Looking for Leverage

In politics, having a “controlling legal authority” doesn’t guarantee things will go the way you want.

You also need leverage.

FCC chairman William Kennard was quite frank on this point while in Atlanta for Supercomm. Asked about the agency’s work in guaranteeing competition, he noted that the Bells’ desire to enter the long distance market has been “an important tool in our arsenal” to require them to “open their markets.”

This is just one form of leverage. The need to approve a merger makes great leverage, which the FCC is using to open up GTE’s local markets to competition. GTE wants to complete its merger with Bell Atlantic, and until that deal is done, you can expect lots of CLECs to win the right to compete in its territory.

America Online is now on the wrong side of this leverage. Time magazine, which will be owned by AOL after its merger with Time Warner, reported the government might require that it open its “Instant Messenger” service to rivals as a condition of having the merger approved.

The requirement that government grant you a boon is the best form of leverage. The necessity that government provide you with protection is another form of leverage.

The media often creates the hysteria that makes this kind of leverage powerful, often to the detriment of freedom. (Big media has the legal firepower to fight laws against speech, and since the rest of us don’t, such laws give it a distinct market advantage.) That’s what we’re seeing in the hysterical reporting over boiler room stings.

Boiler rooms, where shysters kite stock using high-pressure telephone calls, have been around for ages, and were even the subject of a recent movie. Yet when you add Instant Messaging, chat, and forums to the mix, a new level of hysteria can be created. Time (again) claims the Internet and the Mob were “made for each other.” The Industry Standard highlights the Internet connection to the latest arrests.

Now note how this is used politically. MSNBC notes that the frauds may be the leverage that gets national anti-spam legislation through Congress.

The anti-spam bill is (in my opinion) good public policy. So is the idea of opening local phone networks to competition. My point today is to illustrate the process by which politics works, because it doesn’t always work in our favor.

The Internet is going to face many basic political questions over the next few years, and it pays to get educated now. Will our anonymity have legal protection when we need it? Will political speech be free or fettered? Will our government be able to extend its reach to other nations in the name of Internet law enforcement, and will other nations be able to extend their reach here? How will Internet commerce be taxed? (Believe me, it will be.) What kinds of software will be declared illegal? Will the Bill of Rights be extended to cyberspace, or will its protections be curtailed?

These are important questions, and will be dealt with only through long struggle. That struggle will be a political struggle. All of us are about to get a graduate degree in political science whether we like it or not.

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