberspace democracy -- via an interactive
multimedia "open platform" -- before America does,
despite this nation's technological dominance.

...A contrived competition between phone companies and
cable operators will not deliver the two-way,
multimedia and more civilized tele-society Kapor and
Berman sketch. Nor is it enough to simply "get the
government out of the way." Real issues of antitrust
must be addressed, and no sensible framework exists
today for addressing them. Creating the conditions for
universal access to interactive multimedia will
require a fundamental rethinking of government policy.
[
[  How orwellian can you get? Those of us who bought
[  into the glory of dynamic competition earlier on
[  have now become "socially elitist" -- unless we
[  have a mind which can switch identities and change
[  positions as adroitly as our illustrious authors.
[
[  Their cyberspace manifesto now reads:
[        (1) strong private property rights
[        (2) infrastructure to be owned by a
[            private monopoly
[  ---
[
[  The pace of doublespeak picks up now. In the
[  next section we're back in the "competition" camp,
[  finding out why regulation must be eliminated from
[  the communications game, to be replaced by
[  an anti-trust model.
[

   ...Promoting Dynamic Competition

Technological progress is turning the
telecommunications marketplace from one characterized
by "economies of scale" and "natural monopolies" into
a prototypical competitive market. The challenge for
government is to encourage this shift -- to create the
circumstances under which new competitors and new
technologies will challenge the natural monopolies of
the past.

Price-and-entry regulation makes sense for natural
monopolies. The tradeoff is a straightforward one: The
monopolist submits to price regulation by the state,
in return for an exclusive franchise on the market.

But what happens when it becomes economically
desirable to have more than one provider in a market?
The continuation of regulation under these
circumstances stops progress in its tracks. It
prevents new entrants from introducing new
technologies and new products, while depriving the
regulated monopolist of any incentive to do so on its
own.

Price-and-entry regulation, in short,  is the
antithesis of dynamic competition.

The alternative to regulation is antitrust. Antitrust
law is designed to prevent the acts and practices that
can lead to the creation of new monopolies, or harm
consumers by forcing up prices, limiting access to
competing products or reducing service quality.
Antitrust law is the means by which America has, for
over 120 years, fostered competition in markets where
many providers can and should compete.

The market for telecommunications services --
telephone, cable, satellite, wireless -- is now such a
market...price/entry regulation of telecommunications
services...should therefore be replaced by antitrust
law as rapidly as possible.

...there should be no half steps. Moving from a
regulated environment to a competitive one is -- to
borrow a cliche -- like changing from driving on the
left side of the road to driving on the right: You
can't do it gradually.

[
[  Though the "justification" arguments illogically
[  contradict one another, the "conclusions" of those
[  arguments add up to a coherent proposal.
[
[     What the authors are proposing is an
[           *unregulated monopoly*
[
[     It is not surprising that they had to twist
[     logic several times to pack both words into a
[     manifesto, and make it seem like both are
[     natural and consistent consequences of
[     "competitive spirit" and the "American Dream".
[
[  Their cyberspace manifesto now reads:
[        (1) strong private property rights
[        (2) infrastructure to be owned by a
[            unregulated private monopoly
[  ---
[
[  Next they double-click on property rights:
[

    ...Defining and Assigning Property Rights

...Defining property rights in cyberspace is perhaps
the single most urgent and important task for
government information policy. Doing so will be a
complex task, and each key area -- the electromagnetic
spectrum, intellectual property, cyberspace itself
(including the right to privacy) -- involves unique
challenges. The important points here are:

First, this is a "central" task of government...

Secondly, the key principle of ownership by the people
-- private ownership  -- should govern every
deliberation. *Government does not own cyberspace,
the people do.*...

[
[  Here's where the doublespeak pays off. They can
[  make a statement like "the people own cyberspace"
[  and manage to imply they are empowering
[  the individual, when they've already stated clearly
[  that ownership is to be vested in a large monopoly
[  conglomerate. I must tip my hat to their skill.
[
[  In an earlier review, I described this document as
[  grossly rambling and inconsistent. I now have more
[  respect for it. It's masterfully deceitful, and
[  manages to marshall contradictory arguments in
[  support of a coherent business proposal.
[
[  ---
[
[  We now move to another corporate business concern.
[  Such concerns are clearly the domain of serious
[  discourse addressed in the Magna Carta. The rest of
[  the verbiage is a meaningless, crowd-pleasing
[  smokescreen.
[
[  Here we have a plea for rapid capital depreciation.
[  That would be quite a windfall for a conglomerate
[  investing billions in an infrastructure.
[
[  Once again the taxpayer is asked to subsidize the
[  R&D bill for new technology, but the ownership
[  benefit is to go exclusively to the private
[  operator. This has been the pattern since the New
[  Deal.
[
[

 ...Creating Pro-Third-Wave Tax and Accounting Rules

We need a whole set of new ways of accounting, both at
the level of the enterprise, and of the economy.

