The SEC and Madoff: The Need for Authentic Leadership in Regulatory AgenciesPosted: September 5, 2012 Filed under: Public Administration | Tags: authentic leadership, ethos, leadership, Madoff, regulation, Regulatory failure, SEC, sociology 3 Comments
No scandal in recent memory highlights government regulatory ineptitude quite as clearly as the Security and Exchange Commission’s failure to uncover Bernie Madoff’s Ponzi scheme, a scheme that bilked investors “of an estimated $65 billion” (Shafritz, Russell, & Borick, 2011, p. 362). Madoff, a wealthy, prominent, industry insider, perpetrated his scheme on unsuspecting investors beginning as early as 1992 and the SEC had received and investigated no less than six complaints between 1992 and 2008, when Madoff finally confessed (U.S. Securities and Exchange Commission Office of Investigation, 2009). Why was the SEC so slow to respond to tips and complaints about Madoff? More importantly, what institutional changes have been implemented at the SEC to assure that the regulatory agency is a more effective regulatory body in the aftermath of Madoff? This author finds that while the SEC’s internal investigation has revealed some of the systematic causes of their failure, and has worked to address them, the most notable and enduring failure of the SEC was a leadership failure that remains unaddressed, prompting a call for SEC leaders to adopt the principles of authentic leadership to develop an ethical organizational identity.
On Causes of the SEC Failure
In the wake of the SEC’s failure to catch Madoff, despite the numerous complaints, the SEC conducted an internal investigation to determine why they failed to uncover Madoff’s Ponzi scheme during the course of their many investigations (Wingfield, 2009). The SEC (2009) report found that a) investigations and examinations went uncompleted, b) the agency failed to collaborate both internally or externally, c) the agency lacked resources, d) the agency lacked needed expertise, and e) the agency did not have needed process, systems, or controls. Equally important, the agency found a) no conflict of interest or impropriety in their handling of the case, and b) no attempts by senior SEC officials to influence the investigation (U.S. Securities and Exchange Commission Office of Investigation, 2009). In addition, the report is notable for the focus on the specific SEC transactions with Madoff over the years, rather than investigation of systemic problems within the agency that contributed to the failures. As a result, the SEC (2009) report does not address the role of organizational processes, leadership, or culture, in the failure to uncover Madoff’s scheme, rather it ends suggesting employees involved in the failure should be put on a performance plan.
In light of the SEC’s failure to identify systemic issues, it is worthwhile to review outside criticism of the notable SEC failure. For example, Shafritz, et al. (2011) suggest the SEC was subject to the phenomenon of ‘agency capture’ whereby a government agency is overly influenced by industry economic interests. Galbraith (2009) describes the problem endemic to most government regulatory agencies thus:
Regulatory bodies, like the people who comprise them, have a marked lifecycle. In youth they are vigorous, aggressive, evangelical, and even intolerant. Later they mellow, and in old age – after a matter of ten to fifteen years—they become, with some exceptions, either an arm of the industry they are regulating, or senile. (p. 166)
In the case of the SEC’s examination of Madoff, the mid-level bureaucrats that examined Madoff appeared overly cautious given Madoff’s stature as a giant in the investment world (Shafritz, et al., 2011). In particular, because the career path of many in the SEC is in the very firms they are charged with regulating, the agency is susceptible to the ‘revolving door’ phenomenon (Barkow, 2010). Agency capture, therefore, can be considered an individual choice of self-interest over agency purpose. What, if anything, has the SEC done in the aftermath of their public failure, to reform the agency, and how will the agency address agency capture?
Because of the intense public scrutiny following the SEC’s failure to prevent Madoff’s Ponzi scheme, the agency has published a list of reforms they have undertaken. While the list of reforms is fairly comprehensive, this author will seek to outline reforms pertinent to the discussion in this paper. First, the SEC (2012) reorganized their enforcement division and added industry experts to their staff. Second, the SEC centralized the tracking and distribution of tips and complaints into a computer database (Lynch & Goldstein, 2011; U.S. Securities and Exchange Commission, 2012). Third, the SEC (2012) has put internal process controls and a governance structure in place to assure appropriate follow-up and disposition on examinations. Although, given the tactical nature of the reforms, this author thinks it likely that additional oversight failures are likely, primarily because organizational culture and leadership issues remain.
