July 12, 2011

Naive people may think Western economies are run according to the tenets of capitalism. So much is said in favor of markets and contracts, the rule of the law and the importance of meeting the needs of the customers. If only implementation followed declarations.

Take a snapshot. The world out there is a jungle in a jumble, what with the press pressing the juiciest news out of itself. Humor me and my motto, Privacy, Identity, Responsibility. If the lessons drawn from this admittedly biased guide do not apply to the whole society, let me hear from you.

"After years of negotiations with Hollywood and the music industry, the nation's top Internet providers have agreed to a systematic approach to identifying customers suspected of digital copyright infringement" (*)(1). Ben Sisario's story fails to mention the scheme looks like a copy lifted from the French HADOPI. The plot is the same. Content providers get Internet service providers (ISP's) to do their bidding and threaten users suspected of pirating published information. The script, I admit, has been heavily rewritten for a US domestic audience.

On the plus side, Internet subscribers whose IP's have been linked with illegal activities will receive, not three, but six warnings. They will have "the opportunity to contest the complaint". And instead of having their contract cancelled, they will only suffer "reduced connection speeds or a block on Web browsing" (2). And do not forget. "The Internet providers will not disclose the identity of the offending customers to the media companies".

On the minus side, the whole scheme looks according to US law like an illegal collusion between competitors. Who cares about fair markets? It also puts in sharp focus on how companies can unilaterally change their so-called terms of services when it fits their interests. Who cares about equitable contracts (3)? I do not condone piracy but neither can I stomach preferential enforcement of the law to the exclusive benefit of the mighty.

On the practical side, ISP's promise not to divulge any names. All what a true pirate has to do then is to switch ISP's and get a virgin IP. That the scheme is being pushed by content providers despite this apparent fatal weakness only highlights two unfortunate facts.

First it is an acknowledgement that, in the hands of ISP's, an IP is actually a personally identifiable information. To use it, you only have to secure their corporate cooperation. If they see no advantage to extend it, simply hire a Pellicano or a Mulcaire. This is hardly news for the world. Neither is the fact that the scheme will work only because in the US high bandwidth Internet access for consumers is a local duopoly.

As the previous story shows, consumer Privacy will not stand in the way when well capitalized interests want one's Identity. On the other hand, pirates know the best way to avoid Responsibility is to switch one's Identity.

See Jennifer Preston and Jeremy W. Peters' report of "the News Corporation's decision to shut down the British tabloid The News of the World". "Others saw it as merely rebranding" (**). Indeed what's in a name when your customers can recognize your profile at first sight? Can Rupert Murdoch ignore how L'hebdo Hara-Kiri in 1970 mutated overnight into Charlie Hebdo to placate the French government (4)?

Real costs will only pile up if, in order to further other, overriding objectives, Rupert Murdoch "delay[s] launching a Sunday version of the Sun", as it would present its competitors with a window of opportunity, an hypothesis mentioned by Salamander Davoudi and Andrew Parker (***).

Needless to say, this prompt escape from corporate Responsibility was created by a rather tasteless breach of Privacy, as "a private investigator acting for the News of the World hacked the phone of a murdered school girl".

Do not expect this to be a wake up call for real, i.e. decentralized, ePrivacy. Big Data interests are at play. Yet were Mark Zuckerberg to heed Cassandra's voice and prevent predictable catastrophes, he would remember Western economies have little tolerance for bodily violence. What Responsibility will he bear when someone hacks the Facebook account of school girls to better murder them?

While no one accuses Rupert Murdoch of murder, he follows in Henry II's footsteps (5). Your underlings make your most wicked wishes come true?. The crime lies at their feet, not yours. With a big enough empire, you can even try and kick the fault lower. As Andrew Edgecliffe-Johson, Ben Fenton and George Parker wrote, "he stood by Rebekah Brooks, the former News of the World editor [...] confident that she neither had knowledge of or directed these activities" (****)(6).

Hence the lesson of this scandal. Scale creates important economies of truth. Imagine a poor Comcast subscriber telling her supplier she knew nothing about her son's deplorable piracy habit and has never seen the repeated warnings sent as a result. The ISP would brook no such excuse.

Still you reply, for all its faults, capitalism encourages innovation. I do not deny it, but along the way, the spirit of capitalism is twisted beyond recognition. Could you credibly launch an electric car if you did not disclose its sticker price and convince the public you will make a profit on it?

Yet Chris Nuttall reviewed Google+ and reported "it is great technology and it is free, threatening paid-for services" (*****). Verne G. Kopytoff attended the launch of the new Facebook video chat service and reported "the service is free on Facebook" and "making calls for computer to computer through Skype is free" (******). True "people who use Skype to call a landline or a mobile phone must pay", but how many are they?

Electric cars are heavily subsidized but, surely, not to the point of being free. Listen to John Kay (*******). "Economics 101 teaches that markets work best when competition leads to prices in line with costs". He adds "business practices whose rational derives from consumer ignorance and producer knowledge create a [...] problem" and concludes "the legitimacy of capitalism and market organisation will not long survive."

John Kay titled his column "the $10 minibar beer is no basis for capitalism". Travellers may indeed be confused and irritated by hotel and airline fancy charges but can their ignorance match that of the users of Facebook, Google and Twitter?

Naturally such people know in some dim way they are not customers as much as free fodder and that the business model of all these companies is based in part on Privacy piracy. But for a more informed understanding, one knows less about it today than on the Mafia and its hidden economy.

Such crooked capitalism is of course secured by threats and bribes. If you had any doubt about the generalized corruption that I call pronaocracy, watch British Members of Parliament rebell as Rupert Murdoch reels under public exposure and read David Carr's cri de coeur (********).

"Democracy [...] has broken out in Britain". Are democracy and capitalism in the US any less disfigured in practice today than in the UK yesterday?

Philippe Coueignoux

• (*) ............... Net Providers Plan Penalties To Slow Piracy, by Ben Sisario (New York Times) - July 8, 2011
• (**) ............. Move to Close Newspaper Is Greeted With Suspicion, by Jennifer Preston and Jeremy W. Peters (New York Times) - July 8, 2011
• (***) ........... UK tabloid rivals poised to seize moment, by Salamander Davoudi and Andrew Parker (Financial Times) - July 8, 2011
• (****) ......... Phone scandal paper axed, by Andrew Edgecliffe-Johson, Ben Fenton and George Parker (Financial Times) - July 8, 2011
• (*****) ....... Google's new plus points, by Chris Nuttall (Financial Times) - July 8, 2011
• (******) ..... Facebook Offers Video Chat In Arrangement With Skype, by Verne G. Kopytoff (New York Times) - July 7, 2011
• (*******) ... The $10 minibar beer is no basis for capitalism, by John Kay (Financial Times) - July 6, 2011
• (********) . A Tabloid Shame, Exposed by Honest Rivals, by David Carr (New York Times) - July 11, 2011
• (1) for the full text of the agreement, see Common Framework for "Copyrights Alerts", by the Center of Copyright Information, July 7, 2011
• (2) these examples are given by Ben Sisario to illustrate the vaguer and more ominous "mitigation measures", the phrase used by the Common Framework
• (3) for a more in depth analysis of the use of unequitable contracts, see my comments to the Department of Commerce, Jan 2011.
• (4) see Charlie Hebdo in the wikipedia
• (5) see Henry II, of England naturally, in the wikipedia
• (6) The fault must lay somewhere. A year ago, Andy Coulson was high enough to know nothing, now he is low enough to find himself disposable.