Regulation
States, and Information Relationships between owners, producers, consumers, seekers, users of information. What role should government have to intervene? Protector of rights (negative) or Facilitator/creator (positive). The `public interest'. Types of Roles REGULATOR: make rules about content, ownership, use, standards. CENSOR: inhibit socially undesirable information. FACILITATOR: incentives and subsidies(e.g. Canadian mags, artists, scholars). PROVIDER: government information (collection and dissemination), state-owned communications (StatsCan). Some Examples
National interest Global competition and harmonization. National security Encryption exports, `big brother' technologies. Data protection Data mining, profiling, rights of data subjects. Protection of culture Split-run magazines, Canadian content Government and the Internet: What's the Problem?
Traditional media --> licensing. Now: split between delivery service and content. Level playing field for 'bad guys'. Web is global, laws are national. What should we / can we do about... Child Pornography? Hate groups? Online gambling?
The price of freedom and openness?
Some examples Patriot Act and Service providers. Yahoo France and Nazi Auctions (liability of ISP's). Privacy protection US vs. EU. Taxation of online commerce, gambling. Online pharmacies in Canada. Possible options (Economist article) Cross-border laws, treaties, standards. Self-regulation instead of laws. (Internet Content Rating Association). Allow networks, technologies to regulate and filter. Internet & Authoritarianism Utopian myth: Internet freedom and openness. China, Saudi Arabia: filtered Internet. Unholy alliance between Western surveillance companies and Chinese governments. Tool of economic growth and political control. Examples of government-controlled Internet Singapore: `intelligent' island. China, Saudi Arabia, filtered Internet. Social consensus. Authoritarian states and digital commerce. Surveillance and marketing.
Familiar problems of Internet Economy Not ad-supported. Problem of `attention'. Granularity: - No longer pay for aggregate packages, only relevant pieces (pay-per-view, timeshifting) - Info targeted to specialized needs. allows smaller businesses to innovate.
Good consequences. Friction-free Capitalism. (Bill Gates) Low transaction costs.
Better relationship between buyers and sellers. Informed buyer, relationship-oriented seller. Bad consequences Split between basic and high-end (enhanced) services. Corporations try to control `choke-points' of the network. Corporations try to control standards. Open Access and Communications regulation TV: transmission path (pipes) and info service joined. Dial-up Internet: packet neutrality (enforced by law). Uses of network to remain open. Broadband Internet: `tagged' packets, preferential treatment. Old Economy Based on employment of capital and labor alone. Value is produced through: (1) high consumption of matter and energy: saving labor (2) capital controlling labor through management and technology Standardized products (consumers need little info). Scarcity and Economics Producing and distributing scarce things. Efficiency depends on paying attention to marginal costs. (Electricity prices, caps and subsidies) Advantage of markets. Disadvantage of markets. Unpriced costs. Market `ideal': produce right amount of each thing, satisfy the most preferences overall.
Information not a normal market commodity Info products: Marginal costs approach zero. Information goods are non-rival, non-excludable. Information often benefits society more when shared. Free info exchange produces credibility, reputation or network effects.
Examples of E-economy Buying and selling on the Internet ebay, product reviews, discussion forums Discount e-brokers, trading stocks on-line Medical information, information on demand. Scarcity and Economics Producing and distributing scarce things. Efficiency depends on paying attention to marginal costs. (Electricity prices, caps and subsidies, substitutes) Advantage of markets: produce right amount of each thing, satisfy the most preferences overall. Market Failure Unpriced costs & benefits. Externalities. Negative externalities: subsidize producers or consumers. Overproducing cars. Pollution as classic case. Positive Externalities of Information, Knowledge & Research Examples of PE's: scientific discovery, neighbour's tree, on-the-job training. Why research, worker training is under-supplied in free market. Solutions: Intellectual subsidies, property, public education.
Information not a normal market commodity Info products: Marginal costs approach zero. Information goods are non-rival, non-excludable. Public goods. Information often benefits society more when shared freely. Free info exchange produces credible brands, reputations, network effects. Interdependency of markets and governments
Public investment: Defense research helped create Internet. Forced pooling of basic research results to speed defense industry innovations.
Myth of free market as foundation of innovation
Stock market boom. Venture capitalists. Business success stories (Apple computers) Non-market sources of innovation Public science and basic research. Subsidized education: England and Germany examples Economic and technological advantages of social equality. Ebay and free info (buyer/seller ratings, etc.) Final Advice for Papers Plagiarism warning. Citations and Reference lists. Why didn't I get the `A' I paid for? (See Senate explanation of grading scale.) Evaluating Stickiness Universal middleman. Amazon, Ebay, Microsoft. Linked enhancements and services. Stickiness: making `switching' inconvenient. Is stickiness good for consumers? Microsoft's monopoly
Natural monopoly. Stickiness and benefits of uniformity, etc. Common experience, predictable environment. Convenience or unfair stifling of competition and innovation? Network effects: lock-in.
More users more value for the next user. Most products: diminishing marginal returns. Platform products: increasing marginal returns. QWERTY keyboard, operating systems.
First-mover advantage. Arthur's view Prospects of lock-in: drives innovation. Winner-take-all. However: Need for more gov't scrutiny. Are monopolies all bad? Conflicting values within capitalism. Means vs. End of capitalism: Rewarding winners Social progress Microsoft's `Anti-competitive' Practices Exclusionary licensing "If you want Windows, you must..." (Compaq) Bundling, integrated products. Browser wars. Isn't Internet Explorer free? Are consumers being hurt? Secretive code. Critical Perspectives Corporations shouldn't decide public values, society's priorities. Controlling the Internet means controlling much more. Monopolies in `public interest' areas require scrutiny. What if MS tried to buy Google? Good `stickiness' and bad `stickiness'. Proposed Remedies Complainants wanted: Break-up remedy. Prohibition against bundling. Regulation of practices (instead only complaints). Settlement includes: No compulsory bundling or `icons'. No coercion. Reveal more code, improve compatibility. Oversight team at MS headquarters. Jamie Love, director, Consumer Project on Technology From Salon Magazine: http://www.salo...