The Need for Authentic Leadership
The SEC’s failure, in some respects can be considered a failure of leadership and culture. Indeed, if you considered their failure to detect Madoff’s scheme in light of the larger regulatory responsibilities of the agency, the Madoff failure was one notable failure across two decades of similar failures. For instance, the SEC failed to detect the widespread corporate fraud of the late 1990’s as corporate giants like Enron, WorldCom, Adelphia, and Tyco bilked investors and employees out of millions. In addition, the SEC failed to adopt a regulatory position on mortgage lending practices that led to the subprime mortgage crisis. When one considers the regulatory lapses of the SEC (2012) compared with their avowed mission “to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation” (p. 1), one can likely conclude the agency is in dire need of change, but change to what?
Change is, by its very nature, a leadership problem. As a regulatory agency that has grown too ‘chummy’ with the industry as a whole, where self-interest appears to override agency purpose, the SEC needs to transform rather than simply reform. Some argue that the institutional design is flawed, and the agency requires a new design to prevent agency capture (Barkow, 2010). While the existing reforms and new institutional design are important, equally important is a leadership transformation. Some would argue that the SEC needs a ‘transformational’ leader to guide them into the future. However, this author would argue that an agency-wide focus on authentic leadership development is more appropriate, because transformational leadership lacks an ethical or moral dimension.
Authentic leadership theory was born out of the corporate scandals of the late 1990s (George, 2006), however the importance of authenticity was described by Lord Polonius in Shakespeare’s Hamlet, “This above all: to thine ownself be true, And it must follow, as the night the day, Thou canst not then be false to any man” (Shakespeare, 1986, p. 676). “Though, the working definition of an authentic leader is true to ones self, there is an expectation that being true to one’s self is also upheld by the overarching morality of society” (Tonkin, 2010). It is in this context, that authentic leadership applies to the problems of ethics and morality in an organization. Moreover, an authentic leader has the opportunity to drive the ethical identity of an organization through a written code of ethics and authentic leadership behaviors (Verbos, Gerard, Forshey, Harding, & Miller, 2007). How then, does one tell the difference between self-interested leaders and authentic leaders?
A Tale of Two Leaders
This author will describe his experience with two organizational leaders to illustrate an example of leadership authenticity. The first leader to discuss is Jon Doe. Jon’s day-to-day leadership was centered on the notion of crisis, real or manufactured, given both scenarios were equally useful to drive change. Insofar as Jon sought to transform the company, using crisis as an enabler, characterized Jon as a transformational leader. Moreover, Jon’s focus on transformation gave the appearance of the consummate executive, working towards the greater good of the company. However, over time, Jon would often switch positions on key topics regarding organizational change, depending on the power of the position relative to other positions. In addition, Jon would reprioritize organizational resources depending on the crisis of the moment, effectively abandoning earlier crisis, irrespective of the state of resolution. This author’s opinion is that Jon was an opportunist that was expert at aligning his self-interest with organizational interest, rather than an authentic leader.
Contrasted with Jon Doe is Jane Doe. Jane was an organizational leader that was several management levels below Jon. Jane worked tirelessly to craft the organizational mission, vision, and values with the team. In addition, Jane aligned word and deed, being the first to live organizational values. In this respect, Jane was truly an authentic leader. As a result, Jane’s organization was poised to make sound, ethical, business decisions even in ambiguous situations. Moreover, Jane’s team had greater organizational commitment and job satisfaction than Jon’s team. In essence, Jane was able to interweave the organization’s business identity and ethical identity with the organizational purpose.
The differences between these two examples highlight the importance of understanding one’s motivation. In dramaturgical terms, an actor or actress seeks to understand a character’s ‘through line’, the overriding motivation that drives the character’s behavior and decision-making. A leader’s understanding of their own ‘through line’ can serve to define organizational values and ethical identity, a situation desperately need at the SEC.
The SEC learned much from their self-examination of the failures that led to the biggest regulatory miss of the last twenty years. However, like any self-examination, there are difficult to reach places and blind spots that led the SEC to reform rather than transform. Most notably, the SEC self-examination did not recognize the contributing and enduring role played by organizational leadership and culture. It remains to be seen whether SEC reforms will have their intended effects, however, without the development of an authentic leadership capability within the agency, and the resulting ethical organizational identity, it appears likely that the SEC will remain an agency captured by the interests of the financial industry, rather than the interests of the public.
Barkow, R. (2010). Insulating agencies: Avoiding capture through institutional design. Texas Law Review, 89(1), 15-79.
