Classroom Companion: Business

Regulation by Society: The last of Lessig’s modalities—
society—is about societal 
actions to regulate piracy. In spite of the laws passed to regulate piracy, people still in huge 
numbers continued to download and spread copyrighted material illegally. This was 
because the general opinion of the public was not to view free music downloading as a 
crime that should be punished. Campaigns comparing stealing music and stealing cars as 
the same thing did not have any lasting effect on the public. In many people’s opinion, 
digital goods are different from physical goods since digital goods are non- rival, while 
physical goods are rival by nature: stealing a non-rival good is not the same as stealing a 
physical thing from someone. In this case, public opinion is a weak regulating force.
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The main point is that regulating the digital economy can be achieved not only by 
law but also by markets, business models, economic incentives, technology, design, 
and societal campaigns. These forces—or modalities as Lessig termed them—work 
together and influence one another. How well a specific service or part of the digi-
tal economy is regulated is the sum of all these effects and their interactions.
22.5
 Conclusions
Several sectors of the digital economy must be regulated to avoid market failure 
and to create a level playing field for all providers of technology, services, applica-
tions, and content. Regulations also protect the users against access discrimina-
tion and protect them against excessive pricing and misuse of information about 
the users and their preferences, habits, and other personality traits. Some of these 
22.5 · Conclusions

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sectors may be difficult to regulate, for example, protection against formation of 
monopolies in the application and content provider sector and the use or misuse 
of personal information for commercial purposes.
Two of the most important sectors that need regulation are mobile communica-
tions and the Internet. The fixed network is also regulated, but this regulation is 
less and less important as telecommunications now converges rapidly toward a 
mobile Internet as explained in 
7
Chap. 
3
. These are regulations by law that are 
governed and supervised by public authorities. In addition, the market may also be 
regulated by the market itself, by means of technology, and by public opinion and 
ethics (the pathetic dot theory).
It is particularly difficult to regulate the Internet. The reason is, as explained in 
7
Chap. 
4
, that the Internet is divided into two commercially independent domains: 
Internet service providers in charge of transporting bits and application and con-
tent providers creating, storing, and disseminating information and services.
One important field of regulation is net neutrality, shaping the Internet into an 
open and unrestricted laboratory for innovation and exploitation of new ideas. In 
some countries, there are strong forces working against net neutrality and for an 
Internet where the Internet service providers alone determine the conditions for 
using the Internet. This development may hamper the evolution that have, during 
less than two decades, created several millions of new applications on the Internet.