...At the level of the enterprise, obsolete accounting
procedures cause us to systematically _overvalue_
physical assets (i.e. property) and _undervalue_
human-resource assets and intellectual assets. So, if
you are an inspired young entrepreneur looking to
start a software company, or a service company of some
kind, and it is heavily information-intensive, you
will have a harder time raising capital than the guy
next door who wants to put in a set of beat-up old
machines to participate in a topped-out industry.

On the tax side, the same thing is true...

It is vital that accounting and tax policies -- both
those promulgated by private-sector regulators like
the Financial Accounting Standards Board and those
promulgated by the government at the IRS and elsewhere
-- start to reflect the shortened capital life-cycles
of the Knowledge Age, and the increasing role of
_intangible_ capital as "wealth."

[
[  Their cyberspace manifesto now reads:
[        (1) strong private property rights
[        (2) infrastructure to be owned by a
[            unregulated private monopoly
[        (3) investment to be written off rapidly
[  ---
[
[  Next they get into a discussion of transforming
[  government. I'm not sure why they're departing
[  from their focused agenda of launching cyberspace
[  as a private monopoly. Perhaps they think they're
[  on a roll, and might as well go for the whole
[  enchilada -- a corporate state.
[

    ...Creating a Third Wave Government

Going beyond cyberspace policy per se, government must
remake itself and redefine its relationship to the
society at large...there are some yardsticks we can
apply to policy proposals...[vacuous ones omitted]

_Does it centralize control_? Second Wave policies
centralize power in bureaucratic institutions; Third
Wave policies work to spread power -- to empower those
closest to the decision...

A serious effort to apply these tests to every area of
government activity  -- from the defense and
intelligence community to health care and education
-- would ultimately produce a complete transformation
of government as we know it. Since that is what's
needed, let's start applying.

[
[  With their usual twists of logic, we'd probably
[  learn that other constellations of private
[  interests, perhaps including additional unregulated
[  monopolies, should be running all these other
[  areas of public life as well.
[
[  The closing section is vacuous but for
[  background smoke. I'll cite a few representative
[  paragraphs...
[

GRASPING THE FUTURE

The conflict between Second Wave and Third Wave
groupings is the central political tension cutting
through our society today. The more basic political
question is not who controls the last days of
industrial society, but who shapes the new
civilization rapidly rising to replace it. Who, in
other words, will shape the nature of cyberspace and
its impact on our lives and institutions?...

The Third Wave sector includes not only high-flying
computer and electronics firms and biotech start-ups.
It embraces advanced, information-driven manufacturing
in every industry...

For the time being, the entrenched powers of the
Second Wave dominate Washington and the statehouses...

...a "mass movement" for cyberspace is still hard to
see. Unlike the "masses" during the industrial age,
this rising Third Wave constituency is highly
diverse...This very heterogeneity contributes to its
lack of political awareness. It is far harder to unify
than the masses of the past.

[  I guess the Magna Carta is to bring about this
[  unity. Perhaps they seek to form an "internet cult"
[  and the Magna Carta is the "mind-programming"
[  formula being trial-posted. I think they'll find
[  most of us not that easily programmed. We're too
[  professionally familiar with the technology of
[  programming, and are equipped to judge the internal
[  consistency of models.

Yet there are key themes on which this constituency-
to-come can agree. To start with, liberation -- from
Second Wave rules, regulations, taxes and laws laid in
place to serve the smokestack barons and bureaucrats
of the past. Next, of course, must come the creation
-- creation of a new civilization, founded in the
eternal truths of the American Idea.

It is time to embrace these challenges, to grasp the
future and pull ourselves forward. If we do so, we
will indeed renew the American Dream and enhance the
promise of American life.

[
[  There you have it. The American Dream and frontier
[  competitiveness lead us inevitably to the following
[  mandate for cyberspace:
[        (1) strong private property rights
[        (2) infrastructure to be owned by an
[            unregulated private monopoly
[        (3) investment to be written off rapidly
[
[  Buying into this vision upholds the honor of
[  our forefathers, fights big government, empowers
[  the  individual, and ushers in the American
[  millennium.
[
[  Simple, succinct...and packed full of lies.
[
[  My only question is: why did the document have to
[  be so long?
[
[ -rkm
[


-----------------------------------------------------
[End of MC Analysis (2/2)]



---

Richard K. Moore - rkmoore@iol.ie - Wexford, Ireland - fax +353 53 23970