Nicholas Johnson, Concepts, Perspectives and Goals

Law of Electronic Media: Concepts, Perspectives and Goals University of Iowa College of Law Fall 1999 Nicholas Johnson

Contents

Introduction
Telecommunications, Globalization and Entrepreneurship
Information Age, Information Economy
First Amendment: The Reasons For, and Purposes and Effects Of
Electrical Engineering
New Paradigms and "Thinking Outside the Box"
Why "FCC Regulation of Broadcasting and Cable"?
Down-sizing, Out-sourcing, Entrepreneurship, Flat Organizations and the Virtual Corporation
The Billion-Dollar Bonanza
"You Want It, You Got It"
Orders of Magnitude and the "99.9%-Off Sale"
Technological Displacement and Broadside Blows
Globalization
Galloping Multi-Media Merger Mania
Information Rich, Information Poor
Telecommunications and Media Law as "Environmental Law"
Standards
Data, Information, Knowledge and Wisdom

Introduction

[Note: This document was originally prepared for a prior semester of Law of Electronic Media, somewhat different in focus from ours. There is much here, however, that will be helpful to students in understanding this semester's course as well. -- N.J.]

There are a number of goals or purposes for this course (e.g., (a) your substantive knowledge of relevant facts and law with (b) the "demystification" and self-confidence it brings about one more area of law, (c) the further development of your analytical, speaking and writing skills, and so forth). But one of those goals is for you to master some concepts or perspectives.

Rather than give you no option but to try to extract them from our discussion over the weeks of this semester, the headings/comments that follow will give you a preliminary heads up on what to look for.

(1) This memo is not a smooth-flowing essay. There is no "conclusion." It just stops (eventually!). Think of it as more like a glossary, or index. (2) Read it now, refer to it later. It will help you enormously to at least read this through before the second class period, and to come back to it throughout the semester. (3) I know that many of these concepts will be familiar to some or all of you already. So much the better. (4) Some will require no more than a minute or two of class time; others will be developed throughout the course. (5) This is only a listing with sometimes sketchy, sometimes illustrative, introductory annotation; it may be a useful reminder or checklist for you, but it is not all you need to know. (6) There is no necessary connection, or flow, between the headings below, with some obvious exceptions. (7) We will, undoubtedly, add to this list throughout the semester.

Telecommunications, Globalization and Entrepreneurship

My goal is to help you prepare yourself for the next 50 years – which will be your career – rather than the last 50 years, which was mine. Neither you nor I can know for sure what that preparation will require of you. Many of the core lawyering skills are unlikely to change very much: the ability to listen compassionately, read carefully, write clearly, and think creatively.

But there are three inter-related trends it would be risky for you and I to ignore: telecommunications, globalization and entrepreneurship. As you read the material that follows look for insights and examples of those trends, beginning with . . .

Information Age, Information Economy

The concept of "information age" or "information economy" runs throughout the course, from the first evening to the last. You will need to "get it" as an idea. Because there are hundreds of implications of this concept, not to mention examples, be patient with yourself as you flesh it out. It will take awhile. But nothing could be more "practical" for you, because we are going to be exploring and talking about the world in which you will be living and working (2000-2050). That world is/will be as different from the industrial, commercial age (which has, so far, shaped most of the law you've studied) as the industrial age was from the 10,000 years of the agricultural age which preceded it.

Wealth and power, once measured in terms of land, and subsequently in factories, or other physical capital assets, are now primarily measured in "information" most broadly defined (e.g., a credit bureau's records, vaults of feature films, your legal education).

You will want to begin thinking in terms of categories of information age (a) hardware, (b) software and (c) services -- along with lots of examples of each -- as well as the legal and public policy issues they raise.

Hardware categories might include computers, music playing devices (e.g., CDs, digital audio tape players), or geo-positioning satellite receivers.

Software examples could be the contents of computer programs, videotapes, or CD-ROM/DVD disks for computers.

Services are illustrated by airline (or other, such as hotel, automobile rental, or concert tickets) reservation systems, information utilities (such as AOL or CompuServe), or telemarketing firms.

