11/7/14

The libertine days are over: How the material world is reining in Internet companies

Early in the rollout of the Internet, leaders of the emerging online companies described it as an immaterial world of virtual objects and virtual activity that was not subject to the economics, financing, laws, or business arrangements of the material world. They portrayed it is as world without structure in which informality and collaboration among users would guide its operation. They described it as global phenomenon beyond the reach of governments. Many expressed highly utopian visions of the internet. Most embraced a highly libertarian philosophy; some an anarchistic one. These leaders primary interacted with each other and deluded themselves into believing what they were doing was unique, hallowed, and beyond worldly oversight.

Internet service providers saw themselves as facilitators without responsibility for who used them or for what purposes. Companies such as Google, Yahoo, and Huffington Post created value extracting models in which they expropriated the work of others as part of their essential operations and made money from its use by creating saleable audiences. Social media, such as Facebook, developed by exploiting the common human need to communicate with others and they profited at the price of users' privacy. These intermediaries allowed the public and enterprises to communicate all manner of content without hindrance.  None of the uses and business models they pursued raised political, business, social, cultural, or ethical concerns among the creators of these services.

The views of internet-based firms and their creators resulted partly out of youthful naivety, but also because of a lack of interdisciplinary perspectives. Some were self-educated; others the products of highly technical educations. Most lacked understanding of society, political economy and economics, and human behavior. It narrowed their understanding to the point they did not perceive or comprehend what the Internet was actually doing and the  social implications of their actions.

Two decades into the modern internet era (earlier eras included private telecommunication data systems and military and academic networks) the perspectives of internet firms are being altered by realism and they are increasingly feeling the control of the world to which they thought they didn’t belong.

We are seeing the internet giants increasingly fall under the regulation of nation states and multinational government. The libertine unrestrained days of internet firms are over. Commerce, capitalism, and state power are all forcing Internet firms to recognize reality.

This change is manifest in number of ways. Governments are requiring the companies to behave because the firms want the benefits of raising capital through stock markets that are regulated and protected by states. Governments are increasingly requiring internet service providers and intermediaries such as search firms to report and block child pornography, remove clear copyright violations, and address trolling and stalking. European courts have recognized a right to be forgotten that is forcing search firms such as Google to remove links. The ability to make billions of dollars through tax avoidance by moving across national borders to tax havens is being challenged by governments everywhere. Police are requiring assistance from the companies for investigations of criminal activity by internet users. Security officials are asking Internet companies to reduce the use of their services for communication and propaganda purposes by terrorists and others in armed conflicts . Countries worldwide are demanding that ICANN, the arbiter of internet structure and names, be placed under multinational governance.

As much as the tech firms would like to ignore the government demands and continue to pretend they operate in a detached virtual work, they do so in peril of millions of dollars in fines or orders to cease operating in countries around the globe. The problem is that they are big businesses. And there is the rub. Although they would like to think they operate in a separate virtual world, they also operate in a material world where users and advertisers reside, where advertising and search placement payments take place, where content is created, and where they locate physical offices. These are within nation states that construct legal and banking systems, enforce contracts, and collect taxes. Consequently, the big Internet firms are now under the jurisdiction of not one, but as many governments as the nations in which they conduct business and in which their services are available.

In each of these countries Internet firms face issues of commercial and social legitimacy. Numerous countries are considering taxes on ISPs, search firms, and aggregators to compensate the content creators whose products make the internet businesses functional. Domestic businesses argue they are being exploited by these foreign giants and citizens realize that their personal information is making social media and search firms rich. This creates a backlash in which the operations of the internet firms are seen as—at best—exploitive and shameless; at worst they are seen as nefarious and outrageous. No wonder there are increasing political demands to constrain the companies in countries worldwide.

Many of the internet companies are now arguing that if they are regulated, authoritarian governments will do so inappropriately. They are not wrong in that view. History has shown that authoritarian states have controlled the previous communication systems such as the post, telegraphy, telephone, and broadcasting to their advantage and that even liberal democratic states have done so on occasion.

That, however, is no reasons to provide internet firms license that no other firms or individuals have. We are all part of society, whether we want to be or not. With the benefits of society come responsibilities. Those responsibilities can only be truly be avoided by dropping out of society and giving up its benefits---something none of the internet companies really want to do. There is just too much money to be made.

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