The Internet Ecosystem in Perspective

By TAP Staff Blogger

Posted on February 25, 2010

On January 31st & February 1st, 2010, Silicon Flatirons presented a conference on The Digital Broadband Migration: Examining the Internet's Ecosystem. The first panel, The Internet Ecosystem in Perspective, presented a view of the major issues facing the Internet “ecosystem”. The following is a summary of this panel.

The first panel, moderated by Phil Weiser, focused on giving participants and attendees a high level view of the major issues facing the Internet “ecosystem” and tried to put it all in perspective. Weiser started the panel off by asking the foundational question of which forces seemed to be driving the “ecosystem” forward and, equally as important, which forces look to be holding it back.

One of the key elements driving the ecosystem forward, according to many panelists, is cloud computing. Cloud computing, as defined by the panelists, is where software and services are hosted remotely at a data center instead of on the individual user’s laptop. Lisa Tanzi, Vice President and Deputy General Counsel for the Business Division at Microsoft, saw this technology moving into the enterprise space and allowing companies to use it for their core infrastructure at great cost savings. Brad Feld, Managing Director at Foundry Group, a venture capital fund with a focus on early stage technology and software companies, felt larger companies seemed to finally be accepting technology that had been around for quite a while. He felt, from the venture capital perspective, there had been overfunding in the cloud computing sector for some time and cloud computing might be the current "buzzword.”  Regardless, he said, a tremendous amount of underlying innovation is occurring in this area, with an interesting role “reversal” in the innovation cycle. Historically, he said, the needs of the consumer tended to lag innovation, which was often driven by the needs of the enterprise customer, whereas with the rise of broadband connectivity innovation seemed to be taking cues from the consumer. Taking a broader perspective, Dale Hatfield said he has seen the cycle of centralization and decentralization before, but was slightly “suspicious” of re-centralization—especially if it impinged on the individual user’s “freedom” to run their own applications.

Security and privacy were serious concerns for all panelists in terms of forces that could be holding back the Internet “ecosystem.” Initially, they pointed to the recent conflict over cybersecurity between Google and the Chinese government and felt this could very well be just the beginning; sometime in the very near future there will be a massive breach of data security and it is time to get “serious.” One panelist asked whether the “cloud” could yet be properly trusted with each of our families’ personal information. In terms of security, Lisa Tanzi said, there has been much debate on whether the “cloud” is more or less secure than how user information has previously been stored. As more information moves to the “cloud” and its data centers, according to Tanzi, these data centers will become more attractive as targets for hackers regardless of the relative security. She felt there is a role for government in this area, and there is a need for “truth in cloud computing” principles in order for consumers to be more fully informed as to how their information is handled and used. Additionally, she felt there should be stronger civil and criminal penalties for hacking. Finally, due to the nature of global data flows and the international placement of data centers, she said there may be some conflicts and difficulties with the various countries’ laws, especially where those laws are more or less protective of a user’s data than relevant U.S. law.

The need for more security and privacy on the Internet was a matter of course for the panelists, but it was the balance between the two that garnered the most attention. Starting with privacy, Lisa Tanzi pointed out how it is not clear whether Fourth Amendment privacy protections even applied in the cloud-computing context. Since the user is volunteering their personal information, courts might not find the same expectations of privacy and thus refuse to protect it. She pointed out how the case law in this area is very fact specific and this may mean the law in this area is not settled. In light of the new technology, said Tanzi, Congress needs to amend the statute to properly balance users’ privacy needs against the needs of law enforcement. Paul Ohm, Associate Professor of Law at the University of Colorado and a member of the audience for this panel, was equally concerned with this balance and felt there is always a cost to privacy and security. In this vein, he asked the panel, what should users expect to give up in order to have both? According to Brad Feld, it was not possible to have both privacy and security, but this was a technology driven issue not a regulatory one. He then posed the question of whether users ever really had the privacy they thought they did and pointed out how password security tends to be laughable—referring to the average consumer’s tendency to choose an insecure password, as well as often using the same password for multiple accounts.

When it comes to security and passwords, Michael Powell, Senior Advisor of Providence Equity and former Chairman of the Federal Communications Commission, said there are much more sophisticated ways to provide security. As it stands, he said, the average consumer has significant amounts of “responsibility” for their online security but does not have the right tools nor a healthy approach. There is not a “culture” of security among the average users, he said, and no consensus on how to approach passwords or what “healthy” password behavior is. He felt there was no “digital hygiene.” Specifically, children are developing digital behaviors when they are young and have very little at risk, but how will these fairly lax behaviors play out when today’s children grow up and have cars, houses, and sizable bank accounts? Finally, he pointed out how the military version of security was not invulnerability, for security is not something that can ever be guaranteed, but is more of an ongoing chess game where each move is analyzed and then countered. Real security, according to Powell, is about raising the costs of a violation to such an intolerable level that any intruder would simply choose to go elsewhere.

