The Intention Economy: Free Markets Require Free Customers

I’ve just started reading a relatively new book entitled The Intention Economy and written by Doc Searls, a leading Internet thinker and co-author of the 1999 classic, The Cluetrain Manifesto. And though I’ve only read a few chapters so far, I can already enthusiastically recommend it to anyone interested in the future of the Internet, our economy and our society.

The book, and a project Doc has been spearheading at Harvard’s Berkman Center for Internet & Society, build on an article he wrote for Linux Journal back in March 2006. The Berkman Center project is called ProjectVRM, with VRM standing for “vendor relationship management.” As Doc explains, in the emerging Intention Economy, VRM will serve as a healthy and market-improving counterbalance to what’s known today as “customer relationship management” (CRM).

As Doc puts it in the book’s prologue:

Behind ProjectVRM was a thesis: Free customers are more valuable than captive ones.  And, as a corollary, Free markets require free customers.

Doc wrote the original 2006 article for the Linux Journal, while attending an industry conference focused on “The Attention Economy.”  It begins with a few important and insightful questions:

Is “The Attention Economy” just another way for advertisers to skewer eyeballs? And why build an economy around Attention, when Intention is where the money comes from?

Later in the article Doc elaborates a bit more on the core idea that led to his book and ProjectVRM (bolding is mine). Continue reading

Posted in Economics, Human Evolution, Next Generation Internet | Tagged , , , , , , | Leave a comment

Understanding MMT: Recommended Video & Audio

For anyone wanting to better understand Modern Monetary Theory (MMT), I’d highly recommend the following:

A nearly 2 hour joint presentation (including extended Q&A) at the Columbia Law School by Prof. Stephanie Kelton of UKMC and investor and MMT pioneer Warren Mosler.    The YouTube video is embedded below and you can also find it here (with comments) at the New Economic Perspectives blog site.

An audio interview of Prof. Kelton on Harry Shearer’s Le Show.  If you prefer reading a transcript, you can find it here.

As I’ve said many times on this blog, an understanding of MMT opens up all sorts of positive economic policy possibilities, especially when compared to the current austerity-focused policies that are slowing and distorting growth, and threatening to do so even more severely in the future (i.e., it’s austerity, not federal deficits, that will place an onerous burden on future generations).

Posted in Economics, Modern Monetary Theory | 2 Comments

Freeing Progressives From Their Deficit-Fear Shackles

Since the federal deficit was a central (and, in my view, misguided) focus of both of the two recent political conventions, it seems like a good time to revisit the Modern Monetary Theory (MMT) perspective on the deficit (in what will be my first post since finishing up a two-month project that left me with no time for blogging).

The timing is also good (and my job a lot easier) because I can refer to several very good blog posts that have addressed this issue in the past few days.

In a post at New Economic Perspectives (NEP), J.D. Alt critiques a key premise underlying today’s economic conventional wisdom, the acceptance of which he claims is “the principal dilemma of the progressive cause.”

In Alt’s view, progressives have seriously weakened the power and public embrace of their arguments by “allow[ing] a bedrock conservative premise to go so long unchallenged.” In fact, he says, “progressives themselves have either overtly or implicitly agreed with the premise, making it virtually impossible for them to effectively advocate their goals.”

The faulty premise, says Alt (and other MMT advocates) is that “The money for federal government spending must come from the Private Sector, either through the collection of taxes and fees, or government borrowing.”

Alt points out that this premise, a foundation of today’s dominant “economic Common Sense,” ignores a key piece of economic reality:

Where does the money come from that the people earn in the first place? Continue reading

Posted in Economics, Modern Monetary Theory | 4 Comments

Minimizing Competition, Maximizing Extraction

A few things I read recently strike me as good (make that “painful”) examples of how the dominant incumbent ISPs are continuing their quest to minimize competition and thereby maximize financial extraction.

The first relates to anti-competitive developments in the political and legislative sphere.  The second relates to the ongoing trend among dominant ISPs to either merge or cooperate in ways that reduce competition and maximize financial extraction.  The third relates to the integration of “content” and “distribution,” as exemplified by Comcast’s recent acquisition of NBC Universal.

Taken together, these three developments highlight a multifaceted trend toward consolidation of market power in the communication sector, and how this trend is threatening the health of an Internet ecosystem that has been a vehicle for massive innovation, entrepreneurial activity and economic growth, and has enhanced the ability of citizens to exercise their First Amendment rights and engage in voluntary association and self-organization. Continue reading

Posted in Communication Policy, Community Broadband, New Economy Movement | Leave a comment

My Broadband Pipe Dream, Part II: How might we get there from here?

Having set the conceptual stage for a “generative” Internet access strategy in Part I of this two-part post, I’d like dig a little deeper here into the “what” and “how.”

As I said in Part I, and as suggested by this post’s title, the following is not intended to provide a specific and fully-formed proposal but, rather, to point in new directions, suggest some possibilities, and encourage creative and constructive discussion and debate.

To get started, here’s an outline of what I see as key components of a generative Internet access strategy that would be supported (financially and otherwise) at the national level, while being planned and managed at the local community level.

