It's time to "get us on offense and scare the hell out of Google, Facebook, Twitter," declares Phil Kerpen, top dog at the avowedly free market American Commitment. He has concocted a strategy for conservatives, described in a memo obtained by Axios, which calls for government to treat social media platforms not like the newspapers of the 20th century, with unencumbered speech rights, but like the railroads of the 19th century—as "incumbents with market power [who] therefore pose a serious threat" to society.
Meanwhile, the "establishment" is eager to regulate new media, too. Three senators—two Democrats and a Republican—have proposed a bill to extend campaign finance disclosure rules to the internet, constraining who is allowed to buy online advertisements. Alarmed by Russian provocateurs and by the suspiciously improbable electoral triumph of Donald Trump, they aim to bring the wonders of McCain-Feingold to broader information markets.
History speaks loudly on the merits of these ideas. Twentieth century regulatory policies dedicated to furthering "the public interest" in media—the Equal Time Rule, the Fairness Doctrine, the licensing of broadcast radio and television—triggered perverse outcomes that squeezed competition, pre-empted innovation, and quashed free speech. They scorched the very values they were ostensibly designed to advance.
Ajit Pai, the Trump-appointed chair of the Federal Communications Commission (FCC), seems to understand this. He moved decisively this fall to roll back "Title II" regulation of internet service providers (ISPs), the "nuclear option" deployed in 2015 to impose "network neutrality" on the web. But Pai isn't the only player on the field, and his good work could go up in the smoke of a 4:30 a.m. tweet issued from the Mar-a-Lago bowling alley.
A Disturbing Legacy
In 1974, the U.S. Supreme Court found the Miami Herald to be free of any obligation to extend Pat Tornillo, a candidate for the state legislature who had been blasted in a Herald editorial, a chance to respond. A 1913 Florida statute had created such a "right of reply," but the Court struck it down as unconstitutional, 9–0.
The newspaper was a powerful platform that dominated the supply of news throughout its region: "The public…is said to be in peril because the 'marketplace of ideas' is today a monopoly controlled by the owners of the market," noted the Supreme Court. But mandated access, it added, would cast a chilling effect, leading editors and publishers "to avoid controversy." The impact would be counterproductive, and free speech would suffer, as "political and electoral coverage would be blunted or reduced."
Regulation, in short, was itself a threat, compromising the independence guaranteed by the U.S. Constitution. The Florida law was overturned.
The Court got that one right. The rule protecting editorial discretion has served the country well. Newspapers have been biased, sensationalistic, and often wrong—but at least they have not been regulated to death. With broadcasting, by contrast, the Court has often been confused and the First Amendment shaved. Controversial ideas have been silenced and upstart technologies banned.
Almost immediately after the Radio Act of 1927 established "public interest" radio licensing, unorthodox views became a target. Two lively stations, WCFL (owned by the Chicago Federation of Labor) and WEVD (owned by the Socialist Party) came up for license renewals in 1929. The Federal Radio Commission (superseded by the FCC in 1934) warned against "propaganda stations"—a regulatory term of art for organizations espousing opinions. Sanctions, including limits on the amount of electricity they could use and forcibly reduced hours of operation, were inflicted.
To avoid fiscal ruin, the left-wing "mouthpieces" (another term of art) backed off. Mainstream programming was adopted, and the fiery voices were extinguished. WCFL was eventually sold, I kid you not, to Amway.
Conservatives got their own skinning. For instance, right-wing broadcasters opposed to President John F. Kennedy's nuclear test ban treaty were surreptitiously monitored by operatives from the Democratic National Committee. Small stations featuring outspoken administration critics were systematically targeted for "fairness" complaints. They received requests by the hundreds demanding free time for replies. The goal was not to get on the radio but to tax political dissent, getting opposing views off.
The cynical campaign worked, and then some. Broadcast radio and television devoted almost no valuable time to public affairs; unorthodox beliefs scrambled and hid. The Equal Time Rule, embedded in the 1927 law, quashed rather than fostered presidential (and other) debates by giving all office seekers—dozens—the legal right to crowd onto the stage. Neither the major networks nor the major candidates would consent to participate in these circuses.
An act of Congress temporarily waived the equal time mandate in 1960, thereby allowing the famous Kennedy-Nixon debates. No such special dispensations were enacted in 1964, 1968, or 1972, and presidential debates were again lost. The law was revised in 1976 in a way that made such waivers standard, and debates have been the hit of every presidential season since. Only by eliminating a rule meant to promote "equal time" was it possible for public debate to gain any time.
