Net Neutrality: What is the Georgist Response?

Yannis Tziligakis

[Reprinted from GroundSwell, September-October 2010]

Lindy Davies and I, Scott Baker, have been trading differing, and in many cases, similar opinions, on Net Neutrality, and what the Georgist position should be. There was also the following set of observations made by Yannis Tziligakis, a long-time student of the Henry George School in NYC and a Georgist, who was triggered to write by the issues raised in the recently released unauthorized biopic: "The Social Network." This major release movie is about the story of Mark Zuckerberg's meteoric rise to fame as the controversial founder of the biggest social networking site ever, Facebook. I've excerpted and edited his thoughts pertaining to net neutrality here:

The Social Network: Thoughts on Copyright of Ideas, the value of Innovation, Is Value created by individual labor and private Capital or by the untaxed use of the Commons?

Any idea, such as Facebook, no matter how important, is made big by the community that embraces it. Value is created on the demand side (i.e. by the community) not on the supply side (i.e. the individual capitalist or else businessman or entrepreneur).

Pythagoras invented number theory but at his time... the community didn't have any use for it... so we had to wait 2,500 years and for the advent of computers to realize the magnitude and importance of his work in the extremely important field of cryptography. People connected socially through the Internet decades before Zuckerberg thought of (possibly) stealing his friend's idea, according to the movie, "The Social Network," in order to make Facebook. Did anybody reward Pythagoras for his inventions, or the nation and country he represented? We take his work for granted, no royalties paid.

If you have a great idea, good for you... Either you share it with the community or if you wish keep it to yourself. No copyright, or more accurately "clopyright" (clopy means theft in Greek) i.e "cleptocratic rights" on intellectual property. There are plenty of great ideas - some of them flourish and die within the lifetime of their creators, while others wait thousands of years to be awarded the value they deserve.

The mechanical properties of steam were invented by a Greek Heron from Alexandria and used to automate opening of gates at palaces, but this idea caught on monetarily with the advent of the need for industrialized production some 1,800 years later. Shouldn't Heron have been entitled to royalties for inventing the mechanical use of steam? Why should Zuckerberg and every would-be Zuckerberg be awarded hundreds of billions of dollars for their ideas, when they are built on the work of so many others before them?

One thing the Greeks did not invent or think about was a copyright system. You would imagine a nation with such a proliferation of ideas, techniques, entrepreneurship and ingenuity, in every imaginable form, from the arts (sculpting, painting, pottery, music), theater (drama, tragedy, comedy), architecture, construction, religion, mythology, history, philosophy, geology, mathematics, geometry, military strategy, political science and economy, geopolitics, maritime and navigation techniques, astronomy, hydraulics and irrigation systems, metallurgy and mining, economics, trade...that someone would have thought of patenting their ideas and putting obstacles in the community for using them in the form of collecting private royalties from the public use of their ideas. Yet, in Ancient Greece, knowledge and innovation were considered as an outcome fostered by social interaction, and public education, so they had to be shared freely with the community. It's through this dialectic interaction that synthesis and evolution of ideas happens in the form of thesis and antithesis. The individual is born as "tabula rasa" and can achieve practically nothing beyond mere animalistic existence without the aid of the community. So innovation - even if individuals create it - is brought about by the community, through education, stimulation, motivation and the subjection to the dialectic process of intellectual refinement. That's the essence of how a democracy works.

Yet, according to the current zeitgeist, Mr. Zuckerberg is not just to be classified as an innovator, but also as a capitalist. His software platform, Facebook, is considered "capital."

Capital is wealth that assists in creating more wealth (machinery, for example) and wealth must have exchange value and meet human desires.

Land and Labor are considered the primary factors and capital is a derivative of those since capital is created by application of labor (including mental labor) on land (e.g. the soil in the field of agriculture, mining and processing in the field of natural resources, or the making of machinery and tools in the technological field, or in this case, by programming talent utilizing, ultimately, physical capital like wires and switches to transmit information).

