Net Neutrality and the Academics Who Love It

What Faulkner once said about the American South -- "The past isn't dead. It's not even past" -- is now true of tech and telecom policy as well.

The perennial Great Divide in tech policy is about the merits of applying existing regulatory models to the latest technology. The question of the moment is about whether and how government should regulate Internet broadband. And the debate is now roaming into lessons-from-history thanks to a fascinating new book, The Master Switch, by Professor Tim Wu of Columbia Law School.

The book is an economic and political history of communications technologies over the past century or so -- the rise and fall of telegraph, telephone, radio, film, and TV, and the ascendancy of the Internet. Against all odds, it is a ripping yarn -- stolen telegrams that may have tipped the presidential election of 1876, an anti-Semitic priest censoring decades of Hollywood films, and so forth.

But it is also a serious history with a strong view about the pernicious effect of monopolies and oligopolies in technology. Wu's organizing thesis is all forms of electronic communication follow a predictable, tragic arc. An existing giant's death knell sounds when a band of raggedy outsiders, with little to lose, discover or popularize a disruptive and radically better technology. They usher in a glorious, chaotic, and discombobulating period of decentralized innovation. But, eventually and inevitably, along comes a charismatic leader or business with an iron will to power that leads to total domination of the market (e.g., Western Union, Ma Bell, Google, Apple).

The rise of the despot may be good news for the people of the kingdom -- at first. Mussolini making the trains run on time and all that. But just as Early Elvis became Late Elvis, inevitably the powerful turn tyrannical, becoming enemies of innovation, focused chiefly on strangling the next disruptive technology in the crib.

Wu marshals powerful historical evidence, but the lessons one draws from his book is the policy equivalent of a Rorschach Test. Already the Wall Street Journal has run not one but two reviews concluding that The Master Switch proves the need for Less Regulation. The Huffington Post, in contrast, has a piece concluding that the book proves the need for More.

Wu's own prescription -- described in the last 20 pages, after 300 pages of history told relatively straight -- is the so-called Separations Principle. This is the idea that information companies in the digital age must be required to stay in a single "horizontal" line of business. Either you create content (TV, movies, print), or organize content (search engines, social networking), or build devices to access content (phones, tablets), or deliver content (broadband). But please only one, thank you very much.

The reason, says Wu, is the same reason we have checks and balances in the Constitution. We can't have Apple (via the iPad, iPhone, and iTunes) or Google (via search) also controlling the content that we can read and watch. And Wu believes that this applies with particular force to the broadband companies like Verizon, AT&T, or Comcast, because Internet access is now the "last mile" pipe that carries all  modern communications.

Wu's vision has its strengths and weaknesses. A serious appraisal would take a second book nearly as long. But one thing is clear, namely that to Wall Street and many existing businesses it is heresy and treason. This is because nearly all of the nation's large information and technology companies are, in varying degrees, desperate to expand "vertically" -- into content, organization, devices, and delivery. Comcast buying NBC. Apple moving into music and video.

One way to understand the profound disconnect between Wall Street's vision and Wu's is as another in the many fights between town and gown. Skeptically, as an academic not subject to the discipline of meeting a payroll. Or, sympathetically, as a visionary free to pursue the public interest rather than an incumbent's bottom line.

Washington is of course the place where academic dreams of massively restructuring private industry often go to die. And Wu's vision doesn't go anywhere if government won't make it mandatory.

But counting his ideas dead on arrival would also be to ignore a more recent history. Wu and a group of closely aligned left academics have shown a genius for setting the agenda in Washington over the past decade -- although the jury is still out on how much they will actually get.

Indeed, if anyone ever tells you that ideas don't matter in Washington, just point them to the charmed trajectory of Professor Wu. He is a young, charismatic, motorcycle-riding legal academic, best known for coining the term "net neutrality." (Though, according to the New York Observer, he may be more famous on campus for making law students swoon.) Net Neutrality is the idea that there ought to be a law preventing broadband companies like Verizon, AT&T, and Comcast from improperly prioritizing certain Internet traffic (e.g., speeding up Hulu and not Youtube). A proto-Separations Principle of sorts.

