The
3D Internet and Its Policy Implications
Michael R. Nelson,
Director, Internet Technology and Strategy, IBM Corporation, and Chris Francis,
Government Programs, IBM
ABSTRACT
The past year has seen a
great deal of buzz regarding virtual worlds such as Second Life, immersive 3D
online environments where tens of thousands of concurrent users can go to play
games, collaborate, or interact with information in new ways. While resembling
massively multi-player online games such as World of Warcraft, the new virtual
worlds are much more--they provide a versatile, flexible platform where users
can create and share content, develop new software tools, easily create
simulations, and build virtual environments (e.g. an office, a store, even a
golf course or a raceway).
This paper describes how
businesses, academic institutions, and governments are exploring how virtual
worlds might be used, what benefits they provide, and what business models are
likely to succeed. It also describes how Second Life and other aspects of the
3D Internet are indicative of a fundamental shift in how users view the
Internet. No longer is it merely a network for transmitting information; it has
become a place--a place where users (and their avatars) can build things, interact
with others, or just "hang out."
This paper examines how
this shift in mental model might lead to new approaches to regulation (and
deregulation) of the Internet. The paper, which is based on interviews with
more than 20 of the leaders of the virtual world community, examines how the
development of the 3D Internet might be hindered or helped by policy decisions
regarding:
1) Intellectual property
2) Open standards
3) Wiretapping and
electronic surveillance
4) Consumer protection
5) Contract law and rules
of incorporation for businesses in virtual worlds
6) Taxation
7) Tariffs
8) Security, identity,
and trust
INTRODUCTION
The
Internet is entering a new phase, as significant as the development of the
World Wide Web. Prior to the Web, the
Internet was primarily used for one-to-one communication: e-mail and remote log-in. The Web made the Internet a one-to-many,
broadcast medium, too. Today, thanks to
Web 2.0, Web Services, the Grid, Software as a Service, and other forms of
distributed computing, the Internet is becoming a platform for computing—as
well as communications. This platform,
often called the Cloud, is a many-to-many medium, linking millions of users to
thousands of computers simultaneously.
It represents a fundamental shift in how computing is done and has
profound implications for government policy.
To quote Eric Schmidt, the CEO of Google:
We’re moving into the era of “cloud”
computing, with information and applications hosted in the diffuse atmosphere
of cyberspace rather than on specific processors and silicon racks. The network
will truly be the computer.
Sophisticated browsers and technologies like LAMP or AJAX—not neon
lights or Greek heroes but simple building blocks that enable people to produce
and distribute content—are critical in this new world. They are the kind of
technologies that transform audio, video, text and digital data into intuitive,
easy-to-use services. They make Google, MySpace, YouTube, Gmail, Yahoo! and
Microsoft Live possible, and they haven’t even entered adolescence.[1]
The 3D Internet is one of
the most interesting and exciting new services being offered in the Cloud. Virtual worlds like Second Life and online games
such as World of Warcraft allow users to create avatars who can navigate a
three-dimensional world, create new virtual buildings and software tools,
interact with other avatars, and share information (whether video clips, plots
of data, or three-dimensional architectural models) in new ways. The computing power and the data that defines
these virtual worlds are provided by thousands of servers and storage systems
scattered amid the Cloud.
Government policy—and
policy makers—will have a major influence in how the Cloud evolves. Applying old, national regulatory approaches
to Cloud computing becomes difficult when the data and software needed for a
single service may be stored on thousands of computers in more than a dozen
different countries. This paper attempts
to identify the key questions that need to be addressed if policymakers are to
help, not hinder, the development of the 3D Internet. Key focus areas include:
1) Intellectual property
2) Open standards
3) Wiretapping and electronic surveillance
4) Consumer protection
5) Contract law and rules of incorporation for
businesses in virtual worlds
6) Taxation
7) Tariffs
8)
Identity,
and trust
THE TOUGH QUESTIONS
Intellectual Property
A virtual world
such as Second Life is defined by the intellectual property provisions in the contract
between users and Linden Labs, the creator of Second Life. One of the reasons that Second Life has grown
so quickly is because Linden Labs allows users to create and protect their own
content and profit from it. So copyright
is a key enabler of virtual worlds. But
thorny questions arise when copyrighted content is brought into a virtual
world. Suppose a Second Life user
imports a video feed from his cable television service so he and five of his
virtual friends can watch a television program in his virtual living room. Is that fair use? What if he’s sharing the video with 500
friends in a virtual auditorium? What
copyright and broadcasting law applies if the programming is from
Open Standards
On
Wiretapping
and Electronic Surveillance
Some
of the most vexing policy issues related to virtual worlds involve electronic
surveillance and law enforcement. Under
what conditions can a law enforcement agency gain access to a Second Life
user's data and how should and when could a user’s activities be
monitored? Which national laws apply?
Consumer
Protection
Estimates
vary, but even the most conservative assessment concludes that billions of
dollars of economic activity is happening in virtual worlds and in online
games—and the total is growing rapidly. In
1994, the BBC reported that “gaming activity has a gross economic impact
equivalent to the GDP of the Southern African nation of
Contract Law
Companies
are starting to establish virtual stores in virtual worlds like Second
Life. Teams of designers are working
together to create buildings and services for avatars to use. Ailin Graef, a German entrepreneur, is making
more than $200,000 a year by designing, building, and decorating virtual
apartments and houses in Second Life.[6] How will virtual design teams, made up of
employees in a number of different countries, most of whom have never met each
other (except as avatars in Second Life) handle legal issues regarding
incorporation, employee compensation and stock ownership, and intellectual
property? While other transnational companies
have dealt with these issues in other contexts, the virtual nature of the goods
being produced, the transient nature of the work force, and the intensely collaborative
nature of these teams raise new issues. Government
regulations that assume that a company has an office and hold physical meetings
of employees or Board members may need to be revised. To help facilitate
creation of virtual corporations creating goods and services online,
legislation has been introduced in the
Taxation
Now
that billions of dollars of virtual goods and services are being created and
sold in virtual worlds and in online games, it is not surprising that national
and state governments are considering whether such transactions should be
taxed.[8] But which tax regime should apply? And when should the tax be collected?[9] Should it be collected in virtual currency if
the transaction takes place “in world”?