Categories of legal, or public policy, issues could include copyright (e.g., the difficulties of policing abuses made possible with relatively cheap consumer electronics), privacy (e.g., the ease of intrusion with enormous, cross-referenced data bases of information on all of us, or miniaturized audio and video recorders), and antitrust (e.g., the implications of Microsoft's offering an Internet browser within the Windows 95/98 operating system).

First Amendment: The Reasons For, and Purposes and Effects Of

You have probably studied some First Amendment law by now. (If you haven't, don't worry, you can quickly catch up with what you need to know for purposes of this course.) But many of the courts' First Amendment opinions are of little use to us when dealing with the new technologies. There is usually a reasonable basis for pointing out why those judges' analyses are, and ought to be, inapplicable to the new information technologies.

What to do? Go back to basics. What were the drafters trying to accomplish with the First Amendment? If we focus on those reasons, purposes and effects (in addition to the literal language and prior holdings) it may provide us a more useful guiding star in designing public policy and law for an information age.

Electrical Engineering

Don't panic. I know you don't like math and science. After all, that's one of the reasons you chose law school as your alternative to "do you want fries with that?" But anyone who's been accepted into this law school is fully capable of dealing with the modest EE concepts needed for this course.

One of the delightful side benefits of studying "law," as I'm sure you've discovered by now, is the wonderful way in which the fact statements in appellate court opinions necessarily introduce you to real-world knowledge about an incredible array of different human activities. (It doesn't stop at graduation. During the course of my professional lifetime I've had to learn enough to function within the airline, broadcasting, cement, communications satellite, computer, natural gas, oil, ship building, shipping, telephone, and under-ocean cable industries -- among others.) As a lawyer you need to develop the skills of a "quick study"; not mastery of detail, but enough to know what you don't know, ask intelligent questions, and have knowledge of where, and to whom, to go for answers.

Law of Electronic Media is no different.

For example, "Why can't my 'daytime only' AM radio station broadcast at night?" your client asks. To understand those limited broadcasting licenses you need to know at least a little about radio wave "propagation" and the "ionosphere."

This is not as intimidating as it may sound; here's all you need to know for that one:

(a) radio waves escape through the atmosphere (to distant galaxies!) while the sun is heating it up, so many stations with limited local area coverage can use the same frequencies throughout the U.S. (and aliens can train their radio astronomy telescopes on us!).

(b) But at night the signals bounce back to earth from a layer of particles called the "ionosphere" that snuggle up together when the sun goes down. This causes unacceptable interference to stations sharing a frequency. So your AM radio client either gets a "daytime only" license from the FCC or none at all.

Other examples (from dozens) where modest technological insight is necessary to understand the practical problems and legal solutions we will be talking about might include:

the distinctions between "analog" and "digital" and their implications for cable-telephone competition, copyright, or celebrities' right of publicity;

the nature of "spectrum" as affecting its status as "property" and the choice of allocation through licensing or auctions;

the qualities of "electromagnetic radiation" that relate to everything from the liability of cellular phone companies for customers' brain cancer to the continued existence of the nation state itself.

New Paradigms and "Thinking Outside the Box"

This course will require that you develop (if you have not already done so) the capacity for coming up with new ways of thinking. I don't mean by this some one new way of thinking that I know about, and you don't, but that I'm going to teach you. I mean you developing your ability to identify legal problems, and solutions, that no one (including me) has ever thought of before; new combinations of electronic hardware, software or services; new structures of global governance.

The late President Kennedy's brother, Robert, responded to the evidence of poverty and human misery with the line, "Some see things as they are and ask why; I dream of things that never were and ask 'Why not?'"

This is not only an approach to social reform, but also to great personal wealth.

One of the richest persons in the world, the still-boyish-looking Bill Gates, not that many years ago, when he was your age, was also dreaming of things that never were and asking "Why not?"

This will require some real work on the part of all of us, but can pay great rewards of every kind. If you've studied cultural anthropology, or mastered a foreign language, you may draw some useful analogies from that experience in comprehending what we mean by "new paradigms." But don't let this one throw you; we'll walk through it together.

