<nettime> Roberto Verzola: Lords of Cyberspace

["Roberto Verzola" <rverzola@gn.apc.org>]

(via: geert lovink" <geert@xs4all.nl>)

Lords of Cyberspace: The Return of the Rentier
by Roberto Verzola, Philippine Greens

(see book announcement below)

An information economy (previously called a post-industrial or knowledge
economy, also called a cyber-economy) is an economy whose information
sector has become more dominant than its industrial or agriculture
sectors. The information sector is that sector of the economy that
produces, handles, or transfers information goods. At the core of this
sector are information and communications technologies (ICT) for
generating, manipulating, distributing and using information.

Information goods, being non-material goods, are quite different from
agricultural or industrial goods, which are material goods. The main cost
of producing information is incurred at the research and development (R&D)
stage - when the first instance or copy of that information product is
created. The original copy can then be stored and reproduced
electronically at very little cost. If digital format is used, then
perfect copies of the original can be made very cheaply over unlimited
generations of copies. Digital technology, with its unique capability to
copy or transfer information without degradation, is the key that opened
up the development of the information sector into a full- blown economic
sector.

Understanding the information sector: what's the key?

The very low cost of reproducing information lies at the heart of
understanding this sector and the basic conflicts within it. Until one
appreciates the implications and consequences of near-zero cost of
reproduction, one will not understand why information goods are
qualitatively different from other goods and why the information sector is
qualitatively different from other sectors.

On one hand, for instance, information goods are easy to share freely. On
the other hand, the potential profits from selling information goods are
very high, because the marginal costs of production (the cost of making
the next unit of the product) are very low. Here lies the germ of the
basic conflicts within the information sector.

We share information all the time, reflecting the social nature of
information. The easier to reproduce it, the more we tend to share it. But
if information is freely shared, who would buy it at a high price? If one
can get it for free, why pay for it?

Because the free sharing of information goods undermines their potentially
high prices, commercial information producers want to prohibit the free
exchange of information. Then, they can create an artificial scarcity,
which enables them to keep prices -- and profit margins -- high.

This is the whole concept behind intellectual property rights (IPR) such
as copyrights and patents. IPRs prohibit the public from freely sharing
information; they give the information producer the exclusive right to
use, make copies or sell the product. IPRs are, in effect, information
monopolies. Today, they are the principal form of information ownership.
The information economies of today are monopolistic information economies.
Information monopolies make high profit margins possible in the
information sector.

In a capitalist system, investments tend to go where the profit margins
are highest. The high margins in the information sector encourage the
shift of investments from the industrial and agricultural sectors to the
information sector. The transformation of the U.S. economy from an
industrial to an information economy is the simply the result of this
natural movement of investments to areas which promise the highest rates
of return.

Cyberlords: the rent-seeking class of the information sector

The most important property owners of the information sector are
rent-seekers. They control or own an information resource or
infrastructure and get their regular income from charging rents for it
use. There are two types of cyberspace rentiers:

*the software owners, who control the programs, the data, or the content;
and

*the hardware owners, who control the infrastructure, the servers, the
facilities or the equipment for distributing, using, or consuming the
information goods.

Rents take the form of patent and copyright royalties, license fees,
subscription fees, entrance fees, usage charges, technology charges and so
on.

These rentiers of the information sector are the landlords of cyberspace.
They may therefore be called cyberlords.

Cyberlords who control the software may be called information cyberlords.
These include the owners of software companies, database companies, music,
video and film companies, publishers, genetic engineering firms,
pharmaceutical and seed firms, and similar companies who earn most of
their income from IPR rents.

Cyberlords who control the hardware may be called industrial cyberlords.
These include the owners of communication lines and equipment, radio and
TV stations and networks, Internet service providers, theater distributors
and owners, cable TV providers and operators, integrated circuit
manufacturers, and other firms. With these facilities converging towards a
single global information infrastructure for data, voice communications,
media, entertainment, financial transactions, payments, etc., the
industrial cyberlords are consolidating, merging and creating huge new
monopolies that control large chunks of these facilities.