Now, capital is temporary, which means it constantly needs to be updated, worked upon, improved upon, replenished to retain its value. What Zuckerberg is capitalizing upon is not just someone else's idea (as the film suggests), but on the fact that his company can use the commons, that is, the bandwidth (which is a non-manmade natural resource) for free. The value of his software degrades every day, unless it is updated and improved. So the value of Zuckerberg's enterprise is not solely in the software (i.e. the capital component of his idea) but on the "land" component of his idea... i.e. the use of electromagnetic bandwidth.

Now did Zuckerberg create the bandwidth? Of course not. It's a community resource as much as the air we breathe.

Yet, he is capitalizing big time by using the bandwidth, gratis. Or, we could also say abusing it since the proliferation of information leads to an increase in overall entropy, which also implies a decrease in the efficiency of the entire system, what computer scientists call "information overload", or physicists the 2nd law of Thermodynamics - for example, just think how many labor hours you spend clearing out spam from your computer email accounts. Not only Zuckerberg is using the commons for free, he is polluting it by helping the proliferation of garbage in cyberspace. And if you think the cyberspace is a virtual space think again. It may be virtual from the viewpoint of the user but it costs ENERGY to maintain the networks and store these piles of garbage on the Internet and keep them accessible for a long time.

This is how value, which belongs to the community, is privately captured. Zuckerberg encompasses and represents the feudalistic (note, NOT capitalistic) economic paradigm we live in today and it's responsible for misallocation and misdistribution of wealth and all the social and environmental problems that this economic paradigm brings with it.

So what does he do with the hundreds billions of dollars in public value that his company has engulfed and pick-pocketed from the free private use of community resources? He hoards it. Oh wait; he also gives a few crumbs back to the city of Newark to improve its schools. How noble.

To put it crudely, Zuckerberg is a pick-pocketer, not only possibly of ideas, but also of public wealth - the bandwidth of the electromagnetic spectrum, which he didn't create and without which, no information could be transmitted by his company and no revenue could be put into his pockets by advertisers.

We don't directly pay for Facebook, but we pay indirectly, since his advertizing revenues for the seemingly "free" Facebook service is added on the prices of everyday products we labor hard to pay for so as to afford them to satisfy our needs and desires.

So Zuckerberg is picking on our pockets in two ways. Yet, we are supposed to praise him for our ignorance of basic economic facts (I guess we have to thank the thousands of private and public universities and mainly their Economics and Social Science departments for this widespread ignorance) and for his ability to loot public assets, or our inability to manage our own public wealth. Zuckerberg is a posh, glamorous, highly paid public sector employee, and we pay his wages, yet he is treated as a private entrepreneur.

Given the large numbers of similar "entrepreneurial capitalists" that generate their private wealth by looting the public coffers and then hiding it from the economy by boosting land values and rents (which again the community is forced to pay for) accelerating the spiral of robbery of the public, it's no wonder there is not enough to go around and that there is widespread unemployment and lack of liquidity, all while the government prints more money to keep the vicious circle of public robbery going on and devaluating the currency.

"The Social Network" is basically a story of how the community can change the world. But, such a change can only happen if we adhere to the right economic principles. This means that our taxation system should tax the use of the commons and not individual labor or capital. It's the use of the commons that creates the biggest chunk of economic value, and that is what is due back to the community coffers. To this day, the markets are not free - monopolies rule by confiscating publicly created land and natural resource values.

Stop taxing wages and tax the use/abuse of the Commons (land, the natural forces including wind, water, electromagnetic spectrum, natural gas, timber, oil, metals, and, of course, pollution). This will connect workers with the fruit of their labor, increase productivity, increase investment and entrepreneurship, which will in turn lead to even bigger and more substantial innovation than Facebook and will create more jobs, reduce unemployment, welfare and lead to a more aware, educated and healthy population. That is what progress is all about and there is only one way to implement it. Encourage the capitalist model but at the same time create sufficient social funds from the use of the commons to provide for all the social needs humanity has, education, health care, infrastructure, security.

Can we break the vicious circle of modern "feudalism", can we break the shackles of our glamorous slavery, garnished with crumbs of unrealistic dreams of opulence and comfort?

Yes we can, "Land Value Taxation" and the "Single Tax Program" brought forth first by Henry George some 140 years ago in his seminal work "Progress and Poverty" is the way towards human liberation, fair distribution of economic wealth and the solution of the increasingly aggravating social problems.

