Advocate Lobbies To Make Small Business Even Smaller…

source: Berkeley Rep

Further to “Main Streets or Mean Streets,” this from the ever-insightful Simon Johnson:

The US Chamber of Commerce is opposing the administration’s proposed Consumer Financial Protection Agency, on the grounds that it would hurt small business.  Their argument is that this agency will extend the dead hand of government into every small business.

For the Chamber of Commerce, government is the enemy of small business and should always and everywhere be fought to a standstill.  Chamber Senior Vice President (and former Fred Thompson campaign manager) Tom Collamore sees this as “advocacy on behalf of small businesses, job creators, and entrepreneurs” (quoted in the WSJ link above), and the Chamber has launched the “American Free Enterprise” campaign.

Somewhere, the Chamber’s senior leadership missed the plot.  What brought on the greatest financial crisis since the 1930s?  What has hurt, directly and indirectly, small business of all kinds to an unprecedented degree over the past 12 months?  What is killing small and medium-sized banks at a rate not seen in nearly 80 years?

It’s the behavior of the financial sector, particularly big banks and their close allies – by consistently mistreating consumers.  And the letter and spirit of the regulatory regime let them get away with it.

Some members of Congress honestly believe that consumers should have a free choice, unfettered by any kind of restriction, regarding the financial products they buy.

But spend time talking to any marketing professional or call them to testify before your committee – or just ask Mr. Collamore, who was previously at Altria.  The state of knowledge regarding how to persuade people to buy stuff is impressive, the degree of potential manipulation for consumer preferences is simply stunning, and the “innovations” in this area are not slowing down.

The scope for taking advantage of consumers in subtle ways, or outright duping them, is probably higher for finance than for any other sector.  For fairly obvious reasons, people are more likely to misunderstand credit than, say, furniture.  Ambitious executives have therefore hammered hard on borrowers.  And the implications – as you have seen and are still seeing – of systemic financial misbehavior are awful in terms of human impact and essentially without limit in terms of ultimate macroeconomic downside.

Unscrupulous Finance has brought us down and will do it again.  Those most damaged now and in the future include small and medium-sized business owners who are trying to treat customers fairly.

The Chamber of Commerce is fighting the last war (or the one before that).  Their small business membership should wake up to the current reality and press the Chamber hard to change its position before it is too late.

President Obama needs to go over the heads of the Chamber’s leadership, reaching out to and running ads directly targeted at its small business membership.  The White House has to tackle this head on, framing the issue clearly for people with the help of very clear TV and radio ads.  The Chamber of Commerce is arguing that unfettered finance is good for small business.  They are wrong.

As Tom Frank has asked, “What’s the Matter with Kansas?“

Thinking the Unthinkable…

A question I never imagined myself raising: Is it time to (re)turn our telecom/broadband infrastructure into a regulated monopoly?…

Bell, speaking into a prototype telephone

In 1876, Alexander Graham Bell uttered the first (intelligible) words ever spoken over the telephone: “Mr. Watson — Come here — I want to see you.”  Bell patented his device, then a few years later patented an improvement. And until Bell’s second patent expired in 1894, only Bell Telephone and its licensees could legally run telephone systems in the United States.

But then the fun began: between 1894 and 1904, over six thousand independent telephone companies went into business in the United States, and the number of telephones grew from 285,000 to 3,317,000.  Many previously unwired areas got their first telephone service, and many others got competing companies. (For more on this period, see here.)

But this explosion of telephone companies brought with it a follow-on set of issues– main among them, that there was little or no interconnection among systems, so subscribers to different telephone companies couldn’t call each other easily (or often, at all).

Theodore Vail, who’d done a stint as President of AT&T from 1885  to 1889, and then took the reins again in 1907, had a solution.  Vail was a “natural monopolist”:  he innately believed in “natural monopolies” (i.e., that some services– e.g., the telephone– are “naturally” better developed and delivered by monopoly suppliers).  Indeed, Vail joined AT&T from Western Union– which had been founded in part by his cousin Alfred Vail, Samuel Morse’s partner–then, on landing at AT&T  took it over.

