The Libertarian Vision for Telecom and High‐​Technology

April 3, 2001 • TechKnowledge No. 1

The technology and telecommunications sectors of the American economy are increasingly under assault by politicians and regulators at all levels of government — local, state, federal, and international. Although the Telecommunications Act of 1996 reflected a growing consensus that competition and deregulation would bring tremendous benefits to consumers and entrepreneurs alike, the Act not only fell well short of this goal, but has actually resulted in increased micro‐​management of the communications industry. Worse yet, policymakers show an increasing willingness to extend the misguided regulatory legacy of the past to cover the Internet and other emerging technologies within the information services marketplace.

Policymakers must resist the urge to treat existing and emerging markets and technologies as their political playthings. Fresh thinking is needed and this thinking should be guided by three simple principles as policymakers consider how the Internet and the high‐​technology sector should be governed:

Principle #1First, Do No Harm: Just as this sound principle governs the medical profession, so too should such a “High‐​Tech Hippocratic Oath” guide public policymakers. The pace of technological change in this sector makes it almost impossible to establish timely policies that won’t be outdated as soon as they are put into place. While both entrepreneurs and industry giants can sometimes move at cyber‐​speed to avoid rapid technological obsolescence, it is apparent that governments and legislatures cannot. That’s the contrast between “Moore’s Law” and “Murphy’s Law.”

Computer and communications firms have been forced to come to terms with the reality of “Moore’s Law,” which holds that the computing power doubles roughly every 18 months while its price falls by an equally dramatic margin over the same period. In other words, they have to reinvent the wheel every year‐​and‐​a‐​half if they want to stay on top of their game.

However, lawmaking is often beset by “Murphy’s Law”- anything that can go wrong, will go wrong. Moreover, even the most well‐​intentioned efforts will likely take so long to move through the legislative “sausage factory” that most statutes or regulations will be obsolete or redundant by the time they finally take effect. Put simply, “Internet time” and “Washington time” are measured by two very different clocks. Policymakers must avoid quick fixes and supposedly simple political solutions to the complex problems posed by the realities of the new digital economy.

Principle #2Be Patient: The second principle policymakers should heed when considering high‐​tech policies is to exercise patience and regulatory restraint; to be willing to wait for the good results they allegedly seek, to develop naturally. This is not always easy in a town that believes there is a short‐​term political solution to every problem. Many politicians provide lip service to the benefits of the market and self‐​regulation, but then act to subvert the will of companies and consumers by imposing haphazard top‐​down regulatory solutions and protectionist regulation.

Policymakers must avoid activism and recognize their own ignorance. They should not attempt to impose market structures or determine outcomes. Instead they should respect the natural discovery process of the free market, and the spontaneous ordering of our fast‐​paced technological society. As these markets expand, evolve and mature, they will exceed any top‐​down creation of politicians.

Principle #3Embrace Change: Finally, policymakers must embrace technological change and its revolutionary nature. Learning to live with change is never easy. Firms, technologies, even entire industry sectors can rise and fall in a very short period of time. One day, CB radio and 8‐​track tapes are the hottest technology in the land; the next, they are as dated as disco dancing and bell‐​bottoms.

But sometimes such failure is a good thing. Yesterday’s industrial giant becomes today’s also‐​ran. Whether it’s IBM in the ‘70s or Microsoft in the ‘90s, no firm or technology can expect to remain king of the hill for long. In fact, if there’s one constant in the Internet world, it’s change. The New Economy is characterized by extreme volatility: the ongoing stock market roller coaster; techno fads; rapid technological obsolescence; etc. In fact, tomorrow’s Internet is not likely to be the Internet we know today.

Consequently, policymakers must realize that the Internet and the high‐​tech sector will challenge previous policies, existing programs, older institutions, and well‐​established industries. Legislators must be willing to change existing structures, laws, or political norms to accommodate or foster the ongoing expansion of the New Economy. While some Old Economy interests may not like the emergence of these new industry sectors and technologies, policymakers must not allow older companies to use old or new laws and regulations as a tool against their new competitors. The history of communications industry regulation is littered with lamentable tales of one industry sector using the club of regulation to beat their competitors into submission. Policymakers must reject such Luddite proposals.

These simple principles should guide any telecommunications or technology policy debates that arise. More specifically, these principles can be translated into a more concrete set of commandments for policymakers to follow:

  1. Any individual or entity should be free to create and offer to the public any technological good or communications service they want, whenever they want, however they want, and on whatever terms they and their customers find mutually agreeable.
  2. No individual or entity has a natural, inalienable right or entitlement to a specific technological good or telecommunications service.
  3. Free speech rights and the First Amendment are of paramount importance to individual liberty and should be fully honored and protected against government interference.
  4. Rather than impose administrative rules, policymakers should respect private property rights; unhindered freedom of contract; voluntary negotiations and standard‐​setting; private dispute resolution; other common law standards such as the law of trespass and torts; and the proper interpretation of the Commerce Clause of the Constitution as a guarantor of the free flow of interstate commerce.

The Cato Institute’s Tech Knowledge series of commentaries will seek to apply this libertarian framework to the exploding universe of high‐​technology policy issues in a consistent and ongoing manner.

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