The government at the standards bazaar.

• Author: Baird, Stacy
• Position: On information technology

In recent years, there has been heightened interest in having government intervene in what has become primarily a market activity to mandate information technology standards. This article will provide an analytical framework by which government can consider such actions. I premise my proposal on the conclusion that government should be reluctant to intervene in the setting of information technology standards (and particularly, to mandate a particular standard that has not been developed and/or widely adopted by the market) because: (1) the relevant industries are sophisticated in regard to standards setting and have many well-developed types of standards, and forums in which to develop standards; (2) the U. S. government has a strong preference for market-developed information technology standards and promotes this preference as a matter of both domestic law and policy and foreign trade policy; (3) international trade agreements limit the degree to which participating governments can mandate standards; and (4) in contrast to the sophistication of the marketplace, government is rarely as informed, sophisticated in its understanding of the market, or nimble enough to respond to market conditions; therefore, the risk of government failure is significant, and indeed greatest where the market is young and dynamic, as is the case with regard to the current market affected by information technology standards.

Based on these premises, this article proposes the following test, which appears as a flow chart in the Appendix. First, the government should identify which of three categories describe the instant circumstances: (1) clear cases for intervention, those where there is a government responsibility to meet a critical public interest objective and the standard is essential for the government to meet that objective; (2) "gray area" cases, where the standard is relevant to either (a) meeting a public interest objective arising in the context of a non-critical issue in the area of national security, defense, public safety, health or welfare, or (b) providing an essential but non-critical government service; and (3) cases that are clearly not circumstances for government intervention. As to determining whether to intervene in a case arising within the first category, where a critical public interest objective is at stake and a standard is essential to meet the objective, the government should take all necessary measures to address the objective. That said, pursuant to clear government policy, even in these cases government should be predisposed to implement market-developed standards and may apply the same test as described for "gray area" cases. In a "gray area" case, there must be a significant and substantial market failure to develop a standard to meet the important public interest objective before the government should consider mandating a particular standard. "Significant and substantial" means the market failure has proved to be a barrier to government action to address the important public interest objective. The government should further consider mitigating factors, such as whether the market has had a reasonable time, relative to the circumstances, to develop, approve, and implement the standard and whether there is cohesiveness among the stakeholders (i.e., whether stakeholders have adequate forums in which to act in the specific situation). The government and industry should support credible and informed non-governmental public interest (e.g., consumer-oriented) representation to potentially obviate the need for direct government action later on.

Where a government decides to intervene, intervention should be reasonably tailored to rectify the identified market failure and to achieve the particular public interest objective. The government should limit the scope of intervention and define objectives. In order to assure the most narrowly tailored intervention, government should clearly articulate: (a) the specifics of the important public interest objective in the establishment of a particular information technology standard; (b) the purpose and scope of the government intervention; and (c) defined objectives for government intervention to achieve. The government should proceed incrementally with intervention. The first step should be to encourage market behavior through incentives. As a second step, the government should use its leverage as a major market participant and potential regulator to influence market behavior; however, the government should behave as a rational consumer, and it should consider not only the public interest objective at issue, but also the general public good. At each stage of intervention, the government should consider how best to mitigate the risk of harm of "non-market failure." To this end, where the government does intervene, intervention should reflect the market norms and market behaviors to the greatest extent possible.

1. INTRODUCTION

   In recent years, there has been heightened interest in having the state or federal government (or a corresponding foreign governing body) intervene in the information technology standards-setting process to mandate a particular standard. (1) The question of whether the government should mandate a particular information technology standard has arisen in several contexts, including entertainment content protection (e.g., efforts to implement standardized copy protection measures such as the broadcast flag, digital rights management, etc.), access to government services (e.g., state government requirement of the open-standard formats for all government documents), and efforts to achieve greater interoperability for data exchange in the areas of law enforcement, national security, and healthcare. The question of the government's proper role in setting standards has spurred substantial debate. However, to date there has been no objective analysis by which the need for and nature of government action may be determined. It is up to government policymakers to determine the best course in the public interest. This Article will outline a framework to guide government policy when the following question arises: should the government intervene in the market to mandate an information technology standard?

2. BACKGROUND

   The past decade has been a dynamic period in the information technology standards-setting world. The explosive growth of the role of information technology in our society and as a component of our economy has dramatically elevated the importance of information technology interoperability. Interoperability may be achieved in a number of ways, through intellectual property licensing and cross-licensing, relatively simple technical means (for instance, in information technologies and consumer electronics, converters and translators are commonplace in both software and hardware), through industry collaboration with companies working to facilitate interoperability among their products, through a company designing its product to interoperate with the products of other companies, and through consulting services that facilitate interoperability among otherwise non-interoperable technologies. And indeed, as I suggest above, interoperability between modern technologies is often a far simpler task than during previous eras of technological evolution wherein inventors were limited by physical characteristics and mechanical interactions. This said, I will be focusing on standards and standard setting, as standards have been the focal point for government action and significantly, an integral part of some commercial competitive strategies.

   The increased need for interoperability has in turn resulted in enormous demand for standards at a pace that challenges traditional standards-setting processes. Concurrently, government programs have transitioned from reliance on government-specific standards, such as MilSPEC/MilStandards, to voluntary standards developed in the private sector, placing an additional burden on standards-setting forums. (2) As a result of these factors, the information technologies industries are in an extremely competitive commercial environment, one that is also reliant on standards that facilitate interoperability among increasingly heterogeneous products and services. The high demand for interoperability is in turn creating an environment wherein stakeholders are more likely to turn to government to intervene in the market to aid in achieving particular goals more rapidly than may occur in the natural course of market activity.

   In some cases, the government is being asked by one business sector or another to play a role in, or even to take responsibility for, setting information technology standards, the development of which were vexing the industry with conflicting interests, or identified by one proponent or another to need government assistance to accelerate the advancement of one technological solution, business model, or corporate venture over another. Throughout this dynamic period, governments have been asked by stakeholders, or have independently pursued mandating particular information technology standards, in several areas:

   Copyright protection and digital rights management for copyrighted works. This has been a technical, legal, and political issue for years. Examples include recent efforts to seek a government mandate, such as legislation introduced by U.S. Senator Hollings that set a deadline for market action, the failure of which would precipitate a government mandate for digital rights management standards. (3) There have been efforts by both Congress (4) and the Federal Communications Commission (FCC) (5) to establish a "broadcast flag" with specific technical standards for digital broadcast television. (6)

   Open Source Software. There is an ongoing debate as to whether governments should mandate standards that are implemented with open source code software over proprietary software because, proponents of...