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The True Faith of Internet Governance: Statism Finds Its Champion

A portion of me sympathizes with Richard Hill. He argues passionately in his recent article, “The True Stakes of Internet Governance” for a statist position on Internet governance. It is hard to be an unheeded prophet; difficult to take positions that are not in the comfortable mainstream of what, as you perceive, are lemmings heading for the cliff. I know the feeling.

Anyone who has been acquainted with a few ICANN meetings, or read Milton Mueller’s caustic description of the origins of ICANN, which saw it as a compromise negotiated between two contractors to the United States government, has probably developed a degree of cynicism regarding “bottom-up consensus” policies. ICANN is accountable to no one but the US Department of Commerce, and the oversight is benign and limited. The almost casual way in which the United States established ICANN, as a California not-for-profit corporation on a contract to the US Department of Commerce, causes me to wonder why anything as important as the Internet’s naming and addressing functions was founded on so flimsy a basis as a government contract, or that its decisions can held up by a member of Congress protesting to the Department of Commerce.

Yet, as soon as one thinks about the issue, the answer appears: people did not want another ITU, at least the people who mattered in the Clinton administration in the late 1990s. Many rational observers think that they were largely right in that decision, even if ICANN does not merit anything but guarded approval.

My purpose here is to address the arguments raised by Richard Hill in his paper. They are serious, and deserve consideration and, to a great extent, refutation.

We are not comparing Platonic ideals

In matters of practical judgment, such as here, we are not comparing Platonic ideals of participation, equality, and representivity, on the one hand, and ICANN on the other: we are comparing two flawed institutions. This is the major weakness of Mr. Hill’s propositions. Mr. Hill’s arguments could have been made more effective by addressing the obvious faults of the alternative to ICANN, that is, the ITU, which he fails to do.

Mr. Hill has produced an admirable statist manifesto, which however moving, assumes two points that need to be proven, or at least reasonably demonstrated.

First, it seems that Mr. Hill assumes that US corporate influence is bad, state influence is good. As he describes the operations of ICANN and its supporters, he makes constant appeal to the unstated premise that weakening the power of states is, by its nature, bad. This is not necessarily or always so.
Second, in my reading, Mr. Hill’s criticism of US dominance of the Internet proceeds from a deep distaste for commerce itself. If the distaste is not for commerce itself, it is for the power that commerce wields in US Government decision-making, and in its creature, ICANN. Much as one might sympathize with a critique of US political culture and law-making from this point of view, his argument neglects to engage in a balanced consideration of the evils of commercial influence in decision-making versus the evils of governments as decision-makers.

My premises

As I am criticizing Mr. Hill’s premises, I should be clear about mine. As my first premise, I cite Disraeli, “power has only one duty—to secure the social welfare of the people”. The competing governing arrangements for the Internet are to be weighed in that balance.

My second is that the Internet has and continues to accomplish a revolution in the application of computers to problems, in human potentials through networks, and to the transformation of business models. This revolution cannot be resisted: it must be adapted to.

My third is that governments have a useful and essential role to play in setting standards, enforcing rules, and endeavouring to achieve the public good.

My fourth is that businesses have legitimate interests in the evolution of these standards and rules, and benefit as much as consumers in sound government and the enforcement of sane rules.

Money at Issue

Let there be no confusion on this point, though the essential criterion by which the ITU and ICANN must be judged is human welfare, the motive that animates many partisans of the ITU/statist position is outrage at the loss of their economic privileges and subsidies, which were secured in the pre-Internet era. How this outrage has been elicited by the Internet is worth telling.

Before the Internet was created, what we now call ‘applications’—a post-Internet term—were embedded in hardware and charged out as “services”. Changing the functions of a telephone system was nigh impossible, because mechanisms had to change end-to-end, costing billions. The advent of the Internet Protocol suite dissociated the applications from the transport of signals. In the language of the Open Systems Interconnection (OSI) model, layers one through three remain the carrier’s concern, while the applications (layer 6) belong to the new players. Since the old telecommunications providers had essentially one “application”—as the term is now understood—voice telephony, the Internet has had the same effect on telecommunications carriers as Uber promises to make in taxi licensing. The monopoly profits and empires that were created out of the legal privileges to operate a telephone company have been nearly annihilated by the Internet. In particular, even if a country wanted to pursue an indigenous socialist telecommunications policy, the international subsidies on which so many state-owned telephone companies relied have evaporated.