Despite blistering opposition from broadband incumbents, the idea went from academic symposia to the Obama campaign platform in less than four years -- surely a record of some kind. (Much of the credit for popularizing the notion actually belongs to Professor Larry Lessig, who has shuttled among the Harvard, Stanford, and University of Chicago law faculties for the past two decades.) And just last week, the Chairman of the FCC announced his intent to implement rules making net neutrality the law of the land. (Full disclosure: I worked, until this summer, as a senior advisor to Chairman Genachowski and was involved in some of the earlier actions that led up to last week's decision.)

If this were not enough, the contribution that is actually most distinctively Wu's is the less euphonious concept of "wireless Carterfone." This is the idea that consumers -- not their cell phone company -- should be able to decide matters such as which software they want to download and whether to connect them to networks that can accept them.

Within a year of Wu's publishing this paper, the outlines of the idea were adopted by the previous, Republican chairman of the FCC for a swath of spectrum worth roughly $5 billion. And this was over the vociferous objections of the major wireless companies, who until then had been the chairman's leading supporters.

Wu is not alone in his opposition to the crossing of lanes in information industries -- or his desire to have government serve as traffic cop. He is one of perhaps half a dozen closely-allied academics on the law faculties of elite universities like Harvard, Yale, Michigan, and Stanford (at varying times) who share the same concerns and a critical but nevertheless firm belief in the need for a broad government role.

Inexplicably and disappointingly, there is little counterweight in the elite legal academy on the side against. A few high-profile academics, mostly on economics or engineering faculties, have written against Net Neutrality and related ideas. But they remain less effective and, apparently, less interested in making an impact in Washington.

The non-interventionist ball is, for the most part, being carried by lobbyists, think-tankers, political staffers, and other versions of homo Washingtonius. These are powerful forces, with a track record of success. They are especially skilled at arguing why well-intentioned government action will lead to perverse results. (And they often have a point -- government is quite capable, left to its own devices, of doing stupid and destructive things.)  But they are certainly not writing books like The Big Switch.

John Maynard Keynes, in the General Theory, put the case for academics in politics most memorably. "Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back," he wrote. "I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas."

And perhaps the strongest evidence in favor of Keynes's theory is Keynes himself. Just ask Richard Nixon or, more recently, conservative Judge Richard Posner (who penned "How I became a Keynesian" last year).

So what are Wu's chances of actually seeing his ideas turned into policy? The lessons from history are yet another Rorschach test.

In the annals of tech and telecom, the professor to beat is Nobel Laureate Ronald Coase. His classic 1959 article, "The Federal Communications Commission," (PDF) lays out the case for treating spectrum licenses as marketable pieces of private property. Half a century later, the FCC regularly conducts multi-billion spectrum auctions which, in essence, do just that.

But even Coase's example is mixed. His article is intended, among other things, as an arrow at the heart of the broadcasting industry. His beef is that the government gives broadcasters spectrum, for free, on the condition that it be used for broadcasting and nothing but. A better policy, he says, would be to sell a property right in particular frequencies and let market forces figure out their highest and best use.

And yet the broadcast industry remains standing -- propped up by government spectrum policy. To be sure, Coase's idea of repurposing broadcast spectrum is frequently revived -- most recently by Secretary of Commerce Locke and outgoing Obama economic advisor Larry Summers (another professor!) and in the FCC's recent National Broadband Plan.  And during the last decade, the government did reclaim about a quarter of the broadcasters' spectrum. (In a delightful irony, this is the very same spectrum that the Republican Chairman of the FCC auctioned in 2007-08 with the Wu-inspired Carterfone rules attached.) But the antiquated broadcast spectrum model has proved maddeningly durable.