Why "FCC Regulation of Broadcasting and Cable"?

With all this emphasis on innovation and new paradigms, why are we studying old technologies like broadcasting and cable?

There are a couple of reasons.

First, broadcasting is still with us. It has changed in a variety of ways since the 1910s and 1920s in terms of technology, economics and regulation -- some of which have been hinted at above, and others of which we will also explore.

But broadcasting, in its current form, is still with us. And so is the FCC.

And my prediction is that it will still be with us, albeit in its future form, when you are getting ready to retire from the practice of law around the year 2050.

So you need to know something about broadcasting and cable, and its regulation by the FCC (such as it is!), because it is eminently practical, something you will use, and a part of your understanding of the "Law of Electronic Media."

Second, and beyond that is the utility for us of the regulation of broadcasting as an analogy or model. "Regulating" broadcasting with a federal, regulatory, administrative agency (the FCC), is one way of thinking about the legal and public policy issues raised by the new electronics technologies, software and services. (The public utility, common carrier, model is another. The "unregulated marketplace" (quotes because virtually every industry is regulated in some way) is a third, and currently the most popular, model.)

Down-sizing, Out-sourcing, Entrepreneurship, Flat Organizations and the Virtual Corporation

Not many years ago, ATT announced it was offering early retirement to over 70,000 executives -- to repeat, not industrial line workers, but executives! What was going on? Was ATT going out of business? No, it was doing quite well, thank you.

What was going on was but one example of a paradigm shift. Many of you will find yourselves doing quite well during the 21st Century -- personally, professionally, and economically. But you will be "unemployed" by today's standards, because you "can't get a job."

"Getting a job" is no longer the goal -- at least not one likely to be attained (or, if attained, retained).

For a variety of reasons, many of them having to do with the information revolution, it is no longer necessary for large organizations (whether "government" or "corporate") to have "employees" in today's sense -- or at least to have as many of them as they once would.

Corporate example: Many of those 70,000-plus ATT executives were preparing "reports" for higher levels of management; reports that can, today, be prepared by computer -- when wanted, with the content wanted, in the form wanted -- from corporate data bases that can be manipulated directly by top management.

Legal example: Work done for law firms' partners by newly-hired law school graduates, paralegals and secretaries can now be done, at least in part, by those partners directly, with the aid of Lexis and Westlaw.

One of the primary reasons is that organizations often find it cheaper and easier to "out-source" goods and services (such as, say, the copy and printing operation) than to put "employees" on the payroll, with all the costs associated with recruiting, training, and benefits. This is even the case when they end up contracting out to precisely the same individuals who were formerly performing that function as "employees."

"Flat" organizations are those in which authority is transferred to the field, or the factory floor, where quality employees are capable of organizing and supervising the work themselves.

The ultimate "virtual corporation" would be a single CEO with no "employees" whatsoever: contracting out the manufacturing, legal, administrative and other functions to other individuals and organizations paid as contractors.

How do you support yourself in such an economy? Through entrepreneurship. You are perceptive enough to discover an unfulfilled need, and then develop such a high degree of legal knowledge and skills, which you constantly upgrade to stay ahead of the curve of competition, that this newly discovered "niche" virtually belongs to you.

In the context of a law firm, just one brief example:

Rather than "getting a job" with a large firm that puts you in the group of lawyers working on that specialization, you operate a boutique law firm that becomes so highly regarded as "lawyers' lawyers" that you end up servicing large firms all around the country or world.

Or, in business:

Rather than "getting a job" in the legal department of a Fortune 500 firm, you either come up with ideas for new, innovative, information economy firms yourself or join with those who do by, say, providing them the start-up legal services they need in exchange for stock.

The Billion-Dollar Bonanza

So let's practice a little entrepreneurship.

A cousin of mine, when president of a bank in Houston, was approached by a reporter from out of town who wanted to do a story about all the millionaires in Houston, and asked for their names. My cousin explained that he couldn't possibly come up with the names of all the millionaires, but that if the reporter wanted to limit himself to billionaires he might be able to provide that list. (And this was decades ago, when even a million dollars really was a lot of money!)