Meanwhile, new media abundance was being thwarted. FCC regulators, while kvetching about network TV's "vast wasteland," blockaded a competing medium, cable television, in the '60s and '70s. The rationale was that wired networks would "siphon" viewers from over-the-air stations, threatening the latter's financial viability. That was claimed to endanger the "public interest" in TV news and informational programs, undermining American democracy.
Whole genres were arbitrarily banned from cable distribution, including the World Series and Super Bowl, standard product advertisements, movies less than three years old, and, on premium channels, regular series. The Sopranos, Sex in the City, Game of Thrones—all illegal. Only when deregulation eliminated such byzantine rules did bountiful entertainment flow. And real informational programming, which had been cynically used as the justification for broadcast protectionism, finally emerged—on unlicensed, unregulated C-SPAN (1, 2, and 3), CNN, Fox News, MSNBC, Comedy Central, and other outlets too numerous to name. Ideological diversity sprouted with no "public interest" rules to smother it.
Actor-comedian John Oliver fears that without broadband regulation Comcast will stifle less popular or more competitive video content, but the cable distributor is happy to provide air time for the network neutrality champions at MSNBC (which Comcast owns) and Oliver's own HBO (which Comcast pays hundreds of millions annually to transmit). The government's execution of "public interest" rules managed to pre-empt all such creative content in order to serve the alphabetical oligarchs: ABC, CBS, and NBC.
Media bias has been far less harmful than media regulation bias. That can seal off whole markets and make everyone who's left too nervous to speak freely.
When the Watergate investigation flared, thanks in part to the intrepid Bob Woodward and Carl Bernstein, it did not go unnoticed in the Nixon White House that the Washington Post Co. was pursuing both the corruption story in its newspaper and FCC license renewals for its TV stations. Mysteriously, the latter proceedings, which are normally perfunctory, met with challenges. Delays ensued, uncertainty rose. Post owner Katherine Graham claimed extreme personal distress as her company's stock price plummeted. In the end, the Post rallied while Nixon went bust. Democracy got lucky.
What Goes Around
Populists on the right seem to think the American republic needs more close calls, and they see rules popular on the left as nimble swords. Trump bellowed his opposition to an AT&T–Time Warner merger, alluding to "too much concentration of power" and unmistakably tying his critique to concern over "fake news" on CNN. (Time Warner owns several cable TV networks, including the Cable News Network.) Department of Justice (DOJ) underlings then jumped to block AT&T's $85 billion acquisition, a combination that had been waived through—in the form of Comcast-NBC Universal—in 2011. Comparing the performance of Time Warner shares and the S&P 500 Index around the time of the DOJ's anti-merger announcement suggests the company took a huge hit, with perhaps $22 billion in equity up in smoke.
Even as the Trump FCC repealed Obama-era net neutrality mandates (which sought to constrain how internet access providers managed their networks, on the premise that "all bits are created equal"), right-of-center activists like Townhall columnist Kurt Schlichter pleaded for Trumpian death blows: "Conservatives must regulate Google and all of Silicon Valley into submission."
All bits are not, in fact, equal. Consumers generally demand that latency-sensitive traffic (such as voice calls) flow faster, and some content (such as malware) not flow at all. Residential customers are willing to pay more for speedy downloads than for speedy uploads, leading providers to build asymmetric networks that tilt in support of fan favorites (and bandwidth hogs) such as YouTube, Netflix, and Amazon Prime. Nonprofit institutions, with no conceivable interest in suppressing content competition, routinely constrain the traffic on their own networks: For years, universities blocked "peer-to-peer" applications (like Skype or BitTorrent) to keep lanes open for the apps preferred by most faculty and the information technology department.
In practice, not even formal "neutrality" regulation tries to strictly treat all bits the same. Massive exceptions are made under the guise of "reasonable network management" and a variety of arbitrary carve-outs are honored. The "digital phone service" supplied by your cable TV operator accesses pristine bandwidth specially reserved for Voice Over Internet. Use a competitor such as Vonage or FaceTime and you're stuck with "best efforts" delivery over more congested links. This favoritism by ISPs was not attacked under Obama's net neutrality regime because regulators decided to leave well enough alone, even when bit discrimination was clear.