Commission, U. S. S. a. E. (2012, July 30, 2012). The Investor’s Advocate: How the SEC Protects Investors, Maintains Market Integrity, and Facilitates Capital Formation Retrieved August 19, , 2012, from http://www.sec.gov/about/whatwedo.shtml
Galbraith, J. K. (2009). The great crash, 1929. Boston: Houghton Mifflin Harcourt.
George, B. (2006). Truly authentic leadership. [Article]. U.S. News & World Report, 141(16), 52.
Lynch, S. N., & Goldstein, M. (2011, July 27, 2011). Exclusive: SEC builds new tips machine to catch the next Madoff Retrieved August 19, 2012, from http://www.reuters.com/article/2011/07/27/us-sec-investigations-idUSTRE76Q2NY20110727
Shafritz, J. M., Russell, E. W., & Borick, C. P. (2011). Introducing public administration (7th ed.). Boston: Longman.
Shakespeare, W. (1986). William Shakespeare, the complete works (Original-spelling ed.). Oxford Oxfordshire ; New York: Clarendon Press ; Oxford University Press.
Tonkin, T. (2010). Authentic leadership: A literature review. Research Paper. School of Global Leadership and Entrepreneurship. Regent University. Virginia Beach.
U.S. Securities and Exchange Commission. (2012, April 4, 2012). The Securities and Exchange Commission Post-Madoff Reforms Retrieved August 19,, 2012, from http://www.sec.gov/spotlight/secpostmadoffreforms.htm
U.S. Securities and Exchange Commission Office of Investigation. (2009). Investigation of Failure of the SEC to Uncover Bernard Madoff’s Ponzi Scheme – Public Version – U.S. Securities and Exchange Commission Office of Investigation, Retrieved from http://www.sec.gov/news/studies/2009/oig-509.pdf.
Verbos, A. K., Gerard, J. A., Forshey, P. R., Harding, C. S., & Miller, J. S. (2007). The positive ethical organization: Enacting a living code of ethics and ethical organizational identity. Journal of Business Ethics, 76(1), 17-33.
Wingfield, B. (2009, September 2, 2009). New Madoff Report Blasts SEC. The Regulators Retrieved August 19, 2012, 2012, from http://www.forbes.com/2009/09/02/bernard-madoff-sec-business-washington-madoff.html
What Hath God Wrought: Commonality Between the Telegraph and the InternetPosted: September 5, 2012 Filed under: Communications, Sociology | Tags: Associated Press, dual monopoly, FCC, media, media concentration, media conglomerate, media regulation, monopoly, Morse, oligopoly, regulation, telegraph, Western Union 3 Comments
Often with the advent of new technology comes speculation regarding the technology’s social, political, and economic effects, both dystopian and utopian. Such was the case of the telegraph, which caused Briggs and Maverick (1858) to opine:
National health can only be maintained by the free and unobstructed interchange of each with all. How potent a power, then, is the telegraphic destined to become in the civilization of the world…It is impossible that old prejudices and hostilities should longer exist, while such an instrument has been created for an exchange of thought between all the nations of the earth. (p. 22)
Indeed, their statement could have been made in 2000, rather than 1858. Of course, similar utopian speculations abound with respect to the Internet. For example, Shirky (2010) believes that social media will usher in a new era of human creativity and generosity, while Botsman (2010) sees the Internet enabling the rise of collaborative consumption in response to the world’s growing environmental crisis. In addition, Benkler (2006) describes greater civic engagement in the networked public sphere. In this sense, the Internet and the telegraph share a similar social response to the technology, as determinists attempt to shape the neo-technological ideologies of their day. Of course, the Internet, as with the telegraph, will not inevitably alter society in some preordained manner based on the bias of the technology, rather, its social form will be the result of what Starr (2004) describes as ‘constitutive choices’ made today that are based on the foundation of earlier choices. Therefore, it stands to reason, by understanding the ‘constitutive choices’ of earlier generations regarding the telegraph that this generation can perhaps begin to develop a perspective on upcoming regulatory, commercial, and political choices facing U.S. society. Through an analysis of the consequences of decisions made during the development of the telegraph, this author finds that government must balance their regulatory efforts to continue to promote Internet industry growth, while protecting the public from commercial interests that would use their dominant market positions to reduce competition through industry consolidation, thereby exerting undue influence over network, and perhaps limiting freedom of expression in the process.
