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An accountable Internet is a healthy Internet

by Dr George S. Ford

Internet giants like Google have enjoyed an unprecedented run of marketplace and political dominance - in no small part due to laws and regulations that reflect the public's acceptance of Silicon Valley's self-portrayal as an unalloyed force for good.

But there is growing concern and frustration with an Internet lacking the values, laws and norms we expect offline - or as Aspen Institute CEO Walter Isaacson put it: "[the Internet] has begun to corrode, both itself and us. It is still a marvelous and miraculous invention, but now there are bugs in the foundation, bats in the belfry, and trolls in the basement."

Until recently, U.S. Internet companies had little trouble exploiting goodwill to try and export their favorite aspects of U.S. law. For instance, here in Australia Google lobbyist William Patry recently claimed, "if you are a company like Google who wants to store information in the cloud, or Internet searches or text and data mining, we can do that safely in the U.S. We can't do it here."

The latest iteration of this strategy finds Google and their allies calling for Australia to adopt the "safe harbor" provisions contained in Section 512 of the Digital Millennium Copyright Act. Section 512 limits the remedies available against certain online service providers for copyright infringement by their users if the providers take specified steps to address infringement once made aware of it. In Australia, safe harbors only apply to CSPs, not companies like Google and Facebook.

However, a relentless barrage of illegal and unsavory online behavior facilitated by Internet platforms is calling into question the utility of laws these companies claim are "essential" to their business - and safe harbors are not without costs to others. My own estimates suggest the DMCA's safe harbors are costing the recording industry up to $1 billion annually in lost licensing revenue on YouTube alone - and that's just for the United States.

What's more, Silicon Valley is facing a fierce backlash in Washington from anti-human trafficking groups, victims, law enforcement officials and other stakeholders for their tin-eared opposition to legislation seeking to hold accountable websites that facilitate sex trafficking. The bill would amend Sec. 230 of the Communications Decency Act, another safe harbor, immunizing service providers from claims based on content provided by their users without any accompanying obligations.

Given growing concerns about an ailing Internet, it's troubling that Australian lawmakers would consider importing a safe harbor regime that is increasingly under fire in the U.S. To help policymakers in Australia, the U.S. and elsewhere as they consider the appropriate scope of Internet safe harbors, my colleagues and I at the Phoenix Center recently released a paper titled Fixing Safe Harbors: An Economic Analysis, offering a new economic model for safe harbors.

As we see it, the existing and overbroad U.S. safe harbors promote the success of platforms with high shares of illegal material - to the detriment of platforms using available and improving technologies to vet posted files for illegal materials. Put simply, vetting is costly, putting platforms with a conscience at an economic disadvantage in a competitive marketplace.

Economic theory tells us that increasing the risk of liability on platforms that deliver illegal content to users will result in a "separating equilibrium." That is, two types of platforms emerge - those offering legitimate content and those offering unsavory and low-value content. Thus, the introduction of platform liability will allow socially responsible platforms that vet their content to thrive. At the same time, platforms hosting illegal material would become easy targets for enforcement.

For Australian policymakers, our model suggests that instead of importing Sec. 512 of the DMCA, Australia should be exporting its site-blocking law, which was enacted to address the shortcomings of Australia's narrower, but toothless safe harbor regime, and could help diminish rampant online theft and other illegal activity.

Google and their allies argue that lessening liability protections for Internet platforms will "hinder innovation". Hardly. Stronger liability will merely redirect innovative efforts away from exploitation and crime and toward creating a safe, secure and accountable Internet. Such an Internet may be less profitable for Google, but will be better for the rest of us.

Google's Patry also said, "We think Australians are just as innovative as Americans, but the laws are different. And those laws dictate that commercially we act in a different way."

Here, I agree.

By ignoring calls to introduce overbroad safe harbors in Australia, policymakers can help incentivize responsible conduct, making sure the next Google does "commercially act in a different way". That's a good thing, and will help ensure that the best the Internet has to offer can continue to thrive.

George S. Ford is the chief economist for the Phoenix Center for Advanced Legal and Economic Public Policy Studies, a nonprofit research organisation that studies broad public-policy issues related to governance, social and economic conditions, with a particular emphasis on the law and economics of the digital age.

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