The tidal wave of support for net neutrality is surfed by those who think regulations can be steered to hit just one set of targets—broadband ISPs—and then stopped before knocking over the developers of apps and content. That ignores the history of regulation and the adaptive ecosystem of politics.
Former Breitbart chief and Trump adviser Steve Bannon has decidedly strategic views on how a new-and-improved web could advance his cause, according to reporting in The Intercept. (Step 1: Declare Facebook and Google as public utilities, mimicking Obama's move to regulate ISPs.) Meanwhile, Trump delights in hurling ad hoc "public interest" threats against broadcasters. "More and more people are suggesting that Republicans (and me) should be given Equal Time on T.V. when you look at the one-sided coverage?" he tweeted in October. A few days later, outraged by comments made by employees of the National Broadcasting Company, he lit up Twitter again: "Network news has become so partisan, distorted and fake that licenses must be challenged and, if appropriate, revoked. Not fair to public!"
In the aftermath, critics called Trump naive to think he could simply rescind NBC's permits. After all, stations—not networks—are the entities licensed, and their rights are never yanked straightaway. But that misses the point. NBC owns many stations, and the mischief is in the process. Costs can be imposed. Risks can be raised. You can hear all about it on WCFL or WEVD. Or, on second thought, not.
Stabs in the Dark
It isn't just Trump. In October, Sens. John McCain (R–Ariz.), Mark Warner (D–Va.), and Amy Klobuchur (D–Minn.) introduced the Honest Ads Act, which would require social media platforms to identify who paid for an advertisement and what rate was charged. The platforms would also have to maintain public databases of all political ads, showing what audiences were reached. Finally, the bill would ban messages "purchased by a foreign national, directly or indirectly."
This effort was sparked by the revelation that Russian sources paid for $100,000 worth of Facebook spots during the 2016 U.S. presidential election. The Kremlin might well be behind these creepy buys, and disclosure (if advancing information flow rather than punishing it) may be appropriate.
At the same time, such operations are ripples in an ocean of cash. Hillary Clinton spent $1.2 billion through her official efforts and allied political action committees. Had she thought another $100,000 would make a difference, she would not have ended the 2016 contest with $7 million left in her campaign's checking account. Donald Trump was even more cavalier with the marginal ad buy: He shorted his campaign $35 million of the $100 million he had pledged.
A free press will be pocked by suspicious content, some of it associated with state actors. (And no, I'm not referring to the Voice of America.) Thanks to the free flow of cable, satellite, and broadband bitstreams, virtually all 120 million U.S. households can view the Putin-connected channel RT, featuring Larry King Now on its menu. Al Jazeera, a Qatar-owned news service, placed an entire new channel on the cable TV dial in 2013, purchasing the Current TV slot from its owners (including former Vice President Al Gore) for $500 million. BBC America and a host of other foreign-oriented networks, on cable and online, seek to compete in our market. (Disclosure: I am an investor in Crossings TV, a California-based startup that brings Asian-language programming to U.S. viewers.) Elsewhere, market access is tougher. Saudi Arabia, Bahrain, the United Arab Emirates, and Egypt recently banned Al Jazeera news delivered via Snapchat. Should America emulate them?
Hollywood-produced video ranks among America's leading exports. The U.S. rightfully objects when foreign governments take measures to discriminate against it. But many do. Our neighbors to the north, to take a friendly example, have a complex point system for determining whether TV shows are "Canadian" or from the USA. The government then imposes a quota system that favors the former on cable and satellite. This tax on speech enjoys deep popular support in that country.
One may be dubious that the proposed Honest Ads legislation will have much influence. International ad buyers will find many willing third-party ad brokers, and will have plenty of skilled lawyers creating "domestic" structures for their campaign committees. Foreign ownership of U.S. wireless licenses has been outlawed since 1927, but neither the Australians (who launched News Corp) nor the Germans (who control T-Mobile via Deutsche Telekom) have taken the hint. They trump the ban with regulatory waivers and holding companies whose geographic locations are difficult to pin down. Just as tech firms might shift their profits to Ireland or their patents to Switzerland, media owners can create an American corporate address almost as effortlessly as renting a virtual office. But cheer up: Easy access ain't a bad thing. Openness, even to foreigners, is beneficial. U.S. diplomats make that point around the world.
A pure labeling bill might not be pure mischief. But some of us would prefer that the platforms competing for eyeballs craft their own rules, recalling Washington's track record. The 2002 McCain-Feingold campaign finance reform law did not stem the volume of money flowing into politics; it just diverted funds from candidates and parties to shadier "independent" actors.
