Kiss-off freedom on the Internet. The Trump administration’s pick to chair the Federal Communications Commission is quoted as saying he’s in favor of FCC content regulation of the Internet.

Trump names new FCC chairman: Ajit Pai, who wants to take a ‘weed whacker’ to net neutrality.”

What’s worse? In a 2015 news story here, Pai expresses that the FCC should control web content providers:

Continuing, he said, “It is conceivable to me to see the government saying, ‘We think the Drudge Report is having a disproportionate effect on our political discourse. He doesn’t have to file anything with the FEC. The FCC doesn’t have the ability to regulate anything he says, and we want to start tamping down on websites like that.’”

Like THAT???!!! Like WHAT???!!!

WTF is this mad man saying? The free press is supposed to be just THAT – FREE!

Where is the proof of no bias, in-kind contributions, favoritism for the major television networks? Where is a CNN filing? Seen a CBS filing of the sort he’s hinting at for alt-media? No.

He’s instead defending the biggest alligators in the Swamp.

This is Ajit Pai’s war on the Net Freedom.

Will it stop at throttling? Hell no. What about sites that aggregate content or offer contexting that doesn’t agree with officialdom’s Voice of the Swamp?

Pai is being set up to Goebbels 2.0 of the Net.

With all due respect, WTF was Trump thinking on this one?

I have told you before that I would report the new president’s actions evenly and so far I have not prejudged him as so many have. Instead, as promised, I have waited to see what he puts on the table. Generally it has been good. But this one stinks.

It appears to me: The FCC chair would kill Net Neutrality – one of the few things the Obama Administration got spectacularly right.

The full perspective on this will take a minute. But I outlined how government seizure and licensing of the web would happen in my 2012 book Broken Web: The coming collapse of the Internet which is still available on Amazon.

Let me run down the likely roll-out of future history in order that we put this all in context.

I anticipate the stock market will hit its all-time high this year and we will have a major recession if not a depression.

Prior to that collapse, however, which will be the analog to the 1929 debacle, I am expecting an S&P about 10% higher than it is now.

That’s not just my opinion. It’s similar to the view held by my colleague Robin Landry (Landry Asset Management) who has equivalent targets for the market – which we’ll get into in Peoplenomics a little deeper tomorrow.

After the peak, the slide begins. Just like it did for Hoover.

Then come protests and social stresses galore. And last time around, government – as an act of control – passed the Communications Act of 1934 to rule media with an iron fist. Freedom in America? Yes, but not too much.

Here’s the replay.

Just as the Hoover administration screwed up with its populist tariff moves (Smoot-Hawley), we are in position for the newly elected populist president to screw up via traffic layering of the Internet.

Under such a regimen, sites that don’t pay for speedy delivery could be throttled so other – paying traffic – could take priority. A kind of legalized extortion.

People are impatient so ask yourself “Would I wait 60-seconds – or longer – for a site like Drudge, Politico, The Hill, or UrbanSurvival to load?”


That’s what the defenders of the Swamp want to do: Throttle traffic.

The existing FCC ordered the Internet to treat “all bits equally” and says, in effect, that the internet is a utility and all traffic is handled the same. All bits are equal.

To be sure there are already ways for sites with proprietary content to “beat neutrality.” That’s by high-speed ultra-compression of video and audio content.

Moreover, what Pai has advocated really comes down to censorship. He – in effect – will claim it doesn’t impinge of freedom of the press to throttle, but yet it does. It could mandate Alt Media to write with “invisible Ink.” Time is ink in today’s world. Slow certain websites, but not those friendly to The Swamp and what do you have? More public alligator food.

Ever since 1934, the FCC has “seized the air” and now – with this terrible appointment screw-up by Trump – wants power to effectively censor (via digital speed-bumps) content on the net that doesn’t agree with or simply doesn’t have Big Money. Bit Extortion is a good name for it.

This is not the first time of I warned you of how the social replays of the Depression will roll into view. In fact here’s a part of Broken Web from 2012 that cites my even-earlier 2002 review of how the replay would roll: (From 2012:)

Chapter 10: Licensing the Web?

It was a strange question to be asking back in January of 2002, yet there it was, right there as one of our topics du jour and the issues haven’t changed much in the ten years since. Let me show you what I mean:

From 2002:

“There are two extremely important characteristics of the Internet which remain hotly debated to this day and which will shape the evolution of the Internet going forward. One aspect is content of the Internet and the other is message length. Both are diligently explored, and a direction forecast in Andrew Odlyzko’s paper: “Content is Not King” in which he proposes that as networks grow, their value changes from a broadcast medium to a point-to-point value proposition.

(G note: Since 2012, the growth of FB and Twitter have proven this out.)