My first acquaintance with Internet politics came from a study I and some colleagues conducted in 1997 of International Charging Arrangements for Internet Services. The study was commissioned by a consortium of Asia-Pacific nations, which were shocked and consternated that the Internet’s revenue flows did not work on telephone settlement principles. Many telephone ideologists are still seeking political arrangements that would have the effect of enabling them to recover their lost subsidies.

Accordingly, I do not as a rule use the term “the Internet” in the broad sense in which Mr. Hill uses the term (p.3), which conflates applications, protocol layers and transport. When considering Internet-related matters, one must keep in mind the separation of functions between transport and applications. The Internet broke up what used to be a unified industrial structure, and allowed new players to scoop up revenues that the carriers persist in thinking belong to them.

Let us consider an analogy with cars and roads. The telephony era was one in which, by analogy, the telephone carrier (road builder and owner) both provided the road (telephone lines) and the car (telephone calls). Today, we are interested in the cars, rather than the roads, even though roads cost way more. The Internet revolution has metaphorically dispossessed the builders of roads from the profits they were able to extract from the old business model. The car manufacturers are the applications makers, and the road makers—the carriers - are annoyed that they are not getting the money they used to from running their toll roads on “cars”—voice channels - they rented to users.

As Mr. Hill demonstrates, the old order does not lack for defenders.

The Main Arguments of Richard Hill

Mr. Hill’s main arguments are that —

a) The current system, which features the participation of commercial interests, cannot for that reason be democratic. The governance of the Internet by nation-states, whether acting alone or by treaty organizations, is more democratic.

b) The services provided by transnational corporations are in general monopolistic;

c) The power of the transnational corporations limits the power of governments to build out the necessary communications infrastructure, and that this power is increasing rich-poor inequalities; and

d) Arrangements for the governance of domain names and IP address assignments have something to do with international income transfers, or surveillance by security agencies, or network neutrality, or transborder data flows.

a) The democratic deficit

Mr. Hill argues that the current governance model—the multi-stakeholder model—is largely undemocratic “because it is dominated by a professional coterie of representatives of commercial and political interests” (at p.2) and that the role of transnational corporations in policy-making is “blatantly undemocratic” (at p. 5).

Corporations are not democracies; but they are run with an acute sense of what the public wants and, if they fail at this task, their competitors, shareholders and boards of directors will see that their management is replaced.

Mr. Hill argues (p.5) that the role of transnational organizations cannot be in the public interest “because, by definition, the role of private companies is to maximize their profits.” He allows that telecommunications markets have been ‘natural’ monopolies, and that is why we have national governments to constrain them.

There are several errors of omission here.

  • The democratic deficit of ICANN’s way of proceeding is never measured against the democratic deficit of the ITU’s way of proceeding. Both are dominated by coteries, but the selection process differs fundamentally. In the case of the ITU, the coteries are composed of officials and delegates of states; in the case of ICANN they are composed of delegates of companies of many sizes, states, intellectual property interests, and others.
  • Governments have often favoured their telecom suppliers as national champions, defeated attempts to introduce competition to them, and used them as cash cows to bolster government revenues, despite the fact that they could collect more revenues by liberalizing telecommunications carriage. Governments are not necessarily the friends of consumers. The more corrupt the state, the less it can trust the tax system to produce revenues, so it resorts to pillaging the national carrier for revenue.

b) Transnational companies are offering monopolistic services, and the Internet is increasing the influence and importance of transnational capitalism

I can see it now. It is the year 1580AD. Any ship tough enough to sail the North Sea, and possessing jib sails, is tough enough to get around the Cape of Good Hope and reach India, and later, the Spice Islands of what is now Indonesia. Transnational companies, such as the Dutch East India Company, and Portuguese, English and French rivals, are increasing the influence and importance of transnational capitalism, aided and abetted by national governments in Atlantic-facing Europe. They are also eliminating the profits of the Republic of Venice and the Islamic countries between India and Europe in the spice trade, by ending their spice monopolies based on overland transport.

The drive to avoid the Islamic powers’ control of the spice trade caused Christopher Columbus, a Genoese sailor, to be commissioned by Ferdinand and Isabella of Spain to sail west, and we all know what trouble that has led to: more transnational capitalism from that British offshoot of transnational capitalism, the United States.