The most direct historical analogy to Wu, however, is the lesser known but far more fascinating Professor William Baxter, the stiff-necked Stanford Law School antitrust professor tapped by Ronald Reagan to head the Justice Department's antitrust division.

As Steve Coll describes in his masterful history of the breakup, The Deal of the Century, Baxter was an academic first and foremost, dripping with contempt for Washington Realpolitik. He inherited the Carter-era suit against AT&T, which was still in its early phases, and everyone expected that the Reagan Justice Department's first order of business would be to drop it.

But Baxter believed that the existence of the Bell monopoly was an affront to sound antitrust theory and so he accelerated the push towards breakup. And. by a strange turn of events, both the Attorney General and the Associate Attorney General were recused from the case. (They, like so many prominent American lawyers at the time, had worked for the Bell companies before entering government). So Baxter was in charge of representing the Justice Department at the White House.

He was opposed by every other relevant member of the Cabinet. Presided over by Reagan himself, the group met to decide whether to end the breakup attempt. Baxter laid out his case for maintaining the suit. The Secretary of Defense asserted that breakup would compromise the military's telecommunications system. The Secretary of Commerce, stated that it would be a disaster for international trade. They had prepared a joint report to that effect, signed by more or less every Cabinet agency besides Justice.

As Coll describes it, at the close of the meeting, all eyes turned to Reagan:

I don't completely follow everything that everyone is talking about," the President said. "But I do know one thing...." And then Reagan launched into the same story he had told on the campaign trail in 1980, the one about how much it used to cost to mail a letter from Hollywood to New York in the 1940s versus how much it cost to call long distance, and about how the cost of postage had gone up while the price of the same long-distance call had fallen drastically. Only this time, Reagan left out the punchline he had used on the stump: "And of course, the government is suing the phone company." Instead, he just tailed off and left the story hanging, without indicating exactly what the point was.

Baxter took the view that the President hadn't told him to drop the suit. And so on it went.

It is tempting to draw from the AT&T breakup some comfort for the chances of professors in Washington. But the real lesson is closer to the reverse. Setting aside the merits of the case and looking only at practicalities, there are about 1,000 plausible ways that it could have not happened, and just one way that it could have. Which is in fact the way that it did. (There were plenty of other twists and turns -- involving Congress, the FCC, and the courts -- just as implausible as Baxter's meeting with Reagan.)

Whether Wu, Lessig, and their allies will prove Keynes right or wrong when it comes to the Internet is a book still being written. I happen to think that, on balance and in the long run, the odds are more against them than for them. (Keynes would probably hasten to add that in the long run we are all dead.)

What seems certain, however, is that the ultimate answer from Washington will be something that falls in the muddy middle. That is the real specialty of our particular system of government -- and also the enduring lesson of Keynes, Coase, Baxter, and Wu.

Coase did revolutionize spectrum policy for the cell phone industry, but not for broadcasting. Baxter broke up AT&T, but it has effectively been re-formed (though looking quite different than it would have had there been no breakup). Wu and Lessig have pushed Net Neutrality and Wireless Carterfone successfully on to Washington's agenda, but the ultimate rules they will get are almost certain to be less than they would have sought.

And Keynes? As it happens, the quote typically attributed to Nixon -- "we are all Keynesians now" -- was first uttered half-a-decade earlier by the famed conservative economist (and Nobel Laureate) Milton Friedman. (Nixon said something similar, but less quotable, in 1971). The quote first appeared in Time magazine in 1965 -- and here is Friedman's letter of correction:

Sir: You quote me [Dec. 31] as saying: "We are all Keynesians now." The quotation is correct, but taken out of context. As best I can recall it, the context was: "In one sense, we are all Keynesians now; in another, nobody is any longer a Keynesian." The second half is at least as important as the first.

This seems as clear a description as any of what is likely to happen when academic ideas come to Washington.

Images: 1. marssipa/flickr; 2-3. U.S. National Archives.