In some sense, the evolution of radio illustrates Odlyzko’s point. When radio was extremely young it began as a point-to-point communications system. That’s what Marconi and early experimenters were about. Over time, however, the nature of the medium changed. Radio morphed from a point-to-point enterprise to a broadcast medium. With the addition of television, the point-to-many concept evolved until it has become the general framework of the modern broadcast network “empire”.

Presently evolving we see a gradual return to a point-to-point service, albeit in slow motion. There has been a general increase in pay-per-view programming available in American homes, although it has emerged in two stages.

First came the explosive growth of the video rental business. As Richard Roehl and Hal R. Varian have noted, there is an interesting parallel between the advent of the circulating library in England circa 1725-1850 and the proliferation of video rental stores in the U.S. between 1980-1990 [5]. They describe the growth rate this way:

“After the VCR was first introduced as a consumer item, it was viewed as a device for “time shifting” television shows to more convenient viewing hours. However, it subsequently became clear that there was significant market demand for pre-recorded videos. The first company to sell pre-recorded videos was Andre Blay’s Video Club of America. He acquired fifty titles from Twentieth Century Fox studios that had all been previously sold to network TV. At the time of his first ad (in an October 1977 issue of TV Guide), there were fewer than 200,000 VCR owners, but more than 9,000 of them joined Blay’s video club.

By December of that year competition between RCA and Sony had pushed video machine prices to below $1,000 for the first time. By the end of March 1978 Blay had sold 40,000 cassettes, and by the end of the year he had sold over 250,000.

While Blay explored the video sale market, the first individual to see the possibilities for a video rental market was one George Atkinson who ran a “Mickey Mouse little business” in Los Angeles called Home Theater Systems. Atkinson rented Super Eight film projectors, screens and old movies for $25 a night. He bought one Beta and one VHS copy of each of the fifty Fox titles sold by Blay. In order to raise capital quickly he charged fifty dollars for an annual membership and one hundred dollars for a “life membership.” Members could rent videos for $10 a day. (Lardner (1987), pp. 176-7)”

End 2002 section

How does the evolution of pay-per-view figure into our forecast of licensing of the Internet?

We need to exercise a high level of mental acuity here. Not to sound like former President Clinton, but “it depends what you mean by licensing…”

You see, licensing is control. And in a society almost totally based on finance, especially lately it seems, we see examples where government has engaged in control directly, and yet in other instances, has taken an indirect – financial burden – approach. One way this was popularized by government was through user fees, for example.

The Case of Radio:

The answer is that radio provides a wonderful illustration of how a technology may evolve from a “free” thing to something that the general population will pay for if the transition occurs at the right moment in the technology and against the proper economic background.

From Wikipedia: On December 12, 1901, the first radio signal was sent from England to North America [7]. Titled the “Communications Act of 1934”, the actual date of enactment of was June 19, 1934 [8]. In other words, it took about 32 years for radio to evolve from a scientific novelty to a totally government regulated enterprise.

If we can agree that governmental regulation of the Internet is a possibility at some point, then it may be instructive to appraise the Communications Act exemptions from regulation to see where exemptions from licensure may be expected for the Internet.

The first major exemption of licensing with Government is use of the radio spectrum, especially military use. For one thing, the language of the Act specifically makes radio something “free” for government use:

“(d)(1) The application fees established under this section shall not be applicable (A) to governmental entities and nonprofit entities licensed in the following radio services: Local Government, Police, Fire, Highway Maintenance, Forestry-Conservation, Public Safety, and Special Emergency Radio, or (B) to governmental entities licensed in other services.” [9]

Thus, as we see a maneuver toward licensing of the Internet, there will undoubtedly be exemption for government use.

The second major exemption from radio licensing requirements under the Communications Act is Part 15 use, which exempts low power transmitters from regulation provided that they do not cause harmful interference to licensed services and 2, provided that they accept any and all interference received from licensed radio services. In a discussion about shared use of certain radio spectrum between licensed services and Part 15 devices, Chris Imlay, then General Counsel for the American Radio Relay League observed that:

“Avoiding licensing is a big benefit to users, but it comes with the price tag of the complete absence of protection from interference and the absolute obligation not to cause any.”[10]

In order to see the parallel between Part 15 use and its analog on the Internet, you need to understand that Part 15 devices are generally designed as low power, very limited range devices. The general idea was that a Part 15 unlicensed device would not have a range of more than a few hundred feet at most.

Initially, Part 15 devices lived happily within these limits, there has recently been a good case made for expanding the range of Part 15 devices for specific purposes using a new kind of radio technology called ultra-wideband (UWB). The notion is that UWB devices have to be very useful and relatively inexpensive for certain applications, although they would exceed the power and range limits set forth in Part 15. Examples of UWB devices include helicopter power line avoidance radar for low altitude use, and high precision low altitude ground proximity measuring devices for precision aircraft landing. Put simply, UWB technology allows for high resolution radio imaging [11].

