How Washington will shape the Internet

Flags: Not the ones that burn — these are digital codes, inserted into video and audio signals, that tell recording equipment (a PVR, a DVD recorder, your computer) whether it’s OK to make a copy of the content.

This is enormously controversial.  On one side, the recording, film and television industries want a flag to protect their digital content from piracy; they say the flags would allow certain kinds of copying for personal use, but prevent the wholesale distribution of copyrighted material on the Internet. On the other side, the consumer electronics and computer industries are strongly against this, since all of their hardware would have to be designed to recognize and obey the digital flag — not just increasing their costs, but probably annoying consumers. 

No matter how this resolves, it will change both media and consumer electronics.  Opponents of the flag say that consumers will lose control over what they can do, even with movies or music they’ve purchased legally.  On the other hand, television broadcasters threaten that without the broadcast flag to protect their content, free over-the-air television will no longer be free: the networks will start charging viewers for their top-tier programming.

White Spaces: This bland phrase could have a significant impact on the cost and availability of wireless Internet access countrywide. Essentially it would allow wireless operators to use certain television frequencies that aren’t currently occupied by television stations, thus broadening the opportunities for competitive services.

The broadcasters are unhappy about this, arguing that it raises the risk of interfering with television signals. More to the point may be that broadcast spectrum is enormously valuable property and the broadcasters don’t see how sharing does anything for them. Consumer electronics manufacturers don’t have a position on this — probably because some of them hope to make products that use this new spectrum and the rest make television sets they worry might be negatively affected. 

And those are only the high points of the new legislation. If it all sounds complicated, just wait. Over the next few years, government regulation will increasingly be a factor in how the Internet grows. Government has been remarkably hands-off in its approach to the commercial Internet over the past decade (with a few exceptions, such as indecency and children).  But as the Internet becomes integral to the economic infrastructure of the country, it’s hard to see how government won’t be involved in issues ranging from anti-competitive practices to safety and security. We’re going to look at the first decade of the commercial Internet as something like the Wild West — and we’ll mark 2006 as the year that the sheriff rode into town. 

The final impetus for Washington may come when the Internet truly becomes our primary means of commerce, including electronic versions of anonymous cash. At that point, the Internet could become the largest potential tax-avoidance machine ever invented.  (For an early example, consider how many states and municipalities are already worried about losing local sales tax to online shopping.)  These days, any institution whose revenue is threatened by the Internet is quick to take defensive action — and in the years to come I expect no less of our elected representatives. 

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