My Point in Response

I've been holding back from replying on the issue of Net Neutrality; because in this case, following Henry George would lead to a result against Net Neutrality, something that I, like most consumers, actually want.

However, if we regard bandwidth as a scarce resource, or, at least, a finite one, then companies that lease it from the public, via the government, ought to be able to charge by the time interval. That is, if a provider needs 2 minutes of time, he ought to pay twice as much as one who only needs 1 minute of time. While we could say there is no legitimate reason for a carrier to charge one, say, movie producer, more than another for the same unit of time, there really is no Georgist argument why a movie producer should not be charged more for a 2 minute download than, say, a producer of an all-text page that only takes 2 seconds to download.

Now, of course, carriers (phone & cable companies) would like to offer faster speeds for more money - money that only the richest producers of media could afford. This would clearly be discriminatory in preferring one producer of media over another, for money, but is that anti-Georgist? I don't think so. George embraced competition and never said suppliers of a service couldn't offer a better service for more money. Indeed, he would have said just the opposite.

Putting it into terms of the services of his day, it would be like saying a railroad offered a faster train (content) between Chicago and New York over the same tracks (bandwidth) as a slower one, but to do this, the slower one would have to temporarily pull off on a siding, slowing it down even more, while the faster one whizzed by. The richer passengers aboard the faster train would get to New York faster, but they'd have to pay for it.

Now, as consumers, maybe we like having alternative media like, say, Op Ed News (where I am a Senior Editor and Writer) available as quickly as, say, The New York Times, but the Times can pay for faster service, while Op Ed News, which operates on $6,000/month, cannot. The market has spoken, no? Well, the problem is that the media has already been concentrated into just 5 owners of almost all mainstream media, vs. nearly 30, just some 20 years ago. Encouraging pay-for-speed will only favor the rich media companies even more, encouraging even more consolidation and less diversity, because the cost of transporting over the airwaves is a smaller proportion of their revenue, even at expensive high speeds.

It's arguable that making rich media companies pay more for services will stimulate new technology, both to carry content more efficiently, and for producers to produce more compact content that travels over the airwaves or in-ground cables more cheaply. This would be akin to producing a faster train in George's day over better tracks - something that would benefit both high-speed more expensive trains, and slower speed cheaper trains. That, at least, is the argument of the telephone and cable companies. But, in reality, they are neither in a position to encourage more riders on the slower "train" (that is, less well-off, alternative media), nor has it been historically in their interest to do so. They would rather sell expensive packages to richer clients, because the margins are higher. On top of that, the bandwidth providers are content providers too. Time Warner, for example, supplies content as well as the wires to pump the content over. So do wireless carriers like AT&T and Verizon. They would clearly be tempted to give themselves a "better deal" than competing content providers, thus encouraging media consolidation still more.

At first glance, the answer to this problem seems to be in the anti-trust area, more a matter for Teddy Roosevelt followers than Henry George followers. As a person who consumes and develops content for alternative media, I might prefer a neutral net, but at first pass, I can't see the capitalist, or Georgist, case for it.

What is one to do about this ever-growing concentration of content providers into fewer and fewer hands? Well, let's step back a bit and remember that these are public airwaves (perhaps the cables in the ground carrying broadband are private, but the right-of-way through them certainly isn't; that is granted to some carriers and not to others - a fact the courts have recognized and which allows for competing carriers to use each others' wires, without having to dig up their competitor's wires every time a customer switches carriers, thank goodness!). The public has an interest in seeing more diversity of opinion, not less; this is amply demonstrated by taking the counter-example of a country where all the media content is provided by the State in a government monopoly, or to a few well-connected crony companies. There's no room for GroundSwell or Op Ed News in those countries! The public will simply have to demand that a portion of its bandwidth be devoted to carrying alternative media. This is sloppy, and not terribly free-market capitalist, but it is in the public interest. If we look at access to information as a basic human right, than it's perfectly Georgist, because George, above all, was a champion of human rights.

Counter-response to Scott Baker by Yannis Tziligakis

1) George is not for patent rights (the quote I would use is from Progress and Poverty but I have to find the exact phrasing).