Early Development of the Telegraph
Prior to the development of the telegraph, information was delivered by U.S. Post Office mail carriers. Moreover, the U.S. Postal Service only provided service to a fraction of the country and was supplemented by private services such as Wells Fargo and the Pony Express. Because information was delivered by hand and over enormous distance, news of distant events would arrive much delayed. The semaphore system, was first developed by the French in 1789 was demonstrably quicker than postal services, however was labor intensive, expensive to construct, and the communication was not private (Holzmann, 1994). The time delay of the postal service and the inefficiency and lack of privacy of the semaphore system set the stage for the introduction of the telegraph.
While Samuel Morse is popularly credited for the invention of the electric telegraph, others had developed a working telegraph prior to Morse (Mather, 2009; Scherer, 2008). Rather, “Morse’s merit was to conceive once for all the apparatus by which electrical telegraphy became practical” (Mather, 2009, p. 1). However, the development of Morse’s invention into a modern telegraph network was built on the foundation of earlier constitutive choices, including the development of a free press, a national Post Office, Congressional funding of schools, and most notably, property rights in the form of patent law (Starr, 2004). For example, Morse’s invention was dependent on the work of Leonard Gale, an NYU professor that helped him extend signaling distance, through the use of relays (Smithsonian Institute, 2012). Moreover, Morse patented his invention through the U.S. Department of State’s Patent and Trademark Office, protecting Morse’s ability to share knowledge of his invention and safely develop the technology (Smithsonian Institute, 2012). Finally, after presenting his invention to the U.S. Congress, the Congress funded the construction of a demonstration line between Washington and Baltimore out of Post Office funds, from which the first message, “What hath God wrought”, was sent (Smithsonian Institute, 2012). Thus, the development of the telegraph should be credited not only to Samuel Morse, but also to the ‘constitutive choices’ of earlier generations.
Constitutive Choices that Shaped the Development of the Telegraph Industry
By 1870, a mere 26 years from the transmission of the first message, Western Union owned more than 112, 000 miles of wire and handled more than nine million messages annually (U.S. Census Bureau, 1975). The remarkable progress of the telegraph industry between 1844 and 1870 is as much a result of the promise of the technology as it is the product of a number of notable constitutive choices that spurred the development of the technology. Of course, not all of the choices appear to be deliberate. There is ample evidence that Morse thought the telegraph ought to be an extension of the Post Office (Munro, 1891; Smithsonian Institute, 2012). Indeed, most European governments ended up nationalizing the telegraph. However, Morse saw things differently and took his invention and offered to sell the patent to the government for $100,000, but the Postmaster General declined, on the grounds that the proposal “had not satisfied him that under any rate of postage that could be adopted its revenues could be made equal to its expenditures” (Munro, 1891, p. 68). In addition, it also appears that the U.S. Congress as a whole was somewhat skeptical of investing in Morse’s invention (Munro, 1891; Smithsonian Institute, 2012). Thus, it appears that the U.S. proclivity to privatize the telegraph, a significant departure from U.S. historical precedent set by the establishment of the Post Office, may have been the result of skepticism rather than a strategic decision.
The decision to allow the telegraph to remain in the domain of the private sector proved to be a boon for economic growth of the nascent industry. Following the rebuff of the government, patent holders like Morse, sought private capital to erect the needed infrastructure for the telegraph, however, they “had difficulty convincing capitalists of the commercial value of the invention” (Smithsonian Institute, 2012, p. 1). Most resorted to selling licenses to use the patents, resulting in 50 different companies operating telegraphs by 1851, using a variety of incompatible technologies (Smithsonian Institute, 2012). This wildcat period for the telegraph industry was paralleled by the introduction of legislation, first by New Jersey in 1845, and eventually by thirty-four states by 1860 (Nonnenmacher, 2001). The legislation in this period varied state by state, however had common legislative elements and proceeded in two distinct phases, the first being legislation that helped nurture the nascent industry, and the second being legislation that exerted social control of the new technology (Nonnenmacher, 2001).
The earliest telegraph legislation provided right of way for telegraph companies to erect the telegraph poles and wires along public roads, in effect lowering the cost of development (Nonnenmacher, 2001). In addition, early legislation enacted penalties or made criminal, the damaging of telegraph property (Nonnenmacher, 2001). Both types of legislation paint a picture of a pro-telegraph, pro-business, legislative environment designed to spur the development of the telegraph. In describing the legislative environment of the 19th century, Hurst (1956) suggest that the legal order was used “to protect and promote the release of individual creative energy to the greatest extent compatible with the broad sharing of opportunity for such expression” (p. 6). Companies seeking to exploit the new technology found a willing partner in state legislatures.
