The Unintended Consequences Of Internet Regulation

Over the last decade or so, there’s been a growing chorus of people insisting (misleadingly) that the internet is a “wild west” that needs regulation. The reasons stated for this apparently necessary regulation change over time, but the underlying discussion tends to be the same: bad stuff is happening online and it needs to stop. Sometimes, the discussion is more focused on how internet companies are somehow “experimenting” with our lives and our data.

We’ve seen plenty of new internet regulations pop up and — oddly to me, at least — no one seems to comment on how these regulations themselves seem to be experimenting on the way innovation works and our ability to communicate with others around the world.

For all the talk of how tech companies need to “take responsibility” for the consequences of their actions, we see little to no effort to see if lawmakers and regulators should “take responsibility” for the consequences of the new and often experimental laws they’ve put in place.

Today, we’re excited to launch a new report: The Unintended Consequences of Internet Regulations, written by me, and released in partnership between the CCIA Research Center and our own Copia Institute.

This report is something of a follow up to our 2019 report, Don’t Shoot the Message Board, which looked at the impact on investment (generally negative) in various countries and regions that removed liability protections from websites. A few years have passed since that report, and a number of countries around the world have pushed out new laws, or had court cases that changed intermediary liability, and we decided to take a look at how things have played out.

The short answer: not well.

As we looked around the globe, first at the predictions lawmakers made about how these laws would play out, then at how they actually worked in practice, we found that policymakers greatly miscalculated their expectations for how these laws would work. They were often redundant or confusing, and did little to achieve what was promised.

Instead, there were tremendous negative consequences in a number of different areas, starting with investment in innovation, which was shown to decline (sometimes dramatically) in many cases. We saw evidence of this with laws like Germany’s NetzDG, which appeared to actually drive some areas of investment out of Germany and into nearby countries like the UK and France. Unfortunately, just recently, we saw France pass a law similar to NetzDG, and the UK is moving in that direction as well, perhaps not realizing how it may impact innovation and competition.

The research, and included case studies, show how these laws are doing real harm to innovation and competition in the market. It appears that many of these laws serve to lock in incumbents and burden smaller companies. The patchwork of laws also makes it difficult for new entrants to build up global services.

Perhaps even more concerning is the impact of these laws on speech and expression. Remember, the internet is effectively speech, and the efforts by regulators to limit how the internet works had the clear impact of limiting speech as well. While some may consider this collateral damage, it is worth calling out not just how these laws are suppressing speech in various countries that espouse freedom, but how they’ve also become the model for authoritarian countries to suppress speech, while claiming that they’re just passing internet regulations like the rest of the world.

The report details multiple examples of countries using nearly identical laws for the express purpose of suppressing those the government doesn’t like.

One other fascinating finding came out of a surprising bit of data when we looked at India, which has been removing intermediary liability protections at a rapid rate. Unlike elsewhere that we looked in the report, we noticed that there was actually an increase in investment in internet companies following those legal changes. That went against what we’d seen elsewhere, but looking more closely at the details revealed an explanation for this unexpected result: after India passed regulations to harm sites like Twitter, a flood of investment went into a local Twitter-like clone that was friendly with the Modi government.

In other words, this bit of “internet regulation” actually was used as a form of protectionism, to boost a local competitor and harm a global service.

As we note at the end of our executive summary:

As this report shows, the end result of all these regulatory changes does not appear to be an “improved” internet where there is greater “responsibility” by large internet companies, but one in which there is less competition, less innovation, and more ability by governments to abuse their power over these companies to damage speech and privacy interests. That also means an internet that is less in the public’s interest and benefit. As governments around the world rush forward with major new internet regulations, which could have even more sweeping impact than the laws discussed in this report, it is imperative that policymakers do more to understand the impact of these laws on a variety of different areas, and take care in rushing to implement new and unproven policies.

This is not to say that the internet should be “lawless” (contrary to the claims you hear from some, it never was). But so many new policies are being pushed on the internet at rapid speed with little concern for the actual consequences of these laws.

We hope that this paper will help highlight how policymakers should be more careful in rushing to regulate, while also be more open to looking back at the impact of their own policymaking. You can read the entire report in the Copia Institute Library.

Leave a Reply

Your email address will not be published. Required fields are marked *