Vail’s solution to the interconnectivity issues of the early Twentieth Century was a masterpiece of monopolist maneuver:  In 1913, he negotiated “the Kingsberry Commitment” (AKA “Vail’s Bargain”).  Arguing that “one policy, one system [AT&T's] and universal service” would allow AT&T to provide service that no collection of separate companies could give the public, Vail agreed with the Justice Department and the ICC to divest Western Union (but only with the provision that it couldn’t go into the phone business) and to provide long-distance services to independent exchanges (under conditions that the ICC– there was not yet an FCC– would oversee, but that were “comfortable” for AT&T).  In return, the government gave Vail and AT&T permission to acquire independents.

In effect, Vail’s Bargain was “you give AT&T a monopoly, and we’ll give you a world-class phone system that you can regulate.”  And for several decades, that’s how it worked…

“May I connect you?”

But customers got restless and technology beckoned again… and in the Above 890 (Fifties), Carterphone (Sixties), and “Execunet” (Seventies) decisions, courts and the FCC began to loosen AT&T’s hold; then in 1984, divestiture shattered the monopoly altogether (though it’s begun to reform; see here and here).

“We don’t have to care — we’re the phone company”

Still, over the several decades of their monopoly, Vail and AT&T  did hold up their end of the bargain.  Indeed, AT&T’s Bell System provided what was by all accounts the best telephone system in the world.– one that marched steadily towards its goal of universal service, which came in the Twenties and Thirties to mean that everyone should have a telephone. By 1945, 50% of U.S. households did; by 1955, 70%, and by 1969, 90%… and through the period, the quality of the service steadily improved.

I tell this story in some measure as a caution to myself.  I’ve written (see here and here) about the danger (as I see it) that consolidation through the current economic downturn could lead to oligopolistic– or worse, monopolistic– industry structures in the U.S.  And I do worry…

Still, I have to admit that Vail’s tale is provocative… and as we contemplate how to manage the “successor technologies” to the telephone– digital telephony, wireless, cable, and broadband– it’s timely.

I don’t share Vail’s belief in “natural monopolies”;  indeed, I note that European telephony, which was so slow to catch up to phone service in the U.S., was essentially all monopoly-run.  And I note that the explosion of experimentation and advance that characterized the post-patent period of 1894-1913 slowed to a steady pulse as AT&T became a monopoly.

But that monopoly settled (albeit by force) the biggest issue– standards– standing in the way of the growth of telephony.  And while innovation was more “managed ” under Ma Bell, it was formidable:  Much of the advance of the system through the Twentieth Centurty was enabled by science and technology developed at AT&T’s subsidiary Bell Labs, which also contributed to a variety of other technical and social spheres.

Probably the biggest difference between the U.S. and the European approaches to telephony through most of the Twentieth Century was that most European operators were state enterprises, while AT&T was a private company, regulated by the government (actually governments, as state governments also played a big role).While the regulatory regime was elaborately complicated, the fundamental logic was simple:  “rate of return.”  AT&T was “allowed” to earn a fixed return on the capital it invested.  So AT&T had an incentive to keep expanding and improving its system, as balanced by regulator’s concern to keep prices manageable for consumers.

It all worked, and pretty well for all concerned… until it didn’t.  By the Sixties, businesses and consumers in the U.S. began to feel that , while they might have had the best phone system in the world, it wasn’t as good, nor as responsive to their individual needs, nor as cheap as it could be.  At the same time, technology was emerging (some of it from labs founded by refugees from the Bell System) that promised precisely those benefits. Those disgruntled consumers joined with those emerging new competitors to plead their case; and the AT&T monopoly began to fall apart.

But for almost sixty years, it worked.  Through that period the phone industry grew to a multi-billion dollar business.  But the real impact was the telephone’s contribution to the growth in the economy as a whole.  There is no exact tabulation (nor any way to get one); but it seems clear that the fast spread of a reliable phone system drove hundreds of billions of dollars of growth.

Today, we find ourselves considering a stimulus package that features broadband connectivity as a priority, and considering it in the context of a global economy in which we are dropping down the league table in percent population with broadband connections (and even further behind in the speed of those connections).

