World War Web: Our 2012 Prediction is HERE!

In my 2012 book, “Broken Web The Coming Collapse of the Internet” I made a remarkable assertion.

When America gets into the next economic Depression (just ahead, wait for it…) there will be a massive government drive to take over the Internet.  In fact, to emphasize my thinking at time, here’s a piece of…

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 Peoplenomics.com topics du jour and the issues haven’t changed much in the ten years since.  Let me show you what I mean:

—From Peoplenomics in 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 Odlysko’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.

In some sense, the use of radio illustrates Odlysko’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 Peoplenomics 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]. Ttitled 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 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.

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.

Fast-Forward to Present 2018

First, we can look at today’s news flow and see how the “tumblers are clicking into place.”

Reason (.com) reports: “Senate Democrats Are Circulating Plans for Government Takeover of the Internet: Reason Roundup…”

While, at the same time, today the Jamestown Sun reports “Apple, Facebook and other tech companies delete content from Alex Jones.”

Social SITREP Markers

We can list a few bullet points to highlight todays situation report (SITREP) as follows:

• Democrats (ad evidenced by the memo report) may b e realizing that the Internet is the basis for an information-based style of guerilla warfare.
• As such, it is asymmetric (e.g. highly leveraged) and although Alex Jones is the fall-guy du jour, the bigger picture is that much of the pioneering work on Internet Asymmetric Warfare (IAW) was accomplished by groups like Antifa, ISIS/ISIL, Occupy, and Anonymous.
• BTW Anonymous is about to engaged in net-based internecine warfare as they go after the leaker QAnon.  In short, this demonstrates the lack of homogeneity in this “digital uprising” that we have previously mapped.

Taxes Matter

While most internet property owners (like us) pay sxales taxes, the more pressing concern for the American Financial Class is that Internet operators are not paying the subtle American Infrastructure Investment Tax.

Since you won’t find this codified in me-too economics texts, here’s how the battle works:

Pre-Internet, not only did retail businesses pay the local Sales Taxes, but they also paid Indirect Property Taxes.  And, since most retailers were located in Malls and Strip Malls, expansion of American Retailing provided three systemically important revenue streams akin to taxes:

• The Sales Taxes (which are obvious)
• The Real Estate Taxes – less obvious, but rolled into retail operator leases (and in come leases there’s a tax pass-through provision, at least in the commercial leases I’ve negotiated in three states!)
• And last – the Biggie – an unwritten “investment tax” because those capital-intensive malls offered a major “block investment” opportunity to large pools of long-term investment money (think pension funds and life insurers) and these ain’t charities kids.  The cost of some profit is also baked into brick and mortar leases for retailers.

The (financial ignoramuses in ignoramettes) of the MainStreamMedia are totally clueless – at least for now – on how this all plays out.  They have focused on the minutia of sales taxes and have missed how the Internet has not only begun to erode the property tax base, but it continues pressing large blocks of capital to make more, smaller, and riskier investments.

20-years ago, if an old IBM System 36 started “printing up” a digtal currency (which would have been written in RPG, we imagine, lol) serious investors would have laughed.

But, today in the middle of  the Digital Uprising it’s taken seriously.

Remember, this democrat proposal is just in the “circulating” stage for now.  But, the situation is analogous to the position Radio regulation was in during the years immediately prior to the Great Depression.  Here’s a snip from Wikipedia, precisely on point:

“The Radio Act of 1927 divided the country into five geographical zones. Each zone was represented by one of the five Commissioners. The 1928 reauthorization of the Radio Act included a provision, called the “Davis Amendment” after its sponsor Ewin L. Davis, that required each zone to have equal allocations of licenses, time of operation, station power, and wavelength. This greatly complicated things for the Commissioners; they were required to deny station applications to otherwise qualified candidates simply because the new station would put a particular state or zone over its quota. For example, the northeast had a greater population than the southwest, but was limited to the same number of stations as more sparsely populated areas. Likewise, many small communities in the southwest could have added a local station without increasing interference (because of their remoteness), but were prevented from doing so by the Davis Amendment, which was repealed in 1936. “

Now Generalize It

Long-ago, we began using Ure’s Substitution Method of Learning.  It enables the user to powerfully predict future using process templates of past historical events in similar circumstances.

