The main textbook for my “Advertising in Society” class. Check out Chapter 2 for a history of our “Transition to the Market System”.

BACKGROUND ON SOCIETY AND COMPETITION IN THE MARKET

As a college graduate in communications, I’ve been following the development of the information superhighway for a while.  I’ve never worried to much about it because until recently everything was going in a mostly positive direction.  Also there were bigger things to worry about such as how to make a living in an eroding TV/Film industry and how to avoid shady doctors and insurance companies so that I can actually use my insurance benefits.  But with the recent nomination and confirmation of republican favorite Ajit Pai, as FCC chairman, worry is warranted….

Why?  Because Pai has long been critical of regulation of the telecommunications market.  He’s a “free market proponent” and says that he favors a “light touch regulatory framework” for the telecom industry, which sounds like a good thing, seeing as how our western society is based on free market principles.  But this is misleading.

For a quick primer on the issue, watch this PBS News Hour interview with Chairman Pai.

Chairman Pai’s main argument for deregulation is that the technology companies established in the 1990’s were able to prosper because of the “light touch regulatory framework” that existed at the time.  In other words, he’s saying we need to return to the framework that existed prior to the adoption of the new network neutrality rules.  This is the main reason why I’m not a fan of Ajit Pai and the republican path of broadband development in America.  I think Pai’s statement is blatant misrepresentation.  While individual sentences in his statements contain “Historical Truth”, the context is fabricated and that skews the “overall truth”.  Without the proper context, it’s impossible to see that his overall argument falls down.  If you look at an argument as a narrative and, through study, have an accurate understanding of the real world context of this story world in his case study, then you can easily see that the moral of his story has lots of holes.

Our brains automatically fill in the gaps with inaccurate assumptions in order to derive meaning from stories that neglect to provide it.  As a result the story lacks “Narrative Truth”.  Another way of saying this is that The information Pai gives in the PBS interview is factually accurate but does not provide adequate information for a rational analysis by the audience.  The historical information is factually accurate but without context its fertile ground for mis-information and I think the politicians exploit this tactic of manipulating the average American who does not have access to all the information and therefore is not rational enough to understand the big picture (See “Advertising in Society” A: Hovland & Wilcox).  

So what is the proper context?  Market system theory is an expression of classical liberalism.  The idea is to have balance which offers prosperity to all in society.  Our democracy means that all have the right to participate in the dialogues that bring about social policy. 

…the ideas that were of fundamental importance in justifying the new economic order were the notions that……man possessed reason and conscience, that men were born equal and endowed with certain fundamental rights – life, liberty, and property.

• Hovland & Wilcox pg 18

Some conservatives, it would appear, prefer to avoid a real dialogue on the issue of network neutrality in order to benefit big business…the oligopolies.  An open internet would tear down barriers to entry that were erected by oligopolies that dominate the market through manipulation.  This attitude may be pro-business, but it’s anti-small business and that is an anti-competitive policy.  Competition increases atomism which is the fuel that our social system runs on.  With out competition (in this day and age, that  means a handicap for small players, like in golf) the market can no longer right itself when it tips over. 

PAI’S ARGUEMENT EXPLORED

In a social system that rests on the “Rationality of Mankind” it’s necessary to have both adequate AND accurate information.  Not either/or.  Both conditions must be met.  So, in order to mislead us, the hopeful deregulators give us just a snapshot of a small corner of that big picture.  The lack of adequate knowledge by the general public makes us vulnerable to misrepresentation via a narrative constructed to serve an agenda.  What’s the agenda?  Prop up big business by manipulating the market; keep the competition away through state mandated barriers to entry.  They sell the public on the plan that deregulation will help consumers, i.e. the citizens. 

Pai’s argument is largely fabricated.; check it.  His case study narrative occurs at a point in recent history when internet was an emerging market.  At the time, it had not been fully monetized.  I was in communications school at UT Austin in the late 90’s and I remember the tech climate well because I bought my first computer at the dell outlet store on research blvd. for a bout $1,200 bucks.  My professors encouraged us to participate in the social media platforms (B.Y.O.Dial-up modem) and I became  enamored by the possibilities as I sat at my desk (A.K.A upside down cardboard box) in the living room of my first apartment.  At the time the world wide web did exist but much of the traffic generated by primitive social media platforms was conducted through private servers and not the world wide web.  In effect, this means that traffic was separated and so the audience for advertising was very fragmented.  In order to fully monetize the internet it was necessary to standardize the information superhighway and merge traffic onto roads that were all indexed and managed by one large authority rather than many small ones.

******Insert Picture from Communications technology book

I don’t think that giving advertisers access to consumers’ eyeballs for the purposes of selling stuff is a bad thing.  The advertising classes also covered the history of advertising subsidizing the production of high quality TV shows.  My media production half really appreciates that, paarticularly now that an open internet and the technology that goes with it, opens a door so that I, a little guy, can start my own TV channel and maybe even subsidize my own productions when my viewers watch the ads on my very own channel.  So, this post is not to say “booooo consumerism”.  I’m just pointing out that the time period that Mr. Pai is talking about and holding high as the most relevant case study for deregulation occurred during the primitive era of the information industry.  If you’d like to know why that matters….please, keep reading.