Similarly, in this class, we don't have time to talk about all the multi-million-dollar ideas, but we can talk about a few of the available "billion-dollar bonanzas." In fact, one of your assignments will be to come up with one.

The ground rules are that this not only will not, but cannot, require any genuine invention on your part. It's just "putting the stereo components together." Want an example?

Cable television is not the multi-billion-dollar industry it is today because of all those wires running down the street. It's because somebody saw those wires, carrying nothing but local programming, thought about those communications satellites up in the sky, and asked, "Why not?"

With the satellite-distributed, original programming of (first) HBO, cable suddenly had something to sell that viewers could not get off the air.

That person didn't invent coaxial cable, they didn't invent communications satellites, they just read the paper, became knowledgeable as to what is out there, asked "Why not?", "put the stereo components together," and created a multi-billion-dollar industry.

There's a billion-dollar idea in the papers at least once a week -- if you know how to look for it, have the imagination to "get it," and the courage to go for it.

"You Want It, You Got It"

Virtually any electronics you can imagine probably already either exists, or could be invented by a creative inventor or engineer in 18 months or less (the period of time it takes them to double the computational capacity of computer chips).

This is both good news and bad news. The good news is that you have an almost unlimited range of possibilities for your billion-dollar bonanza.

The bad news is that just because something can be invented does not mean that anyone will want it. For example, media conglomerates have already lost millions, if not billions, on "interactive TV."

As any candid educator will acknowledge, it took us 50 years to get the overhead projector out of the bowling alley and into the classroom. Seventy years after Bell invented the telephone, and the New Haven telephone exchange was up and running, no more than 50% of U.S. homes had a telephone. Why is it you think your technology will be adopted sooner?

"Wow!" and "Gee whiz!" carry a lot of weight with hobbyists, like myself, who want one of everything electronic. The fact that it can be done means that we want to do it. It carries far less weight in the marketplace among those who are just looking for goods and services to help them get the day's work done.

Orders of Magnitude and the "99.9%-Off Sale"

Another example of a new paradigm, of sufficient significance that I am listing it separately, is the application of the concept of "orders of magnitude" to electronics.

When we have to think in mathematical terms at all, it is usually in simple multipliers or fractions: "Oh, just give me another half a cup of coffee," or "What I'd really like is the Mercedes, but it costs twice as much," or "Sale! One-third off!"

Orders of magnitude, by contrast, refer to numbers that are multiples of ten more (or less) than the number to which they are being compared.

Someone who earns $200,000 a year is making "an order of magnitude" (or ten times) more than someone earning $20,000; at $2,000,000 a year we would say they are earning two orders of magnitude (or 100 times) more.

Similarly, when the price of the early video recorders dropped from $200,000 to $20,000 that was not just a ten percent, or "half-off" reduction, it was one full order of magnitude. But notice, in this particular example, that there have been two more orders of magnitude reduction in price: to $2000, and then to today's $200 for a VCR. The first was a "90% off sale," the second a "99% off sale." Today's price represents a "99.9%-off sale."

Such "orders of magnitude" reductions in price, or increases in power (of, say, computers), require a radical reordering of the ways we think about such things.

A 99.9%-off sale on $100,000 Rolls Royces would mean you could buy one for $100. How might that affect your thinking about, purchase and use of, one -- or more?

When items priced, and designed, as industrial products for the military or Fortune 500 companies suddenly become relatively cheap "consumer electronics" it can have enormous social, political, economic -- and legal -- implications. That will be one of the sources of the issues you will be looking for, and then thinking about.

Technological Displacement and Broadside Blows

Of course, the other side of the "billion-dollar bonanza" coin is the billion-dollar bankruptcy.

In the 1970s IBM, once the computer company, sold "mainframes," and saw personal computers (if they came within the company's range of vision at all) as little more than toys. They were unable to make the paradigm shift, unaware of the impact of the 99.9%-off sale. Meanwhile a couple little kids in a garage, Steve Jobs and Steve Wozniak, were about to revolutionize the industry -- and IBM -- with a little "toy" they called "the Apple."