2) Even the capital improvements that companies install (such as cable) still have to be placed on public land. So the Georgist argument (which I laid forth with respect to Facebook and their use of bandwidth which uses cables, which uses public land) does indeed apply there and of course it's relevant for net-neutrality as well.

Counter-Point, while not entirely disagreeing with Scott Baker

Fascinating conversation, guys. I mostly agree with Scott here, but I think Yannis makes one good point about "the Net" that's worth considering.

Is there a Geoist position on intellectual property? Well, I think there is, even though some parts of it are controversial. For one thing, Henry George is very clear that the product of labor should go to the producers, and the return to natural opportunities belongs to the community. This indicates a difference between patents and copyrights. A copyright protects the unique product of someone's labor, while a patent gives exclusive rights to some idea that the inventor discovered, but did not create. Thus, George tended to approve of copyrights, but not patents.

Well, it seems to me that what Zuckerberg did falls squarely in the realm of copyright. He created a Web service. He didn't stop anyone else from creating other Web services -- in fact, weren't MySpace, and other social networking sites, around before Facebook? So, even though he might have gotten a very big payout for it, I don't see how his earnings for that are anything but legitimate return for entrepreneurship. (I haven't seen the movie yet; the ethical issue of stealing his friend's idea is a whole other thing.)

However: I do think there is a Georgist element to the issue of Net Neutrality. There is an aspect in which the Internet can be seen as a kind of natural opportunity. Here's the thing: the Net started out as a free public good. Its usefulness and value increased as more people started to use it -- to provide content, to receive content, and indeed to do both things. This is a process that economists call a "network externality." The value of being on the Internet increases as more people get on the Internet. This isn't something that any one individual does, but individual users do benefit from it.

Now the cool thing about the Net from the start was that its very design ensured that every user had the same access to it as any other. This great equality of opportunity allowed all manner of neato services and content to be created by entrepreneurs. Unlike TV or publishing or films, the Internet offered the same cost of access to anyone who wanted to use it.

OK -- so we have this level playing field of entry into a worldwide medium whose value increases as more people use it. But -- wouldn't it be cool if we could think of a way to get OUR content through the Internet's "pipe" faster than other people's content!? If we could do that, we could monopolize the commons of the Net -- not in terms of space, but in terms of time. In effect, we'd be gaining privileged access to users' time, which would make it much more likely that they'd choose to view our content. (Incidentally -- I'm not sure, but I don't think Facebook does that. It has a vast number of users, yes, but it seems as though it doesn't provide individual users with huge gobs of content at once. It has some java games & stuff, but I think it takes up less bandwidth than, say, a news site with embedded video. It's a lot easier to have high bandwidth going out to the world than it is to have large bandwidth at the end for each individual user.)

Well, that is what today's "Net Neutrality" debate boils down to. The Net is growing; it needs Pipes. If a company provides a pipe, should it have to make that pipe available to any data-packet that happens to zip through it, or should it be allowed to restrict that pipe to proprietary content?

Well (OK: self back-patting alert!) I wrote a paper in 1995 in which I argued that the way to solve this problem would be for the government to collect rent from content providers proportional to the degree to which they privatize the digital commons -- and to use that revenue to increase the capacity of Internet infrastructure, which would then be used on an equal basis. If someone develops a software process through which their content moves faster through the Net, more power to them -- and more rent to the community. The content providers wouldn't have to pay for the new Pipes -- only the value of the monopolization.

Scott Baker's Response to Lindy Davies' Counter-Point

There is a lot of material to digest here, but I think the issue of Monopoly, which Lindy brought up too, is central to the argument on both sides. I take it that the FCC and others are torn on how to treat the "Broadband" - as an information service or a utility. It has elements of both. Information can travel over the airwaves, or through various physical media (cable, fiber-optic, telephone lines, power lines etc.). Only the first of these has a natural limitation, in frequencies. But you could argue that a consumer will have only one set of phone lines, power lines or, maybe, cable lines, so there is a physical restriction there too, based on capital in place, and court rulings to utilize it with just one carrier at a time. In that case, Lindy makes a good point in that there is an effective monopoly over a given media. The issue is, will enforcing network neutrality prevent new and innovative, and perhaps costly, methods of delivering ever-growing amounts of information from reaching the consumer who is willing to pay for faster speeds? The answer seems to be a qualified yes. I remember using ordinary phone lines and a dial-up modem in the old days to connect to the Internet. It was ponderous, unreliable, and slow. Now, I have relatively trouble-free, reliable and much faster service through Cable, but I have to pay much more. It seems in this case, you do get what you pay for. If I really wanted blazing speed, I could theoretically pay for a dedicated T3 line* for over $3,000/month. It's hard to see what benefit an individual user would gain from that, but corporations shell out for T3 lines all the time.

