I can see you

One of the great benefits of living in a big country is the standardization that makes the country work like one big market delivering a plethora of goods and services at very competitive rates.

The U.S. is blessed with a common and, for the most part, standardized language and currency. In addition, there are very few rules that interrupt commerce between the various states because they are mostly managed at the national level. It also helps that the constitution’s Interstate Commerce Clause supports the vision of a country-wide market.

On another level, the UCC, or Uniform_Commercial_Code was introduced in the 1950’s to help avoid the small differences between states caused by law and custom and today, basic business transactions are uniform.

But now, changes taking place in the U.S. congress could upset the apple cart and Balkanize the U.S., making it resemble Europe 60 years ago, more than itself from just a year ago. Don’t get me wrong, Europe is a huge market and free trade and a common currency provide most of the same advantages. But state law in America is more uniform than country laws among the EU states.

But according to a March 26 article in the New York Times, Push for Internet Privacy Rules Moves to Statehouses by Conor Dougherty, congress is doing what it can to move backward in a variety of areas with the potential resulting Babel of competing and contradictory state laws governing internet privacy.

The net effect could be multiple states each enacting laws intended to govern their citizens’ privacy concerns relating to what kinds and how much online data vendors like AT&T, Comcast, Facebook, and Google capture and hang on to. Consider that AT&T and Comcast are more like each other in that they are infrastructure players in this case than Facebook and Google, which are content purveyors.

The rules are already in place that govern this Wild West market but congress is nonetheless working to remove them. According to the Times,

Congressional Republicans argue that the rules [being removed] would add an unneeded and confusing layer of regulation and that they fail to distinguish between broadband providers and content companies like Facebook and Google. They also assert, more broadly, that such regulation is onerous and stifles innovation.

But if you wish to confront onerous and innovation stifling regimes, just consider what really would happen when each state decides to regulate its little corner of the world as is now likely. On the plus side there’s this,

More and more, states have taken the position that, if Congress is not willing or able to enact strong privacy laws, their legislatures will no longer sit on their hands,

said Chad Marlow, a lawyer at the American Civil Liberties Union. On the other hand, there’s also this,

California and Connecticut, for instance, recently updated laws that restrict government access to online communications like email, and New Mexico could follow soon. Last year, Nebraska and West Virginia passed laws that limit how companies can monitor employees’ social media accounts, while legislators in Hawaii, Missouri and elsewhere are pushing similar bills for employees, as well as for students and tenants.

It sounds like a can of snakes that technology companies might soon have to deal with individually.

Big companies like AT&T, Comcast et al. have the resources to deal with this but it’s the small, innovative, emerging companies that will suffer according to Carl Szabo, senior policy counsel at NetChoice, who the Times reports as saying:

Hiring attorneys to write privacy policies, coming up with terms of service — that will be a real burden for small businesses

What’s wrong here, even odious, isn’t what appears on the face of this controversy. Removing settled law that benefits a few large players and roils the market is a form of rent seeking. It’s an effort at entrepreneurship that we can best characterize as legislative. Nothing gets invented or made in legislative entrepreneurship but a few people get rich nonetheless.

There are other similar rent seeking behaviors such as balance sheet entrepreneurship in which oil companies, for instance, discover new oil reserves on their books rather than by drilling. What was once 100 barrels of reserves magically becomes 210 and it matters; it makes them more valuable in the public markets, but really? Not so much

The European public has been more cautious about private people's information that vendors are allowed to capture and hold onto even to the point that the right to be forgotten is taken seriously. Americans haven’t become that cautious, though people made a lot of noise about phone companies capturing phone call metadata and hanging on to it in the aftermath of 9/11.

My take

In the still early 21st century, our society is grappling with and making decisions about how the world will work for many decades to come based on a variety of new technologies. Our decisions are as fundamental as those that created the telephone monopoly, electric utilities, and the sprawling car-obsessed culture.

Compared to past events, this time we have a history of how these things work that was not readily available way back when earlier technology shifts occurred. From those experiences we can discover that once permission is given by a society, it’s very difficult to take it back or to amend it.

Opening up the nation’s telephone system, spawned a great deal of wealth creation and innovation but it also took a long trial and a consent decree.

It’s hard to imagine what our age of Information and Telecommunications would have been like if we couldn’t buy our own phones or use functions like voice mail that proliferated after the decree. Would social media even exist? What about mobile communications? That’s why online privacy, and decisions about it, are key to our future and why faux entrepreneurship can be so dangerous.