This time it is the Internet, and those wicked Atlantic powers are at their old game of world domination through better communications, again. After 500 hundred years of western Atlantic naval hegemony, the capacity of some people to be shocked, shocked! by the eternal search for power is a continuous source of wry amusement. Be that as it may, it is now the Internet and its application creators who are bypassing the now decaying telecommunications monopolies.

More seriously, the argument that the new applications providers are engaging in monopolistic pursuits is risible. Infrastructure monopolies have been favoured by the kinds of states that favour greater ITU control of the Internet, so there is a large element of pot-calling-kettle-black here. Further, monopolies in applications are constantly challenged or routed around. They are susceptible to low-cost entrants with superior code. Fundamentally, the Internet creates a market as large as all connected devices in anything conceivable. It is true that a competitive advantage in code may prove to be much more important than a competitive advantage in physical apparatus, but the success of some companies in occupying Internet niches is no guarantee they will not be replaced, diminished or made obsolete. Think of Microsoft’s “monopoly” over operating systems.

c) The power of the transnational corporations limits the power of governments to build out the necessary communications infrastructure, and that this power is increasing rich-poor inequalities

Once again we observe a confusion of applications with transport. It is true that the international voice calling subsidy regime has been rendered irrelevant with the decline of very expensive voice-minutes of long distance calling. The voice calling “settlements” regime served as an important income transfer mechanism from callers in the First World to telephone companies and governments in the Third World, if I may be permitted such obsolescent terms.

Governments in many parts of the world understand the Internet as an agency depriving them of accustomed opportunities to raid their national champion for revenues. States have regulated domestic telecom operators to achieve many purposes: consumer protection from monopoly power, regional transfers of income from callers in one region to callers in another, as opportunities to engage in graft through corrupt licensing practices, and as means of keeping unionized telecom workers quiescent and loyal.
Nevertheless, none of the purposes for which governments enable infrastructure to be built is affected by the existence of the Internet, and the transnational suppliers of applications. If the Internet deprived the local national monopoly of its international voice revenues, there are plenty of ways of solving that problem than insisting on global control of applications providers, through a state- based treaty organization, which is really what Mr. Hill argues is necessary. If this issue were about telecom investment in poor countries, it would be difficult but relatively easier to solve. Money could be found. But it is not about money; it is about who controls what, as Mr. Hill recognizes.

Mr. Hill also believes that the power of multi-national firms, assisted by their control of ICANN, is increasing global disparities. There is not room to engage in statistical refutation of this oft-repeated but invalid proposition in this paper. I invite you to take a simple test. Look at the labels on your clothes. Until recently, I never saw “Made in Cambodia”. I thought Cambodia was the place where Communists slaughtered a third of the population to achieve an earthly paradise. That was 1975. Today Cambodians make shoes and shirts. Manufacturing is shifting as the Industrial Revolution moves from Lancashire to Borneo in the space of 300 years, moving through Japan, China, Poland, Mexico, Brazil, Cambodia and every other country on its way.

The second point about income disparities is the freeing of human potential. In an interconnected world, human potential is able, through computers, to reach markets across divisions of nation, ethnicity, class, religion, and caste provided they have connectivity—which is an infrastructure question under the jurisdiction of local governments.

Income inequalities within countries are increasing, as the working classes in older industrial countries are confronted with immigrant labour, and as products and services can be manufactured or provided from off-shore. The increase of domestic and international competition is powerfully assisted by global communications, as it has been in the past by the jib sail, coal-powered ships, turbines, the telegraph, and international standards, such as the shipping container and the interconnected telephone network. Competition is not only increasing between states, it is increasing within states. The increase of domestic and international competition is a feature of existence, and a far deeper phenomenon than ever the regulation of applications providers by treaty-based organizations could solve. None of these phenomena arise from ICANN’s particular structure, and none is cured by submitting applications providers to the jurisdiction of the ITU.

d) Arrangements for the governance of domain names and IP address assignments have something to do with international income transfers, or surveillance by security agencies, or net neutrality, or transborder data flows.

At this phase of the argument, the linkage between the activities and role of ICANN and its related agencies, and the concerns of Mr. Hill for distributive equity, has broken.

The entire system of domain name administration is simply not as important as Mr. Hill and many others think it is. I give two reasons. First, search engines exist and reliably find Internet resources. Second, the whole ICANN system rests of a consensus to use it, and would fail if there were ever a significant international consensus to use an alternative root.

