Schneier on Security

Horspool • November 6, 2014 4:56 PM

The chief interest of Melissa Hathaway’s paper is how eagerly she justifies oppressive regulatory and tax regimes to increase the power of incumbent politicians and their cronies (in particular, legacy telcos which are crony concessions or SOE’s in most countries).

In her Conclusion, speaking of Internet governance and regulation, Hathaway writes that the USA cannot “maintain its position of influence [with respect to Internet governance] unless it develops and delivers a new message focused on economic competitiveness and business opportunity that respects the rights of individuals in their liberty, thoughts, and possessions.” That sounds like motherhood and apple-pie with which we can all agree but it contradicts many of her preceding remarks so it might be mere cant aimed at the TL;DR crowd. However, based on the text leading up to that passage, one suspects that Hathaway is really writing in an esoteric code which signifies “crony capitalism” by “economic competitiveness” and “systematic oppression” by “respect [for] rights of individuals.”

Before offering two lines praising respect for individual rights, economic competitiveness, and business opportunity, Hathaway delivers hundreds of lines extolling the opposite. For example, in her Regulatory Interests section, Hathaway explains that drafting oppressive International Telecommunications Regulations was the “perfect venue for countries seeking to assert more control over many aspects of the Internet, including facilitating an accounting mechanism to compensate for the infrastructure improvements needed to carry the ever-growing Internet (voice, data, and video) traffic and to initiate security requirements for key facilities and networks.” Indeed, and what was the role of the USA? According to Hathaway, the “United State[s] led the dissenting block… and has been criticized for its position ever since.”

Now, Hathaway earlier gives special definitions for the phrases “accounting mechanism to compensate for infrastructure improvements” and “security requirements.” In Hathaway-speak, those mean respectively “heavily taxing communications between the USA and other countries,” and “government censorship.” So by leading the dissenting block, the USA was in fact advocating for “respecting the rights of individuals” and “economic competitiveness.”

It seems Hathaway recommends the USA to develop and deliver a new message which will be “acceptable” when it supports state oppression of Internet users!

For those new to Hathaway’s intellectual world, let me point out how she builds up her case for oppression.

In her first topical section “Economic Interests,” after eulogizing the former practice of third-world telco monopolies taxing international calls (especially from the USA) with absurdly high “settlement charges”,[1] Hathaway writes that today ISP’s just pay for what they use “thus bypassing the payment scheme previously imposed.” How horrible! Think of each crony telco executive forced to go two or even three years without a new Mercedes-Benz!

But Hathaway has bigger fish to fry. Next she writes:

“Content providers that offer their services via the networks of infrastructure operators using an over-the-top (OTT) model pose further challenges to this model. OTT content and services providers include Google, Facebook, PayPal, Amazon, Skype, and others. These OTT providers consume bandwidth through their delivery of volumes of information to users transiting the infrastructure—usually for free. Some-times these services can degrade the quality of the infrastructure operators’ own telecommunication services, including core services, because they are using more than their ‘‘fair share’’ of bandwidth. Infrastructure operators are thus forced to make additional investments to ensure that they can provide their customers with the low-latency, high-quality experience that they demand 24 hours a day, 7 days a week. To further complicate matters, the majority of the OTT companies are headquartered in the United States.”

Hathaway recapitulates a lie emitted by American ISP’s like Comcast who also want to charge “content providers” for access to ISP subscribers. The lie is that content-providers “consume bandwidth for free.” In fact, small Internet subscribers pay for Internet service in order to send and receive “content.” When an individual shells out $75/month for “24Mbit/sec down + 3Mbit/sec up” “home broadband service” he specifically pays for the capacity to retrieve the bits he finds interesting from “content providers” on the Internet– that’s what the “24Mbit/sec down” part of his subscription is for. And like other Internet participants, content providers pay for ISP links (and in many cases for CDN’s to minimize latency and long-haul bandwidth consumption). What each carrier really wants– something Hathaway supports– is to convert its monopolist technical gatekeeper position into a tollbooth by which it will extort most of the value from unrelated business conducted across the Internet.