However, over time, legislatures also sought to exact a measure of control over the fledgling technology. In particular, state governments appeared concerned over the growing power and potential undue influence of telegraph companies, and introduced legislation to regulate which messages needed to be accepted and how messages were prioritized for transmission (Nonnenmacher, 2001). In addition, legislation was also written creating penalties for the unlawful disclosure of the messages (Nonnenmacher, 2001), perhaps resulting from the growing influence of the Associated Press (American Telegraph Magazine, 1861). These early efforts to exert social control would be only a precursor of legislative efforts to regulate the new medium given the rapid growth and eventual consolidation of telegraph companies.
While the decision to allow the private sector develop the telegraph proved wise from a standpoint of the country’s economic growth, that same decision would have unintended social consequences. Two early patent holders, Hiram Silbey and Samuel Sheldon, after unsuccessfully attempting to compete with other New York telegraph lines, embarked on a strategy to begin acquiring and consolidating lines and technologies under one company that would eventually become the Western Union Telegraph Company (Smithsonian Institute, 2012), the nation’s first industrial monopoly. Much of the success of Western Union stems not only from the company’s role as a consolidator, but also from the combined impact of a nationwide rail system, and a nationwide communication system, on U.S businesses and markets. Yates (1986) describes how the telegraph affected existing forms of economic organization of the period:
In some cases, it favored the formation of large and efficient markets; in others, it favored the emergence of large, integrated firms. By functioning, along with the railroads, to enlarge market areas, the telegraph created the possibility of relatively efficient nationwide markets. (p. 160)
Of course, it followed, that the possibility of efficient nationwide markets attracted capital across a variety of industries to exploit the opportunity.
However, no industry would capitalize on the opportunity quite so well as the Associated Press. The Associated Press was originally formed to pool the costs of telegraphy, but in short order become a dominant information monopoly. The combination of a national news service and a national telegraph network, in the form of a two-headed monopoly, made broadcast possible and raised the concomitant concerns of the impact of commercial interests having to great an influence over the public sphere (Blondheim, 2004). Indeed, lawmakers concerns were justified for a variety of reasons. First, the AP and Western Union operated as a cartel, through their various commercial agreements; the AP’s contracts with newspapers forced the newspapers to not accept news from other news services, while Western Union’s contract with the AP forced AP to solely use Western Union (Blondheim, 2004). “And so Associated Press and Western Union effectively created a criticism-proof information system that married content creation with a national network, and in which few competitors could surface” (Laser, 2011, p. 2). The agreements served to assure their joint broadcast network prevented the likelihood of competition. Second, lawmakers were also concerned that the companies would use their position as the information conduit between businesses and to the public to serve their interests, rather than the public interest (Blondheim, 2004); a situation that became apparent following the ‘stolen election of 1876’, when Senate investigators found that pro-Republican Western Union was funneling information to the Hayes campaign, “while the AP constantly published propaganda supporting the Republican side of the story” (Laser, 2011, p. 1). As a result of the growing media power of Western Union and the Associated Press, the U.S. Congress attempted a variety of strategies to regulate the industry between 1866 and 1900, introducing 96 bills or resolutions and publishing more than 48 reports, but failed to legislate a regulatory framework over concerns of infringing free speech (Blondheim, 2004). Where the Congress had failed to find a rationale for the government’s regulation of the press, in 1900, the Supreme Court of Illinois, in a suit between Chicago Inter-Ocean and the AP, found (Blondheim, 2004):
“Associated Press was of vast importance to the public, so that public interest is attached to the dissemination of that news. . . . It has devoted its property to a public use, and has, in effect, granted to the public such an interest in its use that it must submit to be controlled by the public for the common good.
And so began the government regulation of the communications and news industry, despite Constitutional prohibitions to make no law abridging the freedom of the press, their argument instead being that regulatory control was required to protect a free press.
The introduction of the telegraph brought about sweeping changes to U.S. social, economic, and political institutions creating a series of ‘constitutive choices’ that persist well into the 21st century. The initial choice to allow the private sector to develop the telegraph into a commercially viable technology, commensurate with a favorable regulatory environment that helped to nurture the nascent industry, would set the stage for the creation of a two-headed monopoly over the nation’s information and broadcast capability.