There’s a chorus of objections to the inclusion of broadband in the stimulus package (c.f., this Economist piece, arguing, among other things, that the follow-on economic benefits might not be all that are claimed).  I certainly share the caution over over-expectation, and I don’t expect that the transformative effects of ubiquitous broadband will necessarily solve lots of legacy problems.  But I do believe that the effect will in fact be transformative– and will drive second-order benefits, just as the telephone did, that will dwarf the investment– indeed, will dwarf our imaginations.

An oligopoly is unlikely to get us there in the way and at the speed that, as nation, we want and need. Indeed, the world into which we’re all-too-likely skating– one in which carriers “coordinate” to slow innovation’s pace to market, keep prices aloft, and create walled gardens– is not a pretty place.   An oligopoly has incentives that will, unchecked, lead it to invest less, less broadly, and more slowly.

Source

Per earlier posts, my hope is that we can keep real competition and free access to markets alive.  But if genuine competition isn’t in the cards, it may be that a monopoly– a regulated monopoly– is the answer.  We’d trade off some of the ferment and excitement of ecumenically-sourced innovation for faster standards and deployment… but we’d still get from here to a better– a broader and more accessible– technostructure.

The trick, to observe the obvious, would be to strike the right balance:  it would be as big a mistake to nationalize the technostructure as it would be to allow it to recede into the anti-competitive lethargy of oligopoly.  Indeed (per earlier posts), in any case the new Administration will need to be active in promoting and protecting access (a la Network Neutrality and Intellectual Property Rights reform) and in being sure that national investments in infrastructure actually turn into real improvements in service for, and at fair prices to, citizens.  I hope that this is all that it takes.  But if not, it’s a relatively short step– a question of degree, not kind– to apply those legislative and regulatory tools more forcefully in a way that effectively creates a regulated market, even a regulated monopoly.

It’s hard to recall a time when legislators and regulators did their jobs; but there was one.  For the last eight years, Congress and regulatory agencies have largely been, at best, asleep at the switch; at worst, operating on behalf of the companies they’re meant to be overseeing.  But the AT&T story reminds us that it doesn’t have to be that way.

So is it time to (re)turn to monopoly connectivity?  Certainly not yet. But while I hope that it doesn’t come to this, I’m awfully grateful for the team moving into place in in and around the White House… a team that seems ready to think pragmatically about the public interest– and when necessary, to think the unthinkable.

Now, if we can only bring Congress along…

Saying Thanks…

A joint post to Scenarios and Strategy and (Roughly) Daily:

Back from points (way) East and into more direct radio contact again, your correspondent is digressing from the on-going consideration of futures [S&S] and curiosities [(R)D] to say a seasonal word of thanks to Readers.  I am deeply grateful for your kind attention.

And while I’m saying thanks, a gentle request:  one needs no reminding that this has been a tough year all around.  But the brutal irony is that, like downturns past, this one hits hardest those who were already neediest.  Efforts to eliminate poverty around the world are challenged not only by the reduced support/donations they receive in troubled times, but also by the expanding need– the growing number of families below the poverty line– caused by the downturn.

Two organizations are particularly effective in addressing the challenge:

The Rural Development Institute

RDI is an international nonprofit organization working to secure land rights for the world’s poorest people, those 3.4 billion chiefly rural people who live on less than $2 a day.  Land rights are the single greatest asset for the world’s rural poor. For decades, RDI has used the law to bring land rights to the poor in a peaceful, fair and democratic manner:   For 40 years, RDI professionals have worked with the governments of 40 developing countries, foreign aid agencies, and other partners to design and implement laws, policies, and programs that provide opportunity, further economic growth, and promote social justice. To date, RDI has helped provide land rights to more than 400,000,000 [!] people.

Heifer International

Heifer, another international not-for-profit, is the perfect complement to RDI, offering a series of services to the rural poor that enable them to rise above the poverty line– perhaps most famously, Heifer provides livestock with which families can work their plots, from which they can get milk, and with which, via breeding, they can share the “wealth” with other families.