I once rode on a plane next to a guy in the slide rule business who had failed to see the existence, let alone the significance, of the pocket calculator. (He had some very fancy slide rules for sale cheap!)

The rapid growth of the Internet -- at one time 20 per cent per month! -- has taken almost everyone by surprise. It's created some of the fastest growing hot stocks -- often for companies that have yet to earn a profit. And it's been a real challenge for the pre-existing "information utilities" (e.g., AOL, CompuServe, Prodigy), each trying to sell at a profit a small proportion of what's now available for free to all -- and ultimately adapting by bundling Internet access!

Newspapers had to adapt to radio, and then television, and now Internet-delivered information systems. Broadcast television had to adapt to cable delivery, then direct broadcast satellites, and now all are positioning themselves to compete with television programming delivery by "the telephone company," the Microsoft-NBC joint venture, and the Internet.

When computers were expensive, and lines charges relatively cheap, "dumb terminals" connected to mainframes made sense. Once you could put more computational capacity on your desk than a mainframe used to have -- and at an affordable price (the 99.9%-off sale) -- the telecommunications charges became more of an issue.

West, and other library materials providers, are today promoting CD-ROM technology. If optic fiber produces a couple orders of magnitude reduction in today’s telecommunications costs (e.g., 25 cents a minute, not to mention $200 an hour!) and they become, say, $0.0025 a minute, CD-ROMs may give way to online searching once again.

What does your radar pick up on the distant horizon as a possible threat to your billion-dollar bonanza?

Globalization

By now, virtually everyone is aware that we are operating in a "global economy."

Whatever your nation of birth, you may well end up serving companies that, for all practical purposes, have no nationality.

The power formerly held by nation states is now diffused -- to regional and "inter-national" organizations, global corporations, global non-governmental organizations ("NGOs"), and more localized governments (cities, counties and states) and ethnic groups.

Much of what has made this possible, and continues to propel it, is the existence of global communications networks (under-ocean optic fiber and other cables, and communication satellite networks).

Ford's team of automobile design engineers works together around the world continuously, somewhere, 24 hours a day, linked by a corporate computer network.

You, too, will need to "think globally."

Galloping Multi-Media Merger Mania

When Time and Warner merged (to make "Time Warner") the executives explained their reason: there would soon be five firms controlling all the media on planet earth, and they wanted to end up among the five.

GE had earlier acquired NBC, and Cap Cities bought ABC. Since the Time Warner merger, Disney has acquired Cap Cities-ABC and Westinghouse bought CBS. The merger mania continues with such speed on a daily basis that it is difficult to follow, let alone relate it all to you here.

It is not yet the case that five firms control all the world's media. But that time is not far off. There are already six firms that control over 90% of the entire world's commercial music.

The implications of media ownership patterns are in part economic -- the subject of conventional "antitrust" considerations.

It's going to be difficult for your FM-radio client to compete in the local advertising market with the other local FM in town if the competitor's owner also happens to own the local cable franchise, only local newspaper, TV and an AM radio station. (Such combinations have not been unheard of even in Iowa.)

But the far greater significance (from my perspective) are the implications for the First Amendment (see "First Amendment: The Reasons For, and Purposes and Effects Of," above): the opportunities for a diversity of (often unpopular) information and ideas to reach a democratic, self-governing society, and the ability of the media to challenge establishment institutions of all kinds (corporate as well as governmental).

In addition to the risks posed by (a) a local monopoly, or oligopoly, of media outlets, look for, and think about the risks of, (b) state-wide, or regional concentrations, (c) group ownership (of large numbers of, say, only newspapers, or only broadcasting properties), (d) multi-media ownership (whatever the geographical region, from local to global), in which one owner combines control over newspapers, magazines, and books, radio and television program production, and stations, cable television programming services and the local systems that carry that programming, movie studios and theaters, music companies, video rental stores, and so forth, (e) conglomerates' ownership of media (a major defense contractor, say, owning a TV network).

Information Rich, Information Poor

If it is true, as asserted above, that wealth and power are today measured in terms of access to communications/information, and that this information economy is networked globally, what are the implications for the equitable distribution of that wealth and power among the world's peoples?