Now, of course, there is a difference between letting the consumer pay for different levels of access, and pushing that cost onto the content providers, but in either case, the consumer would pay in the end.

I still maintain that there are valid arguments to keeping the net neutral, but they go to keeping access to a diversity of media in order to have a fully informed citizenry, and this, while not strictly a Georgist argument, is one George, as a former radical printer and then writer, would probably have agreed with.

What Are T1 Lines and T3 Lines?

Response to Lindy Davies and Scott Baker by Yannis Tziligakis

I'm not bashing Zuckerberg for developing Facebook, regardless whether the original idea was his or not. Neither do I accuse him or blame him for his alleged thievery. It's the economic system in place which allows him to use public resources collect disproportionate private revenues.

Any... private idea and the internet for this matter, lives on public land, and uses public natural forces to realize itself. Of course there are elements of individual human ingenuity in it and those should be compensated for. But this happens at the wage level, i.e they are part of labor. The ad infinitum collection of premiums for a single contribution in space and time violates the basic economic principles, of what labor, land and capital are and also... who is that creates the economic value of a single idea. According to me it's the demand, i.e the community side. And I've cited many explicit examples for that, i.e number theory, steam. According to Bertrand Russell much of the past 2,000 years of Western philosophy is nothing but a footnote to Plato, yet Plato hasn't collected a single penny in royalties, and if he hasn't or doesn't then nobody else should.

The copyright and patent system allows people who can fake sole proprietorship of ideas developed through society's forces to rent their socially acquired knowledge and ideas back to society. I don't see how's that not different from renting public land to the public. A single individual could never amass enough wealth to repay all the ingenious ideas that he is benefiting in the every second of his life. And yes, there are some things money can't buy.

As economies grow and societies evolve, land values increase and rents increase. There is nothing wrong with that. What's wrong is that this collective social progress is privately monetized. And this is the exact story with the internet. I have no problem paying more for faster internet service but this extra survalue should really be appropriated by society and shouldn't stop at the middle men, i.e the capitalists in modern nomenclature, or the "undercover feudalists" as I like to call them.

The issue of intellectual property, patents and copyright is a crucial one, for this is how monopolies get established and set a private stronghold on public wealth. George was not in favor of patents, or any other obstacles to the broad use, access and sharing of knowledge or to the exchange. Of course establishment of authorship is an obvious provision that the creative environment should have in place, but using copyright to obstruct other people from using ideas previously discovered (be it by individuals, or groups of people, Universities, or other corporations), is out of place in the Georgist economic paradigm.

Of course Henry George makes this point, in Progress and Poverty, I quote him verbatim and I let the readers judge for themselves, what George would say on this subject: (Progress and Poverty, Book IV, Chapter 3)

"In what has preceded, I have, of course, spoken of inventions and improvements when generally diffused. It is hardly necessary to say that as long as an invention or an improvement is used by so few that they derive a special advantage from it, it does not, to the extent of this special advantage, affect the general distribution of wealth. So, in regard to the limited monopolies created by patent laws, or by the causes which give the same character to railroad and telegraph lines, etc. Although generally mistaken for profits of capital, the special profits thus arising are really the returns of monopoly, as has been explained in a previous chapter, and, to the extent that they subtract from the benefits of an improvement, do not primarily affect general distribution. For instance, the benefits of a railroad or similar improvement in cheapening transportation are diffused or monopolized, as its charges are reduced to a rate which will yield ordinary interest on the capital invested, or kept up to a point which will yield an extraordinary return, or cover the stealing of the constructors or directors. And, as is well known, the rise in rent or land values corresponds with the reduction in the charges."