Hathaway writes that people using OTT “services can degrade the quality of the infrastructure operators’ own telecommunication services, including core services, because they are using more than their ‘‘fair share’’ of bandwidth.” That is artfully-phrased nonsense. The Internet is the “core service” of a modern telecommunications carrier. Legacy services which were formerly “core” such as voice or teletype are now just (very minor) Internet bitstreams.[2] And no one can use more than his “fair share” of bandwidth since ISP subscribers pay for whatever bandwidth they propose to consume.

Hathaway continues: “Infrastructure operators are thus forced to make additional investments to ensure that they can provide their customers with the low-latency, high-quality experience that they demand 24 hours a day, 7 days a week.” What is “additional” about carriers’ routine investments in plant to enable the services they sell?

Oh, writes Hathaway: “To further complicate matters, the majority of the OTT companies are headquartered in the United States.”

Well, there you have it! Many “OTT companies” are in the USA! So we should compensate crony monopoly telcos in other countries, wounded nearly to death by the loss of “settlement charges,” by helping them tax American firms who dare to “provide content” to those wicked Internet subscribers who have already paid (and continue to pay monthly) for the speedy delivery of the aforesaid “content.” Like all monopolists (this is textbook stuff, friends) carriers want to maximize profits by increasing prices and reducing output– except that carriers don’t have a monopoly on “content,” so they wish to leverage the monopoly they do have– on “access”– to extort all the profits from otherwise competitive “content providers.”

In her next section on Technical Interests, Hathaway explains that crony carrier monopolies must be protected because that “enables the government to assert control over those who are trying to evade regulation and payment schemas.” Meaning, of course, censorship and rakeoffs from monopolistic overcharging.

One tires of analyzing Hathaway line-by-line. She blithers on about “security” in such a meandering fashion, peppered with references to justly reviled incidents of state censorship or spying, that it takes a sharp eye to tease out her bottom line that the Internet should be “governed” to facilitate oppression.

Hathaway writes “Security arguments are being used to empower governments to advance their economic, political, and military interests in the operational implementation and architecture of the Internet. This weakens multistakeholder processes and venues and, at the same time, boosts market access, disrupts the power and control over Internet governance, and positions states for standards leadership.” That contradictory farrago (e.g., government interference does not “boost” but rather suppresses market access) leads eventually, per Hathaway, to the problem that “The main challenge lies in the fact that the private sector designs, builds, operates, maintains, and restores the very systems that process, transmit, and operate the country’s most important information and most vital infrastructures, while governments remain the ultimate guarantor of their citizens’ safety and well-being.”

“It is thus the responsibility,” writes Hathaway, “of governments to facilitate the market to meet the economic and national security interests of their citizens… Now that the Internet affects these and other citizen-essential services, governments are evaluating whether the Internet is in need of some sort of market corrections.”

By “market correction” Hathaway means “heavy taxation and regulatory interference.”

Hathaway continues “Each country is using different market levers, in the form of legislation and regulations, to assert control, manage risk, build security back into the infrastructure, and maintain political stability.”

There is the key to understanding Hathaway. When she writes “market levers” she means state interference. Legislation and regulations are not market processes, they are political impositions and are intended to redistribute risks and rewards in favor of those Hathaway calls “political actors” and their cronies. The missing “security” Hathaway wants to build “back” into the infrastructure is the censorship which was so much easier in the days of analog voice and teletype communications, and “maintaining political stability” is code for “suppressing popular unrest.”

I agree with Hathaway that the US should deliver a “new message” that “respects the rights of individuals in their liberty, thoughts, and possessions” to maintain influence over Internet governance. The proper way to deliver that message is for the US to desist from all indiscriminate spying and related sabotage (whether of standards or of computers and network gear) at home and abroad. The US should lead by example so its “new message” will be credible. Hathaway should deliver a “new message” as well: she should repudiate her mealy-mouthed defenses of discriminatory taxes, crony monopoly rakeoffs, and state censorship of the Internet and advocate clearly and directly for an open, competitive ordering which will deliver the maximum benefit to individuals rather than “political actors” world-wide.

[1] High settlement charges were a classic example of an economically inefficient but politically-favored tax. In order to extract revenue from a few callers with very low elasticities of demand, third-world despots imposed gigantic deadweight losses. Of course, since high settlement charges discouraged economic development (and pre-revolutionary coordination between residents and exiles) those despots were pleased– they did (and still do) prefer to rule in Hell than serve in Heaven.

[2] Even in LDC’s.