Is it possible that, just as there is an economic gap between "the rich" and "the poor," (the gap in the U.S. is the greatest of any of the 17 largest industrialized nations) there is a gap between the "information rich" and "information poor" as well? If so, is that gap decreasing -- as advocates of the "global village" would have us believe -- or increasing?

For starters, every year there are more illiterate people on planet earth than there were the year before. Most of the world's people live on less than $200 a year. Some ten million children under age five die every year from impure water (a loss that could be prevented, incidentally, for less than ten cents per child per day). Food, health, and escape from war, are -- quite understandably -- higher priorities for them than a phone (even if the service were available), not to mention a home computer connected to the Internet.

Does this gap exist in the U.S. as well? Are these issues of significance to us in a law school course on the "Law of Electronic Media"? Should they be?

Telecommunications and Media Law as "Environmental Law"

We used to live in an environment made up of a few small clusters of civilization surrounded by wilderness. Now we live in an environment made up of a few "tree museums" (to borrow from Joni Mitchell's song lyrics) surrounded by urbanization.

Today's "environment" is something that we have made -- our "mediated, virtual reality." National parks, amusement parks, and video arcades are seen as interchangeable ways of allocating our time and money. We explore the oceans and forests and mountaintops by watching a TV, or computer, screen rather than taking a walk around the neighborhood.

Thus, telecommunications and media laws have become, for the human species, the most important subset of environmental law. What are the implications of that insight for this course?

Standards

Without standards not only do the trains not run on time, they don't run on tracks.

There were differences of opinion as to the most appropriate width of railroad tracks. But a national network of railroad tracks, with an interchange of rail cars between companies, required an agreement on a standard.

The same thing is true today of the engineering standards that make color television (or even any television) possible -- and they have not yet been agreed upon worldwide.

Standards are central to the ongoing competition between "IBM-compatible" computers and those from Apple.

Standards were what enabled the VHS version of a video recorder to win out over the (superior) Beta format.

The story of high definition television, and AM stereo broadcasting, are also stories of standards.

What is the relationship between the technology, timing, politics, economics, law and public policy of standards setting -- especially those involving the technologies upon which you are concentrating?

Data, Information, Knowledge and Wisdom

Throughout this document I have used the word "information" as a catchall for everything from airline schedules to feature films.

But you will want to be at least generally aware of the concepts "data," "information," "knowledge," and "wisdom" -- though we will probably not explore these philosophical distinctions in depth.

An example:

The "Iowa River" that flows through Iowa City is, in fact, the creation of the Army Corps of Engineers, which regulates the flow of water from the Coralville Reservoir.

The level of the Coralville Reservoir (in 1/1000ths of feet), and the flow from it (in cubic feet per second), are continuously measured by the Army Corps of Engineers, recorded and reported every six hours, and made available on the World Wide Web.

In checking it one day I found the numbers 313.5 and 649.240. Those two numbers are "data."

Once we know that 313.5 refers to 313.5 cubic feet per second of water flow from the reservoir into the river during a given hour and day, and that 649.240 is the reservoir level in feet above sea level we have "information."

If we had the numbers graphed (which they are) over a longer period of time than 48 hours (which they are not) we might have some "knowledge" about how these levels and flow compare with those of past years. (As they are, they do tell us that for some reason we don't know the flow jumped from 313.5 cf/s to 322 cf/s from 1400-0000 hours, and then back again, and that the level during those 10 hours was 649.25 and before and after that dropped off the chart.)

And "wisdom"? Perhaps it's the notion that humankind should not be trying to alter the flow of nature's waters -- or, that we should build even more dams. Perhaps it's the intuitive insight from years of monitoring such things that the next day's flow should probably be increased, or decreased. And it's also possible, of course, that it's the observation that one should "get a life," and not care about such matters at all, leaving them to the expertise of the Corps.

"Data," "information," "knowledge," and "wisdom." Useful distinctions to keep in mind as we consider the legal and public policy implications of "the information age." And may this course provide for you at least some of "the greatest of these," which is wisdom.

[19990822]