While all domain name look-ups rely on a root server, alternative domain name roots are available and could be used to avoid the entire system administered by ICANN. I am not saying this is a good idea; but if a faction of nations hostile to ICANN wished to set up an alternative root system, they could do so.
As to IP address assignments, the world is on track to break through the limitations of IP version 4 and get to the squijillions of numbers available in IP version 6. There will be IP addresses for each of your shoes, credit cards, shorts, keys, and you, if you want them, as soon as people find a use for addressing their belongings. Street lamps need addresses. Any object we can conceive will findable on the Internet with its IP address.

As to the relationship of the influence of transnational corporations on ICANN, on the one hand, and the surveillance of the Internet by state security agencies, I fail to see one. Computers have been invented, encryption is here to stay, and codes will be broken, sooner or later. None of this has anything to do with ICANN or the ITU.

Whether or not “mass surveillance can be stamped out by legal means”, as Mr. Hill proposes, I fail to see the relationship of ICANN or the ITU to any of this.

Net neutrality is another irrelevant rabbit Mr. Hill is chasing after. I sat on a panel of Canadian telecommunications regulators that passed a well-received judgment on Internet traffic management procedures, which included net neutrality. It had nothing to do with ICANN, the United States, or transnational corporations. So far as I have been able to tell, the Obama regime has not seen fit to replace Canada’s current government for helping content creators against carriers, or carriers against denial of service attacks.

As to that old shibboleth, controlling transborder data flows, the mercantilist dream never dies. If it is better—that is, cheaper for users - for data not to cross borders, then build internet exchange points within one’s country. That is entirely a matter of local jurisdiction. If Mr. Hill’s objections go deeper, and he wants data not only to be carried but also to be processed within national boundaries, or subject to international regulation, then he should argue why this degree of regulation and inefficiency benefits users of the Internet.

So what is bugging Mr. Hill?

What Mr. Hill appears to me to propose is that national governments, assisted by the local telecom operators, exercize power over the suppliers of the applications. This, he believes, but does not explicitly argue, would be best achieved by submitting the addressing and naming functions of the Internet to the jurisdiction of a state-based treaty system, which would impose those reductions in national sovereignty necessary to achieve the required degree of international coordination.
Such I result, I argue, would be to the detriment of the interests of their countries’ citizens and, of course, those nasty multinationals that provide the applications.

Each side has reasonable interests to defend and advance. But in a fight between telecom operators and their governments, or governments and their telecom operators, on the one hand, and Internet-based applications providers, Hill’s proposals assume that all good emanates from a tight collaboration of state and local distribution monopoly, against transnational providers of applications.

I am led to infer that something greater than international money flows is disturbing the tranquility of Mr. Hill’s worldly reflections, and that something deeper is bothering him than improved arrangements for the coordination of IP address assignments and the management of domain names recognized by a common root server.

It seems to me that what most bothers the statists is that the Internet has broken up the tight controls that states used to be able to exercise over thought, expression, and access to information. I could be wrong. It might be simply a matter of distaste for the United States and its commerce-driven governmental system.

Those of us who lived in the days of tightly-controlled telecommunications and broadcasting structures, such as characterized the 20th century, have welcomed the bracing possibilities of the Internet, which has linked computers, and the human beings empowered by them, more effectively than treaty-based obligations ever could. It is important not to romanticize the Internet, but it is more important to get the big picture right. The tightly controlled signals transport system of the 20th century was shattered by the Internet. It is still possible to achieve police state goals through communications, if that is your country’s desire, but it has become a lot harder.

If Mr. Hill could achieve his desire of taking us back to the ITU world, the carrier-monopoly world, we would experience something like a Counter-Reformation, and the closing of human possibilities from a different direction than unbridled commerce. Personally I do not want to go there, and most of the liberal market societies of this world do not either. Nor do I want unbridled private sector monopolies of distribution or of applications. There is a role for governments in this, and they already have the powers they need to control monopolies and market power.

If Disraeli’s maxim “power has only one duty—to secure the social welfare of the people” is the criterion by which we judge government by the ITU (or its equivalent) or government by ICANN, then my conclusion is that Mr. Hill’s arguments have failed to demonstrate the superiority of the ITU model. I would go farther, and say that, by confining himself to a critique of ICANN and the forces that sustain it, without reasonably examining the statist alternative, he has failed to engage the relevant issues.

By Timothy Denton, lawyer, former national regulator (CRTC)

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