While both RDI and Heifer forthrightly address poverty– and while that’s surely reason enough to be grateful to them– one should note that their work has powerful follow-on benefits.  The careful research that both groups do has demonstrated that helping families out of poverty in these ways pays tremendous further benefits to the region’s environmental, educational, and public health efforts as well.

So, Dear Readers, a respectful request: as you think about last-minute Holiday gifts, and about year-end charitable giving, I hope that you’ll join me in saying “thanks” in this more concrete way– I hope that you’ll keep these two worthy causes in mind.  (In fact, if one acts fast, one can multiply one’s largesse:  thanks to the generosity of the Weyerhaeuser Foundation, a gift to RDI will be matched, dollar-for-dollar, until December 31.)

Again, thank you, Dear Readers– have the Merriest Christmas and the Happiest Holidays!

As we count our blessings, we might recall that it was on this date in 1917 that the Cheka, the secret police of Lenin’s new Bolshevik government in Russia, was formed.  In 1923 it became the NKVD; then in 1946, the KGB; and most recently, the Administration of Vladimir Putin.

The end of “free”?

For the last few years, the insight that Kevin Kelly offered back in 1990s– to succeed in the new economy, “follow the free“– has been proving out.  Web 2.0 entrepreneurs have been rushing their services into the marketplace, giving them away, in whole or in part, to generate use, and worrying about discovering sustainable business models later…  Importantly, more often than not, that use — e.g., Wikipedia, YouTube– had an “open source” character, depending on user-generated content.

Andrew Keen, writing in Internet Evolution, makes a strong case that the economic troubles that have changed the ambient tone of life over the last few months will change this “open” orientation as well.  Indeed he argues that the economic travail ahead will effectively kill it.  While the entire post is imminently worth reading, here’s a excerpt:

…One of the very few positive consequences of the current financial miasma will be a sharp cultural shift in our attitude toward the economic value of our labor. Mass unemployment and a deep economic recession comprise the most effective antidote to the utopian ideals of open-source radicals. The altruistic ideal of giving away one’s labor for free appeared credible in the fat summer of the Web 2.0 boom when social-media startups hung from trees, Facebook was valued at $15 billion, and VCs queued up to fund revenue-less “businesses” like Twitter. But as we contemplate the world post-bailout, when economic reality once again bites, only Silicon Valley’s wealthiest technologists can even consider the luxury of donating their labor to the latest fashionable, online, open-source project.

In his best-selling book, Predictably Irrational, MIT behavorial economist Dan Ariely suggests that most of us are irrational when it comes to determining the value of our labor. I’m not sure. I may not have Ariely’s grasp of behavorial economics, but I’m pretty sure, if not certain, that the idea of free labor will suddenly become profoundly unpalatable to someone faced with their house being repossessed or their kids going hungry. Being paid to work is intuitive to the human condition; it represents our most elemental sense of justice.

So how will today’s brutal economic climate change the Web 2.0 “free” economy? It will result in the rise of online media businesses that reward their contributors with cash; it will mean the success of Knol over Wikipedia, Mahalo over Google (Nasdaq: GOOG), TheAtlantic.com over the HuffingtonPost.com, iTunes over MySpace, Hulu over YouTube Inc. , Playboy.com over Voyeurweb.com, TechCrunch over the blogosphere, CNN’s professional journalism over CNN’s iReporter citizen-journalism… The hungry and cold unemployed masses aren’t going to continue giving away their intellectual labor on the Internet in the speculative hope that they might get some “back end” revenue. “Free” doesn’t fill anyone’s belly; it doesn’t warm anyone up…

FWIW, Keen’s argument seems to me all-too-plausible.  Just over a decade ago, at the lip of the second big tech updraft in the market, I had the pleasure of leading some work at GBN (The Logics of Change) focused on understanding long social/economic cycles, and the transitions between them.  The scenario that Keen sketches is completely consistent with a move from the period of “change is the only constant” Transition that we’ve been in (since the late 70s/early 80s) into a period of Lock-In– a period of consolidated, oligopolistic economic activity, a period of much more measured (controlled) economic activity and change… and thus, as Keen is suggesting, of more (literally) “mercenary” activity.