The pace of technological development was a major concern. Most panelists agreed the pace of technological development is accelerating and this trend could actually have negative implications for the “ecosystem.” The “ecosystem” is a very complex place, a vast complicated interconnected networks and networks of networks where often there are machines that are only talking to other machines. With the rapid pace of technological development, said Brad Feld, increasingly there is the chance computers could become autonomous in our lifetimes and there is a surprisingly large amount of this computer-to-computer interaction on the Internet. Powell built on these comments by pointing out how humans are already creating systems with levels of complexity beyond our ability to understand and it will be difficult, if not impossible, to maintain a “holistic” understanding of these systems as the complexity continues to increase. He cited the recent financial crisis as an example; that we as a species are creating “brilliant” systems of immense complexity, but failing to understand them.

Continuing along this same thread, and foreshadowing significant themes discussed later in the conference, panelists pointed out how technology is now moving much faster than the regulatory environment can keep up with. One panelist asked if the government might be the wrong tool in this context—if the technology industry is moving faster than governments can react then it might be more effective to have industry coalitions self-regulate. Michael Powell continued in this same line, highlighting the current lack of effective governance tools to address this dynamic because the system as it stands is not “structurally” able to move fast enough. What might a good organizational or bureaucratic model in the Internet age might look like, he asked. Adding in the technical perspective, Dale Hatfield wondered if it would be better to give engineers a larger role in resolving some of the disputes and pointed to a recent proposal allowing the FCC Commissioners to add back a technical assistant onto their staff.

The panelists were also concerned with the effects of education and immigration policy on innovation. The United States has been less intelligent than it could be in its immigration policy, according to the panelists, and the general consensus was the U.S. should be “keeping” as many of the foreign students who gain education here as it can. Half jokingly, Brad Feld floated the idea that “every technical undergraduate degree should come with a green card.” He also felt it was very hard to get a visa in order to start a company in the U.S. Finally, the general state of education in the U.S. was cause for concern. Our nation’s technological ambitions, according to Michael Powell, do not line up with the educational track its citizens are generally on. Alluding to the alarming statistics concerning high school drop out rates in the U.S., he said education is our “Achilles’ Heel” and felt there were implications for both our labor force and our “consumption” force. As a counterpoint, industry panelists mentioned it had been relatively easy to hire top talent recently, but attributed this to the short-term effects of the current recession.

Near the end of the panel, a question from the audience concerning intellectual property, specifically how to balance fair use with the need to police piracy and copyright infringement, sparked significant debate. As the argument goes, and this theme arose throughout the conference, if content is not protected then content creators will not put it on the Internet. Brad Feld pushed back, saying there was not such a clear cause and effect relationship between the two—content will still be put on the Internet without copyright protection. He gave the newspaper industry as an example and pointed out how the smaller players, who are putting their content online and giving it away for free, are forcing the big newspapers to put their content online as well in order to stay relevant. Michael Powell added a public policy dimension to the discussion by highlighting how there are many things consumers want in terms of content, they do not want to pay for, but still cost money to provide. Dale Hatfield felt the “elephant in the room” is how the marginal cost of producing an extra copy in the digital world is effectively zero, but our economy is still based around goods produced with some marginal cost (what has until recently been the historical norm). The pricing and business models have yet to fully make the change from an industrial to an information economy, according to Hatfield, and when the marginal cost of producing something is zero there are incentives for consumers to “cheat.” These issues are not new though and other industries have been facing them for some time, for example, the software industry has been at zero marginal costs almost since its inception. According to Feld, media companies could learn a lot from how the software industry has approached these pricing and business model issues. Feld also pointed out how a number of corporations own “properties” in more than one category—i.e. content companies own applications providers and/or own network providers and vice versa—and he felt this cross-category ownership dynamic will provide solutions and drive future innovations.

Other topics mentioned but not fully discussed during this panel were: managing spectrum resources, maintaining a balance in the level of competition, investment as a key component of competition and innovation (especially investment in basic research and development), how companies are “webifying” their business in order to stay competitive, “applications aware” networks—where the applications themselves determine their own bandwidth needs, increasing “digital literacy” among consumers when it comes to broadband adoption, and to what extent the broadband migration has yet to affect how many day-to-day business processes actually work.

Conference summary provided by Kaleb A. Sieh, Silicon Flatirons Research Fellow and 2009 graduate of the University of Colorado Law School.

Video of the panel which includes event welcome and opening address by Phil Weiser, Deputy Assistant Attorney General, Antitrust Division Department of Justice.