Services such as Facebook and Google apply their own standards of journalism to user-generated content, favoring certain items and refusing to share others. At some level, this is an obvious form of consumer protection. As with newspaper editors, there is value in intelligent curation of the conversation. (Ever read the posts in an anonymous, unfiltered comments section? I rest my case.) Our time is scarce, our sensibilities are real, and friendly intermediation is a gift—and not just because it blocks the death threats and work-at-home ads.
But such organizational leadership can be controversial. "Walled gardens" with proprietary content are often pilloried in policy circles. When platforms have created their own private Idahos, tending to the grass and keeping it weed-free, they have been castigated as haplessly provincial internet neophytes subverting the very idea of the web. Law professor Tim Wu's lack of patience for ISPs that favor their own custom content led him to coin the term "network neutrality" in 2003, launching a campaign that has not abated.
But brace for the whiplash: Armies of the right and left now want those same platforms to eradicate "hate speech" and/or police "fake news." The nondiscriminatory network that actually treats all bits equally is suddenly suspect.
When Wu confronted this meaty issue in his 2010 tome Master Switch, he noted that the biases of private editors are to be feared far less than strictures from the state. "AOL Time Warner, however vast, did not have police power—it could not imprison Google's executives for failing to block Wikipedia or Disney content." Libertarians applauded the logic.
Different synapses fire in Kerpen's pro-Trump internet regulation memo. "Critics will raise First Amendment objections," he writes, "but their arguments will smack of hypocrisy if they supported the FCC neutrality rules for ISPs, which also provide a legal template." Of course, the cited "hypocrisy" is perfectly symmetric—the mirror on the wall features Republicans who opposed regulation for ISPs but now favor it for online interests they consider hostile.
Recall that the Honest Ads bill requires web platforms to shut down foreign advertisements and deny even domestic ad buyers the right to remain anonymous. These aggressive moves are justified, in part, with somber words from Gen. Keith Alexander, the former chief of the National Security Agency: "Because the clear majority of the information on social media sites is uncurated…there is an increasing likelihood that the information available to average consumers may be inaccurate (whether intentionally or otherwise) and may be more easily manipulable than in prior eras."
What a thrilling ride! Content curation by major companies has zipped from being categorically bad to categorically necessary. But here's the truth: Neither polar position beats open rivalry. Let a thousand models bloom.
Go Nuclear, But Stay Calm
Some Republicans have maintained their traditional resistance to regulation, the FCC's Pai among them. So it's unclear which way the house of cards will fall. Dark clouds dot my sky when I hear Newt Gingrich—who, back in the day, opposed Ronald Reagan's efforts to abolish the Fairness Doctrine and sought to legislatively overturn them—proclaim that Facebook should be a regulated utility. On the bright side, neither he nor his friends pushing common-carrier regulation of Silicon Valley have any real grasp of what they're saying or how to achieve it.
At congressional hearings in November, executives from the social media giants were put on trial. Legislators took turns excoriating Silicon Valley for failing to excise fake news from the net. "Google, Facebook, and Twitter survived the Washington hot seat for 3 'Russian Meddling' Congressional hearings last week," reported Cap Alpha, a sage analyst firm that charts valuation trends in tech markets. "That the companies were contrite and promised to do better seems sufficient for now. Our main observation was a reluctant admission that the Internet is vast and not easily censored or controlled."
Still, the record is ominous. For generations, officials marched under a "public interest" banner to suppress the very technologies that have since opened vast new vistas. Regulators are now pondering the opportunities for new power. They are not much constrained by evidence, or liable for failures.
The European Union, following punitive attacks on the American disruptors of yesterday (Microsoft, Yahoo, Intel), has trained its cannon on the revolutionaries of tomorrow (Facebook, Amazon, Google). "The vanguard of regulatory action is Europe," writes Fortune, where national capitals and the E.U.'s executive arm "are putting the screws to U.S. tech firms."
It is sweet irony that the Trump effort to Make America Great Again has smuggled its policy blueprints from Brussels. Hectoring business leaders and second-guessing difficult trade-offs, exploiting fears and "holding corporations' feet to the fire," assuming market failure while proposing magical government rules to fix it—those cheap tricks are the box-office boffo or reality TV of politics.
Welcoming the future while fashioning reasonable solutions for emerging problems? That may be just another ratings disaster. Stay tuned.
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