Our country was built on a social foundation called the market system.  This social system was conceived in the early 1500’s when there were no machines.  The reason this system was needed was to replace totalitarianism and traditionalism.  People were not satisfied with being told what to do and where they fit in by an aristocracy.  They needed an egalitarian social system that would preclude the possibility of a social elite rising to power, claiming that they were the only rational people in the world.  These free world dreamers didn’t believe in a perfect system in which balance would never be disrupted,  but they did believe they could do better.  In theory, the market system is “self-righting” and that makes it better.  BUT….. in order for the system to maintain balance it’s necessary to have atomism; i.e. plentiful market participants of every kind.  This is how things went haywire.

Very brief history lesson.  In the mid 1970’s we officially moved into the “Information Age.” This took over from the “Industrial Age” which started one hundred years earlier in the 1870’s.  When the manufacturing industry of the 19th century was given machines, it leveraged the possibility of manufacturing more product than the market demanded for the first time ever.  Once the warehouses were stuffed full of supply that outstripped demand, they resorted to advertising so they could move all the leftover product.  The unplanned and unexpected consequences of consumerism was, the firms that were first to adopt the new technology were able to make a ton of money, grow their operation quickly and this created economies of scale.  These economies of scale, in turn, erected barriers to entry making it impossible for the new guy to compete.  The end result was that our social structure eroded from atomistic into oligopolistic.  Subjectively speaking, the aristocracies had rebuilt themselves.  Objectively speaking, competition was eliminated through market manipulation.  What was it again that market theory always said was required, above all else, to maintain social balance?  Ahhh, that’s right…Atomism; the very thing that was lost at the dawn of the industrial age. 

Fast forward 100 years.  The same thing happened as we transitioned into the information age because it was enabled by the rise of computers.  The home computer was not adopted on a mass scale by consumers until the 90’s which means the entrepreneurs and visionaries that started the prosperous tech companies in the 1990’s got into the business first. 

Side note: In the 1970’s the big tech company was IBM and they believed that there would never be any consumer market for computers and this left the door wide open for the little guys like Jobs, Gates, and Dell to do what they did in the 1980’s and 90’s.  They got in before the existing mega companies could create barriers to entry. 

After that, the internet became monetized and the same thing happened again.  The little-guy dot com founders got in before giant companies could create the platforms that we now use for social media and streaming audio/video content. 

Side note:  The same thing happened to the film industry in the 1920’s when “The Majors”, created distribution networks first, made tons of money and created barriers to entry in the film industry….but that’s another story for another day

All you have to do is look at the history books to see that, since history repeats itself, the telecom majors will take action to create barriers for their competition, given the opportunity.  Chairman Pai claims that he needs to predict market failure in order to preemptively regulate the market.  Well eliminating net neutrality is the thing that will cause market failure by eliminating competition, according to history.  So the action taken by the FCC to repeal net neutrality is actually a self fulfilling prophesy.  

So, the point is this:

Who cares if the 90’s had a “light touch regulatory framework”.  There were no barriers to entry back then.  That situation has changed. 

The market has moved from its primitive stage into its fully developed stage which means that without regulation, the future market will not respond the same way as it did in the past.

Side note: If you look at the history of the relationship between buyers and sellers that goes back 500 years to England, you’ll see that certain elements of the system design did not exactly pan out.  As a result, there is much precedent for regulating markets in order to provide the balance that would have been inherent had the entire system not failed.  Laissez-faire was never adopted.

Without regulation, the broadband market will now do the exact same thing as every other post-industrial revolution, natural market in the U.S.; the structure will turn oligopolistic.  That will create barriers to entry which is bad for society.  

Just like a true market system, Net Neutrality is about power to the people.  What Pai and the Republicans are after is “Power to the Machines”, and as we’re now finding out, once they get it, they will never give it up.

ADDITIONAL FACTS and FIGURES

• I Figure, I’m a firm believer in the market system.  I think it’s brilliant.  The problem is that like any other systems design, it has to be constructed properly and maintained.  
• Fact: Laissez-faire is NOT a tenet of the market system.  It was a battle cry used by those who railed against an oppressive government….the totalitarian government of the middle ages.  In America we’ve never had a totalitarian government.
• I Figure, the closest thing to a totalitarian regime that we have in this country is a cadre of individuals that comprise the decision making bodies of oligopolistic market entities, who actively manipulate the market in society with their sights dead-set on the bottom line of a balance sheet.  Then they manipulate our government through the lobbyists to prevent the adoption of policies that will reduce their market power. 
• I Figure, Mr. Pai and the republicans claim that Network Neutrality hampers the free market.  On the contrary, it is in the interest of a free market that millions of Americans ask Mr. Pai and the FCC to uphold their duty and continue to intercede in this precarious state of affairs in order to prevent such totalitarian regimes from getting a foothold.
• Fact: No matter the social system, in theory, government has always been responsible for doing what it can to maintain balance in society.  In the west, this means creating policy that restores balance so all Americans have the opportunity to build prosperity,