Together, these elements are intended to maximize the economic benefits predicted by New Growth Theory, by leveraging the federal government’s role as sovereign issuer of currency and the strengths of “generative” (vs. “extractive”) Internet access ownership models. Continue reading

Posted in Communication Policy, Community Broadband, Economics, Human Evolution, Modern Monetary Theory, New Economy Movement, New Growth Theory, Political Reform | Tagged , , , , | 2 Comments

My Broadband Pipe Dream, Part I: Review & Stage-Setting

In this post I hope to tie to together some threads of  analysis explored in earlier posts, with the goal of setting the stage for a follow-up post that will outline what I’ll call my “broadband pipe dream.”

So let’s review….

In a previous post I provided a conceptual overview of how a combination of New Growth Theory (NGT) and Modern Monetary Theory (MMT) provides a policy rationale for federal investment in broadband infrastructure and related development of value-generating network usage, skills and applications development.

This investment would support accelerated Internet-driven economic growth, as explained by New Growth Theory and its analysis of “the economics of ideas.”

It would do so by leveraging the U.S.government’s ability to deploy its sovereign currency in ways that (contrary to economic conventional wisdom), would not trigger deficit-driven problems related to the solvency of the U.S.government or inflation, as explained by Modern Monetary Theory.

In several other recent posts I considered issues related to the industry’s migration of Internet access to vertically-integrated and unregulated monopoly or duopoly structures, and the impact of this trend on the Internet’s “openness.”  (see here, herehere, here, here and here).  As I noted, these issues have been explored in depth by law professor Susan Crawford, in several papers and an upcoming book entitled “Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age.

In another post I considered different models of ownership and control of Internet access networks, applying an analytical framework developed by Marjorie Kelly in her new book, Owning our Future.  This framework focuses on differences between ownership structures with a purpose of maximizing “financial extraction,” and ownership models that have what Kelly refers to as a “generative” purpose and structure.

In that post I argued that publicly-traded cablecos and telcos typically approach local networks with a primary purpose of financial extraction (e.g., maximizing stock price, free cash flow, shareholder dividends, etc.).  In contrast, community-owned networks tend to have a “generative” purpose along the lines of:

 …to provide households, businesses and public service organizations (e.g., schools, healthcare providers, public safety, etc.) with affordable, reliable, symmetrical, high-capacity broadband connectivity and related services, to support their ability to prosper and thrive in an increasingly competitive and knowledge-based global economy.

It seems to me that this kind of “generative” purpose and ownership structure is very much in harmony with the growth-promoting role of the Internet, as suggested by New Growth Theory.  That’s because such an ownership model will tend to maximize the free flow and “combinatorial explosion” of ideas by maximizing Internet availability, affordability, symmetrical capacity, and the ability of end-users to freely leverage these capabilities to generate and exchange value–without control or censorship of this exchange of ideas and value by a centralized authority, whether it be a public or private entity. Continue reading

Posted in Communication Policy, Community Broadband, Economics, Modern Monetary Theory, New Economy Movement, New Growth Theory | Tagged , | Leave a comment

Wireline Access Tends Toward Monopoly

When we consider questions related to Internet access policy (as I’ve been doing lately on this blog), it’s useful to have a sense of both the economics and historical trends in this key sector of the economy.  In this post I’m going to provide some of this, using excerpts from a paper I wrote awhile back.  Some of it may be a bit wonky, but I hope it will be useful for anyone wanting some additional background.

One of the key implications of this post’s analysis is that facilities-based wireline competition tends to be economically inefficient and, over time, wireline (and, to a somewhat lesser degree, wireless) access markets tend toward increasingly monopolistic industry structures (often referred to as “natural monopoly.”)

And even when there are already two wireline network operators in place (as in much of the U.S.), the same migration-to-monopoly economics are at work.

For example, AT&T and Verizon, the nation’s two largest telcos, have been experiencing accelerating customer losses in the markets in which they offer only DSL broadband (which account for roughly half of their holdings, if you include mainly-DSL markets recently sold off by Verizon).  Yet, in spite of these accelerating competitive losses, they have decided not to upgrade these markets with fiber optics, which would allow them to compete much more effectively with cable.

The primary reasons for this are:

1) telco DSL networks are fundamentally inferior to cable networks in terms of broadband capabilities, but are expensive to upgrade to the kind of fiber optic-based network that can compete with cable (as Verizon’s is doing quite successfully in the areas where it has upgraded to a fiber-to-the-home network.)

2) the two giant telcos don’t see enough financial payback from upgrading their remaining DSL-only (or dial-up only) markets and, instead, are focusing mainly on wireless, where they are the ones with dominant market power, but which does not provide real competition for cable-delivered broadband (due to speed, reliability, price and other factors).

Thus, as Susan Crawford has pointed out, in much of the nation, high-speed Internet access is migrating to an unregulated “cable monopoly.”  

If we’re serious about Internet policy, we need to understand and deal with this reality.   Hopefully the following will help a little with that understanding:

Continue reading

Posted in Communication Policy, Economics | Tagged , , | Leave a comment