Since Radio is a communications channel – and so is the Internet and Social Media, we can therefore predict the future through simple word and concept substitution.

That 1927-28 period might revise to future history that would read like this:

“The Internet Act of  2019 divided the Internet into five classes of service. Each class was represented by one of the five Internet Commissioners. The 2020 reauthorization of the Internet Act included a provision, called the “Ure Amendment” after its sponsor, that required each class to have equal allocations of licenses, time of operation, post limits per user, and link- and reposting limits. This greatly complicated things for the Commissioners; they were required to deny website applications to otherwise qualified candidates simply because the new website would put a particular user group over its quota. For example, the political users had a greater population than the religious users, but was limited to the same number of posts per user as other groups. Likewise, many small small groups in minor categories could have added a website without violating traffic limits (because of their small size), but were prevented from doing so by the Ure Amendment, which was repealed in 2025 just before the Global War. “

Don’t me to get off the economics of the Long Wave, so far, but this is big, important, life-changing stuff.

Five BIG TAKEAWAYS

• The Internet has been weaponized as a battlefield
• The digital uprising is getting noticed along with its tax-avoidance currency
• The Internet can generate sales taxes, but not property taxes and with not investment return to society at large
• Regulation to contain all these systemic risks MUST be forthcoming
• Operators of small, independent websites that depend on social media are far more susceptible to government and corporate censorship which is why Alex Jones’ got screwed and UrbanSurvival just avoided the boom and bust cycle future presented by social media.

We did this because we recognized that Social Media, at its core, in the Heroin Dealer business mobel.  They gave it away FREE in order to get the world “hooked” and now, they’re doing what any self-respecting Heroin Dealer does:

They’re squeezing their addicts.

I told you in 2012 that this was coming.

Good morning, and thanks for attending today’s session of “Long-term Strategic Thinking 609.”

We now return you to the noise of the daily (dull) news flow.

Market Takes

Our Peoplenomics “Golem” mechanistic trading model is set to print up more money today as the markets zoom toward what we think will be new all-time market highs in the next three weeks.  Dow futures are +86 when I looked earlier.

China bounce pushes world shares toward six-month high.

Fluff and Guts

Seeing a press release crossing this morning, “KKR Releases “China: A Visit to the Epicenter” by Henry H. McVey,” reminded me of something really important.

Before the Second Depression shows up, you need to watch the video The China Hustle.  I won’t often put anything on your “must watch list” but this one is such a piece.  The Amazon write-up lays it out:

“From the producers of Enron: The Smartest Guys In The Room, a Wall Street heist story about Chinese companies, the US stock market and a still-unfolding financial crime so big, it has the power to affect all of our wallets..”

There’s no SEC in China, and the American SEC doesn’t pass judgement on where a company is real…but whether the numbers and checkboxes have been filled in.

Big Money and a Little China could become Little Money in Big China, so caveat emptor!

Also Useful:

CoreLogic Reports June Home Prices Increased by 6.8 Percent, Millennials Identify Affordability as Biggest Hurdle

Icahn highlights Amazon threat in bid to block Cigna-Express Scripts deal.

Fiat Chrysler trying to stop the sale of Jeep clone.

Environment:  Dangerous Cat 4 Hurricane Hector moves close to Hawaii, High Heat continues across the West and East.

Sheep Dippin’s

Here’s What the California Wildfires Look Like From the International Space Station.  Big picture?  Yes.  Money-maker?  Not so much.

Johnny Depp’s movie ‘City of Lies’ pulled from release schedule a month before premiere.

West Hollywood Council Passes Resolution to Remove President Trump’s Walk of Fame Star.

And if You Look Closely…

You’ll see that one South American country may be doing more to secure its borders than America’s Fools on Hill:  A Brazilian Judge Has Closed the Border to Stop People Fleeing From Crisis-Hit Venezuela.

Peoplenomics tomrrow – “Electromagnetic Investing”

And here on the free side:  “How to Lose Ebonics in One Lesson.”

Fed Consumer Debt (“credits” if you own the bank)  this afternoon – may impact the last hour of trading – so a heads-up there...moron the ‘morrow…