Given the events of the last several months, I’ve been revisiting the The Logics of Change, and will be writing, over the next few weeks, more about about the differences between Transition and Lock-In, and about indicators that we may be moving from one to the other.  Here, let me just note (as a balance both to Keen’s strong argument and to the different, but in many ways complementary, one that I’ll be unspooling) that the hardest thing in the world is to “see” the ultimate outcome of fundamental shifts in society and the economy from “within,” as they are unfolding.  That’s why scenario planning– which explores multiple possible futures– was created.

So, even as I heartily agree that the implosion that Keen describes is possible, and can understand one’s thinking that it’s probable, I caution against assuming– and thus basing plans on the assumption– that it’s certain.  If history’s taught us anything, it’s that we simply don’t know; we can’t know.

Indeed, I’d suggest that we all take Keen’s provocative piece in the binocular spirit in which I strongly suspect he meant it: on the one hand, let us understand (and get ready for) the implications of a future in which “free” fades away; on the other, let us work to understand that ways in which these same dynamics could make “free”– the participatory, open source imperative, if you will– even more central to economic activity and growth.

More on which, from me, anon.

The Terms They Are A-Changin’…

In the coverage of the on-going economic unpleasantness, there’s been much attention paid to the market for debt and derivatives, and to the potential impact of the difficulties there.  But the whole of the financial firmament is troubled, even the less-sexy domain of private equity investment in operating companies: the money that VCs, investment banks, and other wranglers of private capital put into companies with an eye to riding them to sale or an IPO.  It’s not a huge market in comparison to the trillions of dollars in CDOs and default insurance traded in 2007, but it’s not peanuts: in 2006, there was roughly $400 Billion in this sort of VC and private equity investment activity in the U.S.; and perhaps more to the point, those investments drive the growth– and the much larger values– of the companies they fund.

In the last week, I’ve been awash in reports, some in the press, some from friends, of private equity investors leaning on the companies in which they have stakes to reprice those stakes– to give the investors more.  The arguments from one case to the next are idiosyncratically different in their details, but they all have the same general thrust:  “we made our investments expecting more growth than it now seems likely the company will achieve, so you (the company) should give us a bigger stake.”

Some of the take-back requests are coated in offers of interim financing, aggressively (read “punitively”) priced to accomplish the take-back.  Others are more naked:  “Just give me…”

As strikingly, these “requests” are made in a totally unapologetic way, with the confident brio that entitlement engenders– and often with the veiled (sometimes unveiled) threat that an unhappy investor will at best be unhelpful to the company in the future; at worst, an antagonist in court.

Importantly, in the cases of which I’m aware, the issue is in no way misrepresentation.  The companies had plans on which the investors, after due diligence, invested; the plans were followed…  and like essentially all plans, worked in some ways and not in others.  The issue that called the question wasn’t any of that; it was the sudden dramatic downturn in the economy:  credit is tight; anxiety is high; spending has dropped like a rock…  a situation triggered– and to some extent at least, abetted, if not indeed caused– by the excesses of the very financial firms now doing the demanding.

I’ve been around long enough to have gone through several busts; I’ve learned that many (if not most) investors understand opportunism to be not just their right, but their obligation.  (And indeed, I’ve seen some forms of opportunism contribute powerfully to turn-arounds.)  But I’ve never seen opportunism practiced in such a rapacious way as these recent days– nor, I’d suggest, so desperately nor short-sightedly selfishly.

To a person, every one of the entrepreneurs I know who’s been approached in this way is some combination of offended and angry.  They get it that the economy is troubled; they understand that current financings might be at valuations down from prior rounds.  But they don’t– can’t– understand the rationale for revaluing those earlier investments.  There was certainly no prospect that, if the economy hadn’t tanked and the companies had over-achieved their plans, the investors would have offered stock back…  It’s a situation all too resonant with the first version of the Paulson Bail-out Plan: privatize the upside; socialize the risk.

Some of these entrepreneurs have no choice; they need cash, so they are holding their noses and swallowing the deals.  Others are finding alternative ways to get by and to grow.  But none of them will, I suspect, ever see their investors the same way again.  None of them will ever again hear the representations of these members of the incumbent financing class with the same degree of trust (which is, I believe, a real shame for the private equity folks I know who are *not* behaving greedily, but who may be tarred by this brush).