When one looks at Part 15 exempted devices, it’s clear that they are to radio what intranets are to the Internet. Both are designed for specific missions with limited range. Just as traffic on Part 15 devices, such as certain types of wireless LAN cards can facilitate one-to-many, many-to-one and many-to-many modes, so too does the Intranet provide for such limited use.

A second attribute of Internet licensing is that it will likely provide exemptions for Intranet uses which are equivalent to short-range radio uses. Definition of an Intranet is that it is a “Browser based network for a specific audience, not open to the public.”

One last developmental parallel is that prior to the Communications Act of 1934, the government had already set up government monitoring stations. These stations advised on signal purity, spectrum use and only the most blatant of spectrum abuses.

Now look around yourself and ask: What is the parallel for the internet? Is there unofficial surveillance underway already…? I’m willing to wager that the modern computer surveillance networks are – just as early radio monitoring sites were, manned by federal employees and all – just a stepping stone to full on regulation and licensing. The only question is when?

Internet Lost Tax Revenue

Recent U.S. news reports (again this is 2012) indicated all 50-states are now facing tax shortfalls that will result in declining state budgets for at least several years. This is in keeping with the ideas expressed on this author’s web sites that the U.S. is likely in a second economic depression of the scale of the 1929-1940 event.

One type of revenue loss is related to software piracy. Here, lost taxes on software alone are something approaching $1.6 billion per year according to the Business Software Alliance’s figures for 2001. The problem has only gotten bigger since then, although recently, Amazon was making its “sales tax peace” with major enforcing states like California and Texas. (2012)

The problem of the Internet causing a loss of tax revenue is fairly clear. Even if a form of taxes could be developed that worked for companies, there would remain a sticky problem of individual Internet sales. This can range from anything as small as an occasional sale of a household trinket on eBay to something as complex as illegal gun sales over the Internet. (We call this the gun-show paradox!)

One could assert that the recent scramble to enact vast new powers to “protect us from terrorism” constitutes a veiled effort to stifle political dissent, as there has been no demonstrated role of email in the major terrorism events to date, such as the World Trade Center attack. But since when has government policy been confined to truth? Or, will we see a false-flag attack yet to come as a preconditioning event to get the public used to the idea of their old internet going away and a new corporate/government dominated Internet – licensed Internet – replacing it.

Regardless of the motive, it’s clear that the Internet could be used for destructive purposes if a person or group had that particular bent. We should observe, as in the case of automobile licensing, that if something presents a potential threat to society at large it can be licensed effectively.

It would be lights out for the net as you now know it.

(end 2012 book extract)

The appointment of Pai – or any other Net Dictator – flies in the face of Trump promises to “do the right thing” and “reduce regulations.”

Sadly, it may be too late to derail the collapse of Net Neutrality.

All that remains to be seen are three things:

  • Will small voices be even further stifled in search and through onerous regulation and “throttling?”
  • Will the FEC hold to the standard of a “cash or in-kind contribution” to establish bias?
  • Will throttling only be applied to bandwidth-intensive content providers like the pack of doom-porners who have recently gone to “fat channel” video?

These are important questions, but one has been definitively answered.

Trump doesn’t think “all bits are created equal” at least so it appears with this terrible appointment.

Although we have held to a “wait till he does something wrong” approach to the new presidency, now he has and we’re calling him out on it.

With a person like Pai at the helm, we look for the FCC to impose use taxes – and worse – on the online retail sector, as well.

Since Trump may evolve into being The Real Estate President because folks like Amazon going consumer-direct short-circuits one of the biggest real estate investment programs of pension funds and insurance companies: Ownership of malls.

The Real Estate President may harbor a legit business model grudge against the ‘net. After all, it is solely responsible for the death of all those lucrative mall occupants once called Video Stores. Remember them?  How many rents did they generate at the peak before the web?

And now – as we recounted in our report “Bezos and Bentonville: Barbarians at the Mall” – we see not only punitive action against alt-news sites, but punitive tariffs against brickless online retailers as a growing probability, as well.

I apologize for the singular focus of this morning’s report, but it’s potentially the largest government theft of freedom in modern times.

And we must “call ‘em like we see ‘em.”

Futures this morning are flat.

The market isn’t sure what to make of Trump’s moves of Monday.

But we are on this one.

Generally good picks so far. But this one sucked.

It’s a 24-karat screw-up. More off-balance than a washer with a big rug in it.

So it goes in our chronicle of Wars Between the Business Models.

32-years from Radio to Regulated. Now a similar time-span from first Web bytes to regulation.

Tell me history doesn’t rhyme!

Tell me I’m not the Pai’ed piper…