The cyberlord class also includes highly-paid professionals who are
indispensable to the economic viability and growth of cyberlords. These
include top-level managers, lawyers, and others whose income are mainly
payments from cyberlords they work for. Lawyers, in particular, are
absolutely necessary for the enforcement of the copyrights, patents, and
other IPRs of information cyberlords.

The social nature of information continually asserts itself. Thus,
information products tend to spread themselves globally as soon as they
are released, regardless of the will and intentions of the producers.
Cyberlords, therefore, have no choice but to globalize their operations as
well, and to follow where their information products go. They push the
globalization process incessantly to ensure that every country, every nook
and corner of the globe, is within the reach of their mechanisms for rent
extraction. Thus, cyberlords are an important social base of
globalization. As they gain political dominance in a country, a new ruling
class of rentiers will emerge, ushering a neo-feudal era ruled by
cyberlords.

WTO: enforcing the cyberlords' property rights

To strengthen their global reach, cyberlords needed a global legal
infrastructure for extracting rents. This turned out to be the World Trade
Organization (WTO). Under the WTO's persistent pressure, various
international agreements have been concluded or are being pushed that
protect and advance the interests of cyberlords. The most important
agreement, without which cyberlords would not be able to realize their
high profit margins, was the TRIPS agreement under GATT, which bound all
WTO members to very high standards of IPR protection.

The TRIPS agreement was followed by other WTO agreements essential to the
growth and expansion of the information sector, and which have been or are
in the process of being concluded. These include: the e- commerce
agreement, the information technology agreement, and the agreement on
telecommunications. These agreements ensure low-duty or tax- free
transactions, an increasingly deregulated playing field, the lifting of
restrictions to the entry of foreign firms, and other policies beneficial
to cyberlords who operate globally. These also include agricultural
agreements, in so far as they ensure markets for the
genetically-engineered agricultural products (which may be seen as
information products of the genetic variety) of information economies.

Three types of economies

With the emergence of powerful information economies led by the U.S., we
can distinguish between three major categories of economies in the world,
depending on the production sector that is most dominant: the information
economies, the industrial economies and the agricultural economies.

Compare the prices of typical products: an agricultural crop like sugar; a
industrial manufacture like a small refrigerator; and an information
product like software. A $100 software on a CD can be copied within
minutes for less than a dollar. A $100 refrigerator would need a lot of
metal, plastic, glass and other materials, as well as sufficient energy to
process and mould them into a working appliance. To produce $100 worth of
sugar, one needs to plant lots of sugar cane, grow them for months,
harvest them and then process some several hundred kilos of sugar. Yet, in
a WTO-ruled world, these products are supposedly of equal value. Clearly,
the greatest returns will be enjoyed by the information economy and the
lowest (often, negative) by the agricultural economy, with the industrial
economy somewhere in between.

In the past, industrial economies enjoyed a favorable pattern of trade
with agricultural economies. This colonial trade pattern kept the
erstwhile colonies under the economic control of the former, although the
latter had gained formal political independence. Similarly, we can expect
information economies to enjoy a favorable trade pattern with industrial
and agricultural economies. The higher profit margins in the information
sector will allow information economies to continue to extract large
amounts of resources from developing agricultural and industrial
economies. Agricultural economies try very hard to industrialize, in the
hope of extricating themselves from the colonial trade pattern with their
industrial trade partners. But they will not necessarily succeed in doing
so. By the time they reach industrial status, the U.S. and Europe will
have become full-blown information economies, thereby remaining in a very
good position to continue such a colonial trade relationship.

Historically, therefore, the emergence of the global information economy
can be seen as the third wave of a continuing globalization process. The
first wave involved direct conquest through colonialism. The second
consists of the post-colonial expansion of industrial economies producing
material goods. The third is the emergence of the global information
economy.

High initial costs filter out the poor

Can we not leap-frog development stages and right away become an
information economy? Won't the new information and communications
technologies (ICTs) democratize benefits and make it possible for poor
countries to catch up with the developed economies? Not likely. In fact,
new ICTs are bound to exacerbate the existing gap between rich and poor
countries, and between rich and poor sectors in every country.