It’s been suggested that the end of the liquidity glut that fueled private equity (at the same time that it fed derivative creation/kiting) may spell the doom of investment banking and private equity as we’ve known it.  Certainly this kind of grab-back behavior by private equity investors suggests that it might.  Like crabs clawing each other back into a pot of boiling water, these investors are behaving in a frenzied, self-interested–and in the end, self-defeating– way that feels very like a final act.

But surely there will be institutions doing business as “investment banks,” “private equity firms,” and “venture capital funds” into the future. And with any luck, they will play some semblance of the “old” private equity role, which has been– and should continue to be– central to fueling innovation and growth.

I console myself that, to the extent that this happens, it will be folks like my funder friends who are equitably and constructively supportive of their investments who will prosper.  A. P. Giannini kept lending/funding on fair terms after the S.F. Earthquake of 06, and again through the Depression… and, even as banks failed around him in legion, built Bank of America into the trusted success that for decades it was.

Here’s to the Giannini’s of this century…  The Kings are Dead.  Long Live the Kings!

Me, me, meme…

The web is, of course, an extraordinary resource–  full of answers to questions that we’ve only just realized we had (though as Kevin Kelly points out, not exhaustively full; and even then, the source of many new questions …  At the same time, it’s a serendipitous source of surprise and delight… and in the sharing of those unexpected treasures– the creation of memes– the fabric of community, an emergent new social “language.”

So it’s a treat to take a stroll down memory lane, and to be reminded of memes-gone-by…  some, stepping off points to bigger and better things…

(Without this short circulating on the Web, there would be no South Park. Says Wikipedia: “Fox executive Brian Graden initially distributed the video to 80 friends in December 1995, one of the friends rumored to be George Clooney. Brian Boitano ended up getting a hold of the tape, and was apparently flattered by his depiction. After months of being passed around on bootleg video and the Internet, the film caught the attention of cable network Comedy Central. The network hired the pair to develop South Park, which premiered in the USA on August 13, 1997.”)

And some, like “The Star Wars Kid,” altogether ephemeral (albeit inspirational– pace Stephen Colbert)…

See them all– from the LOL Cats to Tom Cruise bouncing on Oprah’s couch– located  at Internet Memes…  And remember: All Your Base Are Belong to Us!

Call now!

from EconLog…

Imagine an announcer came on TV and said, “Welcome to the 2008 Bank Telethon. You’ve heard all the horror stories. Now, with the holiday season approaching, I know you’ll want to reach deep into your pockets to lend a hand.”

“I know what you’re wondering: How much should I give? Well, the banks need $250 billion. I know–that sounds like a lot of money to raise in just one telethon. But if each household in America gave just $2000, then we could reach our goal. So let’s get every household in America to pledge $2,000 to the banks so that they can start lending again.”

If that were the announcer’s pitch, would you give the $2,000?

Guess what… You just did.

The recipients?  Click here.

Radical juxtaposition…

Dealing with replacement credit cards, occasioned by one’s data being lost by/stolen from a merchant and misused, is becoming a pretty routine part of a consumer life.  Events of the past week suggest that there’s more where that came from…

This same phenomenon is on the rise in a sphere that’s every bit as anxious as the commercial to know all it can about us– government.

Consider these two items from last week’s British press:

UK Government Plans to Increase Surveillance and Data Capture… a £12 billion program to monitor every Briton’s phone calls, e-mails, and internet usage.

And, at the same time…

British Ministry of Defense Stunned by Massive Data Loss…  the British MoD has lost a hard drive with the personal details of 100,000 serving personnel in the British armed forces, and perhaps another 600,000 applicants. This comes on the heels of the MoD losing 658 of its laptops over the past four years and 26 flash drives holding confidential information. (It emerges that the MoD outsources this stuff to EDS, which is under fire for not being able to confirm that the data was or was not encrypted.

And now we read that The World Bank was cracked last week as well…

So, as folks in the U.S. learn that (despite White House pledges that wire tapping and data collection would be restricted to security threats), hundreds of routine calls and emails from routine Americans are being routinely heard/recorded by U.S. intelligence agencies, we might all do well to assume that anything and everything we say or do anywhere near an electronic device is going at least to be overheard by “authorities,” and all-too-possibly lost by them into general circulation.

