A 'Characteristics' Approach to Content Regulation and Consumer Choice
Policy application: Content regulation and consumer choice
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- 5.2 Subsidy of Filter Research
- Consumer Education and Awareness
Policy application: Content regulation and consumer choiceIn this section we now turn to applying the characteristics approach to the consumers choice with respect to Internet services. In the model to be used in this paper, the operationally relevant characteristics to be examined will be 'individual control' and 'gatekeeper control' . That is, it is assumed that the consumer has narrowed the choice such that these two characteristics are the characteristics which distinguish the available choices. They are also the characteristics which best capture the impact of changes in government content regulation policy. The characteristic 'individual control' refers to the ability of an individual and other Internet users to use the Internet without external restraints on their behavior. Gatekeeper control refers to the extent to which the behavior of Internet users, including the individual consumer, are constrained or regulated by external gatekeepers such as filter programs, Internet service providers (ISP's) and laws. [9] The goods rays in the characteristics space will now represent different ratios of individual and gatekeeper control. These combinations may represent policy models, or simply reflect the different combination of the gatekeeper and individual control offered by different Internet service providers. The efficiency frontier represents the maximum amount of individual and gatekeeper control that an individual can purchase with a given budget. The individual chooses that point on the efficiency frontier that maximizes their utility subject to the constraint of non-satiation and that neither characteristic produces disutility Purchasers of Internet services therefore attempt to fulfill their underlying purposes of usage by choosing the ISP whose combination of individual and gatekeeper control best suits their needs. We now turn to considering the impact of the Australian government's content regulation policy on Internet end users choice. The primary piece of legislation in Australia's Internet content regulation scheme is the Broadcasting Services Amendment (Online Services) Act 1999 which came in to effect on 1 January 2000. It was introduced into the Senate on 21 April 1999 and was promoted as a measure to: " enact a regime which balances the need for the Government to meet legitimate community concerns about the publication of illegal and offensive material online, that is commensurate with the regulation of conventional media, while ensuring that regulation does not place onerous or unjustifiable burdens on industry and inhibit the development of the online economy."(Alston, 1999) A full explanation of the operation of the legislation outlining the details of its operation can be found in DCITA (1999). For the purpose of this paper, three aspects of this policy will be considered. Firstly, the policy places controls on the types of content that can be published on the Internet and via the IIA code of conduct (IIA 1999) places other restrictions on Internet users behavior. [10] Secondly, the policy involves government subsidy of research into content blocking technologies. Thirdly, the government has , and intends to continue to, engage in an education strategy , informing Internet users not only of details of the law, but also its benefits and the benefits of filter software and how to obtain it. Prohibited Content F   
G2 G3 C A 0  
D G4 igure 6 presents us with a typical consumer choice for an Internet user, as discussed in the introduction of this section of the paper. Different 'goods' on Figure 6 represent different ISP's (or regulatory models of ISP behavior) each offering different combinations of individual and gatekeeper control.
G1 IC1 IC2 X1 B C21 IC3 X3 C11 Gatekeeper Control (C1) Figure 6: Regulation of Behavior - Prohibited Consumption Under the Australian content regulation scheme, distribution of certain classes of Internet content is prohibited. Under industry codes of conduct forming part of the scheme (IIA 1999), ISP's have also placed additional restrictions on their users behavior and the code aims to encourage ISP's to enforce these restrictions. In terms of the characteristics of individual and gatekeeper control, these actions represent a change in the ratio of individual to gatekeeper control. Expressed another way, certain combinations of these characteristics are no longer allowed. Referring to Figure 6. the impact of these changes may be seen as a prohibition on offering Internet services which do not meet a certain level of gatekeeper control to individual control. For example, Internet services which do not combine gatekeeper to individual control in a ratio of at least C11:C21 are prohibited. Thus, in Figure 6. The Internet service represented by G1 can now no longer be (legally) obtained and any combination involving G1 is also no longer obtainable. A consumer originally consuming at X1, will now no longer be able to consume that combination of goods. As discussed in section 4.1, the consumer now maximizes at a lower level of utility, the corner solution associated with point B. However if consumers have preferences represented by indifference curve IC3 , then these consumers will experience no change in utility as a result of the change in the policy. Indeed, unless a consumer was previously consuming a combination of goods involving G1, then there will be no impact on their consumption and demand for particular Internet services. This may offer some explanation as for why many Internet users did not oppose the content regulation policy and why demand for many Internet service providers would have been unchanged as a result of the restrictions discussed in this section. Only consumers at points such as X1, i.e. those with a strong preference for low ratio of gatekeeper to individual control would be effected and have an incentive to campaign against those provisions. 5.2 Subsidy of Filter Research Individual Control(C2)