Consider the nature of an information product, whether software, hardware,
or a data connection: the initial costs (the development costs, the
equipment costs, the leased line costs, etc.) are high, but the operating
or recurring costs are low. Because the initial costs are high, few firms
or individuals can afford them. These high initial costs serve as barrier,
filtering out those who have little or no capital. But the rich who can
afford the high initial costs then enjoy lower operating costs (the cost
of reproducing software, running equipment, maintaining a leased line,
etc.). This makes them much more competitive vis-a-vis those who have been
excluded from the new ICTs because of the high initial costs. The more
competitive rich will get richer, the less competitive poor will get
poorer.

We might be able to overcome the high costs

The introduction of ICTs is clearly an expensive proposition for most
developing countries. They compete for our peoples' time, skills and
attention, taking resources away from essential activities like food
production, health services, basic education and so on. Yet, the
possibilities of the new technologies are also tantalizing, and many
people sincerely feel that these technologies also have some benefits to
offer and, properly deployed, can facilitate solutions in providing for
basic needs. How does a poor country solve the problem of providing for
its people facilities which are terribly expensive and which are hardly
affordable? Here are five strategies that countries can try to reduce ICT
costs: *Emphasize appropriate technology, make do without the online
frills, and concentrate on low-cost off-line technologies, which can bring
in the most essential services; these technologies include email-based
approaches like Googlemail and www4mail, text-based approaches,
storage-based (instead of connectivity-based) approaches like VCD players
cum CDROM browsers; intermediate technologies like micro- power broadcast
stations. *Use free/open software like Linux/GNU and OpenOffice whenever
they are available, because they take full advantage of the benefits of
pooling together the intellectual resources not only of a country but of
the whole Internet community and their approach is in harmony with the
nature of information, giving all users the freedom to use, to share and
to modify software. *Apply genuine compulsory licensing where commercial
software is the only option; GCL is an internationally-recognized
mechanism that allows poor countries to access technologies on their own
terms. *Set up public access stations that do not require the ordinary
citizen to pay a fixed monthly charge; and *Work out a system of public or
community ownership over the hardware infrastructure to minimize
rent-seeking by private interests, which can lead to further concentration
of wealth.

But can we overcome the technology's built-in ideology?

While the preceding strategies may allow developing countries to deploy
ICTs more effectively, these may not be enough. It was appropriate
technology advocate E.F. Schumacher author of the widely-acclaimed book
Small is Beautiful, who once warned that technologies often carry a
built-in ideology which is so deeply embedded that one cannot have a
technological transplant without getting at the same time an ideological
transplant - the biases, values and mindsets carried by the technology.

This is as true of the Internet as with the earlier technologies that
Schumacher cited, such as nuclear power and the Concorde jet. On the
Internet, we much watch out for the following built-in biases embedded in
the technology:

The superiority of the English language (and, by extension, culture?). The
lingua franca of ICT is English. Programming languages, including the
languages for programming hardware, are in English or derived from
English. This forces technical persons to consider English a necessary
language to learn, because it is a key to technology access. From
knowledge of the language comes familiarity and identification with the
culture behind that language.

Automation. The ICT perspective is to replace men and women with machines.
The process may create new jobs, but these new jobs are also subject to
the same bias: they will also, in the future, be replaced by machines.
Hidden centralism and hierarchy. This centralism and the corresponding
power hierarchy is facilitated by the growing privatization and corporate
control of Internet facilities as well as decision-making and can be seen
in the following:

*consolidation of control over information content and infrastructure,
with a corresponding growth of enormous powers to those who wield such
control;

*assignment of IP network addresses, those dotted numbers which are needed
to establish a permanent presence on the Internet, without which one is a
second class Internet citizen, and the assignment of which is now largely
corporate-controlled;

*the domain name system (DNS), which is as important as the IP address in
establishing a personality in cyberspace; and

*the technical standards, which include communications protocols, packet
formats, mail and document formats, sound and video formats, and all the
different standards that make internetworking possible and without which
there will be no Internet.