Back in 1999 Scott McNealy of Sun put it bluntly– and at the time, seemingly cynically– in addressing concerns over consumer privacy:  “You have zero privacy anyway.  Get over it.”   Nearly a decade later, it seems that what’s true in the commercial sphere is at least as true in the civic…

…And will surely continue unless/until citizens begin to demand of their governments– until we begin to demand of our governments– more competence.  And more respect.

The Infrastructure of Democracy…

As more and more of the economy in the U.S. and around the world shifts onto the internet, either directly or as an enabler, we need no reminder that our (personal and national) access to and command of new communication and computing technology matters absolutely to our prospects of prosperity.  And increasingly, the internet is central to the self-determination– to the democracy– that underlies.

On the sad occasion of the death of my friend Nancy Hicks Maynard, I looked back at a 1996 GBN White Paper she did on the future of newspapers (download here), and at the introduction to it that I had the honor to contribute:

The press, and more particularly the newspaper, have long played a special role in our lives. Democracy in the U.S. was born on a typesetter’s table and has grown with printer’s ink in its veins. But more broadly, journalism and the press have played a central role in the development and practice of democracy throughout the world because the right of self-determination is useless—or worse—without access to information.

Newspapers, as we know them, date from the Enlightenment; their roles as recorder of public agendas, as articulator of informed opinions and positions, and more recently, as public watchdog, have co-evolved with democracies. At the same time, newspapers have assumed increased importance in commercial life. Newspapers have withstood countless threats over these centuries from political authority and economic twists. Still, while they’ve changed over the years, the newspapers of today would be instantly recognizable (even if the layout and content would be puzzling) to Rousseau or Payne.

Over the last few decades, however, newspapers have faced a new threat: electronic communications. First radio, then television news have made themselves increasingly central to the societies they’ve entered (some would say, transformed). And these media have changed the place of newspapers in the ecology of journalism and democracy.

Now, with the spread of the Internet (and the dawning sense of what it may become), we seem at the verge of a much more revolutionary development: the advent of user-controlled and -defined media, where “personal news services” and “news-on-demand” might become the dominant themes. Clearly, such a direction would have profound implications for democracy…

A recent Pew study reminds us that the web is indeed an ever-more-important channel of news and information, an ever-more-central medium of civic dialogue…  the question is, how effective– how “clear”– a channel?

In a blog post this week, Vint Cerf (the person most often called “the father of the internet”) reports on an EU investigation into making broadband part of “universal service” (the basic connectivity/communications to which any citizen should have access).  Open networks– net neutrality– are key, the EU believes:  the Internet will thrive only by remaining free and open, but there are a variety of dangers that could close the net.

Download the EU Whitepaper exploring these issues (only 10 pages, and well worth reading) here.

It’s no secret that Vint and Google, for whom he is Chief Internet Evangelist, are advocates of net neutrality*; so it’s no surprise that Vint is heartily supportive of the EU’s initiative.  But what’s especially helpful about Vint’s recap is the clarity with which he (and the EU) deconstruct “openness” into it’s constituent issues:

This paper restates the danger of internet service providers using their “traffic management” powers “for anti-competitive practices such as unfairly prioritizing some traffic or slowing it down, and, in extreme cases, blocking it.” In order to prevent such a negative development, Commissioner [Viviane] Reding suggests legislation is required to ensure that Internet traffic is treated fairly and not blocked or slowed down. I’ve spoken out about this issue of net neutrality in the U.S.

In the paper, the Commission vows to help forge new copyright solutions to enable new business models to emerge. We’re looking closely at this issue.

The paper also makes a compelling case for open standards. It acknowledges the danger of “dominant players” leveraging “proprietary standards to lock consumers into their products or to extract very high royalties from market players, ultimately slowing innovation and foreclosing market entry by new players.” She promises that the Commission will use its regulatory powers to prevent such players from putting a brake on the web.