G1 G2 G3 C B A 0 X1 IC1 IC2 Figure 7: Subsidized Filter Research
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E F X2 IC3 X3 Gatekeeper Control (C1) Another plank of the content regulation policy was conducting research and development into various filtering and adult verification technologies. For example, in announcing the funding for NetAlert [11] , the government described its future role as including : "commission R&D into cost effective and technically feasible technologies that may be adopted service providers to prevent access to illegal and offensive material hosted overseas; commission R&D into the development of technologies that will assist in the adult verification of overseas sourced material at the Internet service provider level." (DCITA, 1999a) Part of Australia's content regulation policy therefore includes government research into the advancement of what might be referred to as gatekeeper technologies. Let us assume that the effect of this research is to lower the price or improve the quality of gatekeeper technologies. How then might this effect the consumer? In Figure 7 we will begin by assuming that the Internet services G3 and G4 represent Internet services offering gatekeeper technologies such as filter software or filtering services as feature to their customers. Now, as a result of the government subsidy, the price of the filter software is lowered. Those Internet service providers offering these products are able to offer their services at a lower price, representing a shift outward in the efficiency frontier from ABCD, to ABEF. Any consumer who includes goods G3 or G4 in their consumption bundle now rearranges their consumption bundle to take advantage of the expanded efficiency frontier. For example, the consumer represented by the original consumption point X1, is now able to enjoy a higher level of utility, IC2 being higher than IC1. For consumer who don't use filtering software, such as the consumer at point X3, their utility is left unchanged. By itself, this appears to be an argument in favor of subsidizing research into filters, since it will raise the utility of filter users, whilst 'apparently' not making non-users worse off. . However, the subsidy for research into filters is drawn from the budget allocation of the Department of Communications, IT and the Arts (DCITA), as well as proceeds from the Telstra privatization. (DCITA 2000). Thus, this policy may represent not only a redistribution of income from one class of Internet user to another, but from non-users to Internet users. Consumer Education and Awareness As discussed in section 4.3, where information costs are non-zero, consumers may actually be consuming at a point inside their efficiency frontier. The aim of a consumer education or awareness campaign is to shift a consumer closer to a point on their true efficiency frontier by reducing the information costs faced by the consumer. However it was also pointed out that if there is bias in the reduction of information costs, then some consumers will benefit from the education and awareness campaign more than others. As reported in the six monthly report on the operation of Australia's content regulation scheme (DCITA, 2000), a significant component of Australia's content regulation scheme is an education and awareness campaign for Internet users, and in particular families. The involves " focusing on reassuring the community, particularly parents, that their children’s Internet experience can be safe, educational, informative and entertaining." (DCITA, 2000). NetAlert's contribution to the education process include assisting in the preparation of complaints about offensive content, advising parents on the use of filter technology, and a public education campaign to explain the operation of the scheme and the functions of NetAlert. (DCITA, 1999a) The focus of the education campaign could therefore be construed as lowering the information costs associated with gatekeeper control in a greater manner than for individual control. As Figure 8 shows, this represents a biased movement outwards of the consumption choices available to the individual. Individual Control (C2)
G1 G2 G3 C B A 0 X1 Figure 8: Reduced 'Gatekeeper' Information Costs 
D G4 IC1 X3 
E F G H X2 IC2 
X4 IC3 IC4 Gatekeeper Control (C1) In figure 8, the true efficiency frontier is represented by the frontier ABCD, however due to information costs, consumers are restricted to consuming points on the frontier EFGH. The government education and awareness campaign focussing on increased awareness of the online regulation scheme and gatekeeper technologies, lowers the information costs associated with the characteristic gatekeeper control. The efficiency frontier thus shifts out in a biased manner, such as the dashed frontier represented on Figure 8. As was discussed in section 4.3, a biased policy benefits some consumers more than others. Those consumers who value the characteristic gatekeeper control more highly and who consume more of this characteristic will benefit to a greater extent from the education strategy than consumers who value this characteristic less. For example, it is possible that households with young children or who are unfamiliar with the sometimes anarchistic nature of the Internet may receive a significant benefit from an education strategy biased towards gatekeeper controls. Experienced Internet users and civil libertarians may not experience as much of an improvement in their utility from the education campaign. Download 164.44 Kb. Share with your friends:
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