These centralist elements, by the way, make the Internet a perfect
listening post and control point for military and intelligence
applications. Globalist bias. On the Internet, by the very design of the
technology, the global players enjoy a hidden subsidy by local players, a
perverse case of the poor subsidizing the rich. Whenever ISPs charge a
flat rate regardless of destination, those who communicate with nearby
contacts pay as much as those who communicate with distant contacts, even
if the latter use more network resources. This is a hidden subsidy for
globalization that comes with the design of the technology itself.

Unlimited growth. A major criterion in Internet design is "scalability" -
- that the design should allow for unlimited expansion and can be
indefinitely extended to larger and larger scales. It is true that
information, because it is non-material, can increase practically without
limit. The problem is in extending this thinking to the material world.

No accountability. The ease in establishing transitory social contacts on
the Internet and hiding identity not only discourages the growth of social
responsibility but also fosters unaccountable behavior patterns. As a
result, the Internet has become the natural habitat of scam artists,
spammers, and other anti-social elements whose brazen unaccountable
behavior are tolerated by server system administrators.

It is as if the ideology of the cyberlord class had been embedded in the
technology itself. To become a truly appropriate technology, the Internet
needs a redesign based on a very different ideological perspective. In the
meantime, unless ICT users are fully aware of and consciously reject these
hidden, built-in biases, as they use these technologies, they are also
getting a dose of the ideology behind them.

And can we defeat the cyberlords and their neo-feudal rule?

Feudalism has been defeated before. It can be defeated again. The feudal
rule of landlords was defeated by land reform. Cyberlords can be defeated
by a similar property reform which can be summed up as follows: stop the
privatization of information, information resources, and information
facilities; work for public domain information content, tools, facilities
and infrastructure; and develop non-monopolistic ways of rewarding
intellectual activity. The Philippine Greens, for instance, have
formulated the following demands in the information sector:

1. The right to know. It is the government's duty to inform its citizens
about matters that directly affect them, their families or their
communities. Citizens have the right to access these information. The
State may not use 'national security', 'confidentiality of commercial
transactions', or 'trade secret' reasons to curtail this right.

2. The right to privacy. The government will refrain from probing the
private life of its citizens. Citizens have the right to access
information about themselves which have been collected by government
agencies. The government may not centralize these separate databases by
building a central database or by adopting a unified access key to the
separate databases. Nobody will be forced against their will to reveal any
information they do not want to make public.

3. No patenting of life forms. Modified or not by human intervention,
these may not be patented: life forms, biological and microbiological
materials, and biological and microbiological processes.

4. The moral rights of intellectuals. Those who actually created an
intellectual work or originated an idea have the right to be recognized
that they did so. Nobody may claim authorship of works or ideas they did
not originate. No one can be forced to release or modify a work or idea if
he/she is not willing to do so. These and other moral rights of
intellectuals will be respected and protected.

5. The freedom to share. The freedom to share and exchange information and
knowledge will be recognized and protected. This freedom will take
precedence over the information monopolies such as intellectual property
rights (IPR) that the State grants to intellectuals.

6. Universal access. The government will facilitate universal access by
its citizens to the world's storehouse of knowledge. Every community will
be enabled to have access to books, cassettes, videos, tapes, software,
radio and TV programs, etc. The government will set up a wide range of
training and educational facilities to enable community members to
continually expand their know-how and knowledge.

7. Compulsory licensing. Universal access to information content is best
implemented through compulsory licensing. Under this internationally-
practiced mechanism, the government itself licenses others to copy
patented or copyrighted material for sale to the public, but compels the
licensees to pay the patent or copyright holder a government-set royalty
fee. This mechanism is a transition step towards non-monopolistic payments
for intellectual activity.

8. Public stations. Universal access to information infrastructure is best
implemented through public access stations, charging at subsidized rates.
These can include well-stocked public libraries; public telephone booths;
community facilities for listening to or viewing training videos,
documentaries, and the classics; public facilities for telegraph and
electronic mail; educational radio and TV programs; and public access
stations to computer networks. Another approach in building public domain
information tools is to support non-monopolistic mechanisms for rewarding
intellectual creativity. Various concepts in software development and/or
distribution have recently emerged, less monopolistic than IPRs. These
include shareware, freeware, "copyleft" and the GNU General Public License
(GPL). The latter is the most developed concept so far, and has managed to
bridge the transition from monopoly to freedom in the information sector.

