Internet Regulation Imposes Constraints

Early 2012 saw a massive internet-led protest against the Stop Online Piracy Act and PROTECT IP Act (SOPA and PIPA, respectively). These acts were drafted to protect the intellectual property rights of media content owners such as music producers or film studios by creating ways for content owners to file action in court against websites hosting pirated content.

While this legislation was written with good intentions, it has gone horribly awry. Both pieces of legislation would establish an “internet blacklist,” requiring domain name servers that direct internet traffic to block the blacklisted sites in the United States. This would require content-hosting websites such as Youtube or Twitter to actively filter submissions to their site to block content in violation of copyright laws, rather than simply comply with content removal notices as established in the Digital Millennium Copyright Act’s (DCMA) clause on “safe- harbour” protections for websites. The actions of a single user uploading copyrighted material to an online community would result in the shut- down of the entire community. Further, the requirement of domain name servers to block the sites within the United States would harm the standard of a “global” internet by creating effectively different versions of the internet for users within the United States and outside of it.

To observe the effects of a self- regulation requirement on internet businesses, one only has to see a recent Booz & Co. study showing that over 80% of current Venture Capitalists would cease to invest in digital content intermediaries–companies such as Youtube, Facebook or Twitter–if either SOPA or PIPA were to pass. This is due to the fact that self-regulation would create serious financial burdens on businesses in this sector, making it nearly impossible for entrepreneurs to create successful businesses.

A similar requirement of self-regulation exists in the People’s Republic of China; there, websites such as Youku or Renren (Youtube and Facebook equivalents) employ staff to filter through content on the website to ensure that it is compliant with the content requirements of the government. However, the cost of labour in the United States is much higher, and employing such a staff would be impossible.

Furthermore, because of the requirements, a large number of cloud computing and server hosting companies can be expected to move out of the United States to avoid potential lawsuits. This effectively creates a drain from the United States to Asia or Europe in an industry that currently accounts for $2 trillion in GDP and 3.1 million jobs.

Although the specific SOPA and PIPA bills were recalled and postponed respectively, they are expected to be reintroduced at a later date. If these bills were to pass, the internet technology industry in the United States would be irreparably harmed, and the entrepreneurial freedom that has put America at the forefront of the internet world would be crushed. More than just an issue of social and political significance, SOPA and PIPA are bills that businesses should be equally as fervent in opposing as higher tax rates.

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