What impresses me most of all is how the Commission recognizes that an Open Internet requires a combination of these three points. For Europe to keep up in the global online race, it needs to sprint ahead powered by an openness recipe encompassing a neutral network, users rights, and open standards.

It strikes your correspondent that the key words here are “to keep up in the global online race”– a race that has an economic edge to be sure, but that is also about the pursuit of an ever-more-inclusive and involving participatory society.

Even if, as Vint suggest, net neutrality is necessary, it is not sufficient.  The infrastructure, however open, must be robust.  In an article on the shifting of global internet traffic away from the U.S., the New York Times recently noted:

Internet technologists say that the global data network that was once a competitive advantage for the United States is now increasingly outside the control of American companies. They decided not to invest in lower-cost optical fiber lines, which have rapidly become a commodity business.

That lack of investment mirrors a pattern that has taken place elsewhere in the high-technology industry, from semiconductors to personal computers.

The Times goes on to say:

The risk, Internet technologists say, is that upstarts like China and India are making larger investments in next-generation Internet technology that is likely to be crucial in determining the future of the network, with investment, innovation and profits going first to overseas companies.

Now that’s not, in itself, a bad thing (and certainly not an unfair thing– to the investor, the gain).  The concern is less that infrastructure is improving elsewhere than that it isn’t (at least at the same rate) here.

And with a national debt that is setting new records by the day– and its future implications for investments both public (e.g., see this) and, given the likely tax implications, private– it’s not getting easier to see how that infrastructure is going to improve on the pace that our economy– and our democracy– require.

Which suggests to your correspondent that those of us in the U.S. might usefully keep two things in mind as we navigate the sure-to-be-difficult next many months:  On the margin, act/manage/vote for openness; and on the margin act/manage/vote for infrastructure.  It won’t make the short term much worse– and it will help insure that we have a healthy long-term.

*One notes that Tim Berners-Lee, “father of the web” (and thus, Vint’s “son”?  “nephew”?) shares Vint’s commitment to net neutrality.  In the spirit of full disclosure, so does your correspondent…  who has the pleasure of Vint’s and Tim’s acquaintance, but is otherwise unrelated.

Pots, Kettles, et al…

A bad weekend for free speech… and for organizations, a potential challenge that’s both new and old…

• In recent weeks, the Kremlin has tightened security in the Caucasus province Ingushetia, apparently fearing the regime’s enemies may stir up trouble there while its troops have been occupied in Georgia.  On Sunday, Russian police arrested and shot to death the head of an Internet news service who had been critical of authorities in Ingushetia.  Reported as a “stray bullet” by TASS; see this AFP report or this WSJ story for a different account…

• As this Salon piece reports, Minnesota authorities, acting under the direction of Federal authorities, have infiltrated “vegan groups [!] and and other left-wing activist groups” in the Twin Cities area over the months running up to the Republican National Convention.  There seems to be little doubt that it was this domestic spying by the Federal Government that led to “the excessive and truly despicable home assaults” by the police over the weekend. (See also coverage by the Minneapolis Star-Tribune and Minnesota Public Radio.)

As nations turn their attentions to “managing” discourse within their own borders, there is all too usually an attenuation of real communication across their borders as well.  International relations become (even more completely than usual) a theatrical tool for influencing domestic opinion, at the same time that the prospect of genuine give-and-take among nations tends to decay into the brittle rhythm of “assert and demand.”

As recently as three weeks ago, that very wise observer of the global scene, Gwynne Dyer, was confident that there would be “No New Cold War (Probably)” ; last week, he was not quite so confident.  The events of this past weekend can only deepen that concern.

So even as we develop our personal positions viz. freedom of expression, we– those of us with a stake in or stewardship of organizations that do business directly or indirectly around the globe…  that’s to say, essentially all of us– should begin thinking about a global business climate in which the friction of unfriendly, if not downright hostile, borders are a much wider reality than they are now, or have been for a couple of decades.  There’s an entire generation of young people in organizations today who have never known business under those conditions.  Here’s hoping that they never do…  but better to “rehearse” just in case.

Besides, simulating this kind of not-very-pleasant “Bloc’ed-up World” might motivate more of us to do everything we can to avoid it.