9. The best lessons of our era. While all knowledge and culture should be
preserved and stored for posterity, we need to distill the best lessons of
our era, to be taught - not sold - to the next generations. This should be
a conscious, socially-guided selection process, undertaken with the
greatest sensitivity and wisdom. It is not something that can be left to a
profit-oriented educational system, circulation-driven mass media, or
consumption-pushing advertising.

The key issue in the information sector is IPR. Information cyberlords
will rise or fall depending on how this issue is resolved. In the software
field, the short-term strategy is the expansion of various forms of
compulsory licensing of commercial information products. Long-term
strategies include protecting the people's freedom to use, share, and
modify information tools and content through free software licensing;
resisting the patenting of life forms; phasing in non-monopolistic rewards
for intellectual activity; and encouraging the social sharing of
non-material goods.

In the infrastructure area, we should advocate various forms of
community/public control or ownership over backbone information facilities
and infrastructures, to minimize private and corporate rent-seeking.

Such strategies run squarely against WTO principles, which are highly
protectionist over IPRs and which favor corporate control over information
facilities. As the legal infrastructure which cyberlords rely on for
maintaining their high profit margins, the WTO will remain major arena of
struggle in the information sector. The WTO setbacks in Seattle and in
Cancun have opened windows of opportunity to question the various
pro-cyberlord WTO agreements, particularly TRIPS. Developing countries
must try to get these agreements postponed, reviewed, and modified, to
weaken pro-cyberlord provisions and strengthen those provisions that
increase public access and control over information content and
facilities.

While the cyberlord class has become increasingly powerful, the source of
its power is also the key to its weakness. This is the extremely low cost
of reproducing information, which is the basis of the social nature of
these goods. It is impossible to stop people from sharing information,
regardless of the will of information producers and cyberlords. The more
we freely share information that they want locked up under IPR, the weaker
information monopolies will become.

This is how we can stop the return of the new rentiers.

Roberto Verzola
World Social Forum, Mumbai, India
January 18, 2004

Note:

Roberto Verzola's pieces on the the information economy have been
collected into a book, entitled Towards a Political Economy of
Information: Studies on the Information Economy, which will be launched on
March 10, 2004 by the Foundation for Nationalist Studies (FNS). He may be
reached at rverzola@gn.apc.org.

The following is the table of contents of the book:

Part I. Information and Intellectual Property Rights (IPR)
1. The miracle of the loaves
2. A new offensive against the Third World
3. U.S. piracy in the 19th century
4. The "piracy" of intellectuals
5. GATT: Free Trade or Monopoly Growth?
6. IPR: a clash of value-systems
7. Towards a political economy of information

Part II. ICTs and the Internet
8. Expanding market for information economies
9. A hierarchy of access
10. ICT: job creator or destroyer?
11. A poor learning environment
12. An interactive idiot box
13. Private space controlled by rentiers
14. Perverse subsidies
15. Internet cafes: connectivity for the masses?

Part III. Genetic Information And Genetic Engineering
16. Turning farmers into "pirates"
17. Pirating genetic resources
18. Beware of modern vampires
19. Biosafety and genetic contamination

Part IV. Monopolistic Information Economies
20. Information monopolies and the WTO
21. Globalization: the third wave
22. Cyberlords: rentier class of the information sector
23. Testing the political strength of a cyberlord
24. Globalization: poor design?
25. What could be more important than efficiency?

Part V. Alternatives: A Non-Monopolistic Information Sector
26. A well-kept IT secret
27. IT or AT?
28. Community rights over biological material: property or moral rights?
29. Low-cost strategies for ICT deployment in developing countries
30. Greening the information sector
31. Alternatives to globalization


#  distributed via <nettime>: no commercial use without permission
#  <nettime> is a moderated mailing list for net criticism,
#  collaborative text filtering and cultural politics of the nets
#  more info: majordomo@bbs.thing.net and "info nettime-l" in the msg body
#  archive: http://www.nettime.org contact: nettime@bbs.thing.net