Indeed, the Western Union and Associated Press cartel was an opportunistic response to a new national market for information by capitalist enterprises, that allowed the companies to prevent competition, assure profitability, and generate wealth through the combination of monopoly power and agenda-setting. The decision by lawmakers and the judiciary to determine the appropriate role for government and business in assuring freedom of expression and a free press was perhaps the most important ‘constitutive choice’ of the era that developed the legal basis for regulating information and communications.
The telegraph could have developed far differently in the United States. Perhaps a skeptical Congress could have chose not to fund the initial demonstration line, allowing European countries to take the lead in the new industry, a scenario that could have had dire economic and even military consequences, given the telegraphs role in opening markets. Another potential scenario could have been to place the entire enterprise under the direction of the Post Office, in which case the two-headed monopoly may never have existed. However, considering the short sightedness of the Postmaster General, it is equally likely that the technology would have taken far longer to reach its full potential, due to the lack of innovation inherent in public administration. Finally, the attempt by Congress to regulate the industry could have resulted in a public utility model given the similarity of infrastructure requirements in the power distribution and communications industries. In any event, while there were serious political, economic, and social consequences based on the constitutive choices made by decision-makers of the period, it is equally clear that the development of the telegraph was critical to the political, economic, and social progress of the nation.
Western Union and the Telegraph Today
Telegraph usage peaked in the 1929 with more than 200 million messages sent and began a long, steady, decline in usage, supplanted by the telephone, radio, television, and eventually email and the Internet as the primary source of communication and news (Freierman, 2006). The final telegram was sent on January 27, 2006, after which Western Union became a pure financial services company, focusing on money transfers (Freierman, 2006), a situation this author find ironic, given the heavy regulatory requirements in that industry.
Historical Perspective on ‘Constitutive Choices’ in the Internet Era
Like the telegraph, the rapid growth of the Internet has introduced a variety of political, economic, and social concerns regarding how, whether, and in what form the government should intervene in regulating the Internet and the communications and media industries. Advocates of network neutrality wish to assure no government or commercial restrictions of the network, while commercial interests are seeking legislation like the Stop Online Piracy Act to assure the protection of intellectual property that favors traditional business models. In addition, the communications and media industry continues to rapidly consolidate, not unlike the period preceding the formation of Western Union. In particular, media and communication companies like Comcast are beginning to vertical integrate merging the content and network, a situation also bearing a striking resemblance to the Western Union/Associated Press cartel. Finally, the International Telecommunications Union, an arm of the United Nations, is seeking to regulate the Internet. With so many ‘constitutive choices’ facing the nation, and indeed, the globe, the public can look to the past to a degree to help formulate a perspective on the future.
Indeed, the narrative that describes the development of the telegraph is instructive, insofar as it highlights the delicate balance between private sector creativity and government regulation in the market for information. The government should favor policies that continue to promote the possibilities afforded by the new technology, including outsourced manufacturing and services, creative destruction of established industry into new industries, like cloud computing or open source, and free trade agreements that favor countries with an information advantage, like the United States; policies that unleash the creative energy of individuals and businesses.
Moreover, the government should seek to regulate the communications, media, and high technology industries in order to prevent the accumulation of too much power or influence into to few companies. For example, the Internet is dominated by several giant high technology companies including Google, Microsoft, Facebook, and to a lesser extent Yahoo. These infrastructure companies have become the de facto standard for consumer interfaces to the Internet and as such wield enormous influence in their ability to select, present, and prioritize Internet content. It would be prudent to assure a level playing field for additional market entrants, and assure that these firms do not unduly influence the political process through their ability to influence content.
Finally, the government needs to consider carefully, whether to participate in an international regulatory regime over the Internet, given the close relationship between communication technologies and freedom of expression identified during the telegraph era. In addition, the U.S. high technology and computing dominance is a source of economic growth and competitive advantage in the international marketplace worthy of protection from international regulatory requirements.
Upon examination and analysis of the development of the telegraph, a picture emerges that is neither utopian nor dystopian, and yet demonstrates vividly the link between communications technology and national progress. 19th century entrepreneurs, lawmakers, judges, businessmen, and citizens had to deal with the consequences of the first nationwide broadcast network and the ramifications of choices that defined the development of the technology without experience with broadcast networks or mass media. However, 21st century scholars and lawmakers have a large body of scholarly work that describes the ‘constitutive choices’ made during the development of the telegraph that suggests that government must continue regulatory efforts to promote industry growth, while protecting the public from commercial interests that would use their dominant market positions to reduce competition, exert undue influence over network, and perhaps limit freedom of expression in the process.
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