Volume XI, Number 1                                                                                                              January, 2004


A quarterly newsletter for clients and friends of Chenault Systems


Everybody Wants to Rule the Web

By Adam Thierer and Wayne Crews

There's mounting evidence that the Internet's good old days as a global cyber-zone of freedom -- where governments generally take a "hands off" approach -- may be numbered.  In fact, last week, delegates from 192 countries met in Geneva to discuss how the Internet should be governed and what steps should be taken to solve the global “digital divide” and "harness the potential of information" on behalf of the world's poor.  Also on the table at the session -- the United Nations World Summit on the Information Society -- was the question of domain name management and how much protection free speech and expression should receive on the Net.

The real issue, however, is whether a “U.N. for the Internet” is on the way.  Last week's summit and another in 2005 will discuss whether Internet decision making should be shifted from largely private management to the United Nations.

In one sense, none of this is surprising. Regulators across the globe have long been clamoring for greater control over content and commerce on the Internet.  Ironically, in the guise of protecting the world's citizens, statists around the world want to get their hands on one of the world's most liberating communications technologies.

While the U.N. conferees have “generously” agreed to retain language that enshrines free speech, despite the disapproval of countries such as China and Iran, these matters are far from settled.  There've been a few notable international cyber-spats already, such as a French court's attempt to force Yahoo! to block the sale of offensive Nazi materials to French citizens, and an Australian court's ruling that the online version of Dow Jones publication Barron's could be subjected to that country's libel laws.  And Chinese officials have attempted to censor the search engines Google, AltaVista and Yahoo!

Apart from speech and libel laws, sales taxes, privacy policies, antitrust statutes, intellectual property laws, and that fearsome "digital divide" are other hot button issues that will undoubtedly find their way onto the U.N. agenda.  What gives foreign bureaucrats the right to wrap their tentacles around the World Wide Web?  How can a Web site operator know how to act or do business in this confusing legal environment?  And who really should have jurisdiction over Internet activities anyway?

We examine these complicated questions in a new Cato Institute book, Who Rules the Net?  The threat a patchwork of international laws poses for online vendors and the growth of e-commerce arises from the fact that compliance with 190 different legal codes would be confusing, costly, and technically impossible for all but the most well heeled firms.  A Web site operator's only option would be to conform its online speech or commercial activities to the most restrictive laws on the planet to ensure global compliance.  If you like the idea of Zimbabwe's dictator du jour setting libel standards for everyone on Earth, this sort of lowest common denominator regulation is the legal regime for you.

If enough countries start playing these games, the threat of retaliation and potential trade wars increases as cross-border legal spats intensify over privacy, gambling, pornography, intellectual property, and tax policy.  All these interventions provide footholds for poorer nations to effect wealth transfers from wealthier nations to address digital divides and poverty largely of their own making -- problems rooted in fundamentally inept or despotic governance rather than Internet governance.

The implications for online commerce are profound.  The moment one puts a Web site online; one has “gone global.”  Should that mean you have automatically and willingly subjected yourself to the laws of every country on the planet?  Shouldn't the origin of content matter?

This is one reason some favor the “U.N. for the Net” model.  But others have suggested that international treaties or adjudication by the World Trade Organization might offer the better approach.  Still others assert that the best answer is to do nothing because the current unregulated Web environment has helped expand free speech and commerce globally for companies, consumers and citizens alike.

We favor the latter.  But to the extent pure laissez-faire is not an option, “country of origin” standards may provide the best default solution.  That is, government should only exert authority over those actors who physically reside within the confines of their traditional geographic borders.  In this sense, an origin-based jurisdictional methodology protects sovereignty while simultaneously giving meaning to the notion of “consent of the governed” in an online setting.  Healthy jurisdictional regulatory and tax competition via origin-based rules would allow companies and consumers to have a “release valve” or escape mechanism to avoid oppressive jurisdictions that seek to stifle online commerce or expression.

Software-enabled geographic targeting may increasingly play a role, too.  Particularly as U.N. power grabbing grows more extensive, businesses may choose to avoid interaction by using geo-location technologies to selectively target their services instead of making materials available to the entire planet.  Such targeting may be the better approach from a marketing perspective anyway. But to have it forced by U.N. shenanigans would be unfortunate.

The great advantage of the Net is precisely the ability to reach as many people as possible and overcome artificial restrictions on trade or communications at traditional geographic boundaries.  The Web, whatever problems it has raised, has provided far more opportunity and freedom to mankind.  The U.N. appears eager to assume greater control over the Net, not because of it’s failures, but because it undermines members’ authority.  That sounds like the best reason ever to make sure a U.N. for the Internet never becomes a reality.

Adam Thierer is director of telecommunications studies and Wayne Crews is director of technology studies at the Cato Institute in Washington, D.C. They are the editors of "Who Rules the Net? Internet Governance and Jurisdiction" (Cato Institute, 2003)

Reprinted with permission of the Cato Institute copyright 2003.

To learn more about the Cato Institute, visit

Bowl Game Computers

By Tom Chenault

One of our clients asked us how Chenault Systems would fix this “computer problem” of today’s college football rankings.  First of all, this is not a computer problem, but a people problem based on how the computer is programmed by people.  The rankings are based on media and coaches polls, along with quality of schedule and win/loss records.  We feel the BCS (Bowl Championship Series) is a mistake based on misguided business goals and politics.  Here is our proposed solution:

1. Re-organize the top six conferences (ACC, Big 12, PAC 10, Big East, SEC, Big 10) into ten schools each.  For example, move Miami to the ACC and move Penn State to the Big East.  We would call this the “A League”.  All the other Division 1A conferences, such as C-USA, WAC, Mountain West, etc., would be the “B League.”

2. Each school plays all other nine members of their respective conference for a true and complete round robin, i.e. nine conference games.  This will provide a true conference champion with no extra title game.  There can be an NFL type tiebreaker if there is a tie (e.g. 3 teams have a 7-2 record).  Each school also plays three non-conference games outside their conference or league.

3. If a school performs poorly for a number of years in the A league, they get demoted to the B league and replaced by a school doing well in the B league.  For example, if a Kansas, in the Big 12 (with 10 teams), goes 2-10 for three years in a row, they move down to the Mountain West conference.  They could be replaced by a Colorado State, from the Mountain West, who may go something like 10-2, 9-3 and 11-1 the last three years.  Rules need to be set up for this.  Perhaps the Jeff Saragin rating system would work here.

4. At the end of the season, the six A league conference champions, combined with two Cinderella at-large teams from the B league, play it off in an eight-team tournament for three more weeks during the holidays.  This would take up seven bowl games.  The other twenty-one bowl games can go after the other teams that are not in the top eight tournament.

This plan is not perfect (and would probably be rejected by the NCAA), but is far better than what we have now with the BCS.  College football championships need to be settled on the field.  Voting is for gymnastics.

Technology consulting needs a new fresh approach to problem solving:


Traditional Large Firms

Chenault Systems

Average Billing Rate

Very large to maintain large profit margin

Reasonable to maintain client relationship

Percentage of Development Done “Offshore”



Number of “Strategic Alliances” with Software Vendors

Too many

None, we are objective consultants

Quotes Worth Noting

“One of the greatest delusions in the world is the hope that the evils in this world are to be cured by legislation.” -- Thomas Brackett Reed

“During my service in the United States Congress, I took the initiative in creating the Internet.  I took the initiative in moving forward a whole range of initiatives that have proven to be important to our country's economic growth and environmental protection, improvements in our educational system.” – Al Gore