Or should tax only be collected with the virtual currency used in a
virtual world is converted to a real-world currency? Who’s going to do the necessary paperwork?
Tariffs
Related
to the question of taxation—and perhaps even more complicated--is tariffs. Given that many virtual products are the
result of collaboration between team members (or between different companies)
spanning several countries, which makes it hard to even assign a “country of
origin,” it is hard to see an elegant or effective way to charge tariffs on the
importation of virtual goods.
Identity and
Trust
Perhaps
no issue is more fundamental than the question of identity and trust in virtual
worlds. One of the attractions of the
virtual worlds such as There.com is that users can live a fantasy life through
an anonymous avatar. Yet, inhabitants of
virtual worlds can verbally assault or harass others in a virtual world—and
often easily avoid punishment (other than having their avatar banned from the
virtual world.) For example, the virtual
headquarters for Presidential candidate John Edwards in Second Life was
vandalized by hackers.[10] The lack of spoof-proof ways to link avatars
to real people has fueled concerns among law enforcement agencies that virtual
worlds are being used for illegal gambling, distribution of child pornography,
money laundering, and other illegal activities.
In
order to examine this issue, IBM recently did an in-depth study of identity in
virtual worlds and collaborative spaces (e.g. Wikipedia), which face similar
issues. The conclusion is that there is
a clear need for decentralized system for single sign-on authentication based
on open standards and open source software.
Fortunately, in the last couple years, an ecosystem of companies has
been developing to provide such services.
Shibboleth, OpenID, and Project Higgins are key pieces of this
ecosystem. Governments may have a role
in spurring development and deployment of such systems.
CONCLUSIONS
The
policy research community is just beginning to explore the difficult regulatory
and technology issues related to virtual worlds.[11] Virtual worlds are at a very early
phase. In many ways, we are at a stage
similar to where the World Wide Web was in 1993, when the first commercial and
government Web sites were being created, security was poor, and very few legal
and regulatory issues had been adequately addressed. The explosion of e-commerce and e-business
that happened in the 1990s could not have happened without clarification of key
cyber-law issues.
Today,
virtual worlds are still predominantly used for entertainment, but they are
becoming a platform for commerce, education, and e-government. Furthermore, virtual worlds are combining
elements of the real world (via Google Maps, for instance) to create what MIT’s
Technology Review calls “Second Earth.”[12] We can only realize the full potential of
such new applications if policy and regulatory questions are answered and user
concerns adequately addressed.
Viktor
Mayer-Schoenberger and John Crowley at Harvard, have speculated on how today’s
regulatory structures will be applied to virtual worlds.[13] Their important law review article sees four
possible scenarios: (1) Virtual world
providers will serve as regulators by enforcing the terms of their contracts
with users to prevent cyber-fraud and ensure proper behavior, (2) Governments
could try to block their citizens from using virtual worlds that don’t abide by
government restrictions and regulations (although this will never be 100%
effective, just as governments have not been able to completely block access to
Web sites), (3) Government may try to minimize the real-world impact of virtual
worlds by, for instance, banning the sale of virtual goods for real-world
currency, or (4) “Real-World Assisted
Virtual World Self-Governance,” which is by far the most interesting scenario. Under this approach, governments provide
support for mechanisms where by users of virtual worlds can agree upon and
enforce their own “community standards” and rules of conduct. Such self-government is already starting to
happen in place in Second Life and other virtual worlds.
How policy and policy-making will evolve in virtual
worlds and online games is not clear.
But what is clear is that more research is needed to ascertain just what
is happening in these new online spaces.
Furthermore, the policy research community can help by developing and
debating creative suggestions regarding
how best to address concerns about cyber-fraud, illegal activity, intellectual
property theft, consumer protection, and identity. Without solid data and new approaches, we can
expect to see old-style regulatory proposals propelled by anecdotes. That is clearly not an effective way to
foster growth of new virtual world applications.
[1] “Schmidt, Eric, “Don’t Bet
Against the Internet,” in “The World in 2007,” The Economist http://www.economist.com/theworldin/business/displayStory.cfm?story_id=8133511
[2] http://www.research.ibm.com/research/press/virtualworlds.shtml
[3] http://www.virtualworldsnews.com/2007/06/liveblogging_mi_3.html#more
[4]“Do Virtual Worlds Need
Standards?,” PC World,
[5] http://news.bbc.co.uk/1/hi/technology/3570224.stm
[6] http://www.businessweek.com/the_thread/techbeat/archives/2006/11/second_lifes_fi.html?chan=search,
http://en.wikipedia.org/wiki/Anshe_Chung
[7] http://cairns.typepad.com/iilp/2007/05/johnson_testifi.html
[8] http://news.com.com/2100-1043_3-6140298.html?part=rss&tag=2547-1_3-0-5&subj=news
[9] http://news.com.com/Are+virtual+assets+taxable/2100-1043_3-6027212.html
[10] http://gamepolitics.com/2007/03/01/edwards-sl-hq-trashed/
[11] http://www.amazon.com/State-Play-Virtual-Machina-Technology/dp/0814799728
[12] https://www.technologyreview.com/Infotech/18911/
[13] Mayer-Schoenberger, Viktor, and