Napster's Second Life?: The Regulatory Challenges of Virtual Worlds

Abstract

INTRODUCTION 1775 I. VIRTUAL WORLDS 1781 II. GOVERNING VIRTUAL WORLDS 1790 A. Qualities of Rulemaking 1794 B. Qualities of Enforcement 1797 III. REGULATORY COMPETITION AND THE ECONOMICS OF VIRTUAL WORLDS 1802 A. Attracting New Users 1802 B. Retaining Users 1804 C. A New Deal 1805 D. Constitutionalization 1808 IV. COMPETITION, COORDINATION, AND TRANSPLANTATION: VIRTUAL WORLDS AND REGULATORY INTERDEPENDENCE 1810 A. Regulatory Competition 1812 B. Coordination 1815 C. Transplantation 1817 V. VIRTUAL WORLDS AND REAL-WORLD GOVERNANCE 1818 A. Regulating Virtual world providers 1819 B. Constraining Regulatory Dynamics 1821 C. Defensive Posture-Restricting Permeability 1824 D. Real-World Assisted Virtual World Self-Governance 1825 CONCLUSION 1826 INTRODUCTION Imagine a world with millions of people communicating and transacting, a world just like ours except that it is made entirely of bits, not atoms. Ten years ago, Internet pioneer and Grateful Dead lyricist John Perry Barlow imagined such a radical world-cyberspace.1 He saw people interacting without the constraints of national rules. They would be independent from regulatory fiat and unbound by the mandates of Washington, Paris, London, Berlin or Beijing. His vision relied on information traveling over a global network at lightning speed, with content living off server farms2 in nations with little regulation, weak enforcement, or both. In this world of global regulatory arbitrage,3 organizations could relocate their servers to jurisdictional safe havens overnight.4 Servers might pop up in exotic places like Aruba5 or Costa Rica,6 or places outside any jurisdictional reach, like the vacated Sealand-like7 oilrigs of the North Sea or even space.9 Barlow was not alone; others, too, had hoped that his vision would turn into reality.10 Still others, however, feared that result, and he and his compatriots were heavily criticized, even ridiculed. Humans, it was argued,12 cannot escape their physical presence. People shall always remain in the real world, because this is where their online actions have consequences. It is where the products that people purchase online get delivered to their doors, where the membership fees they pay for an online service get charged to their credit cards, where the money that they deposit in PayPal is debited from their bank accounts, and where their account balances are only replenished by the toil of their working lives. To these critics, Barlow's vision of life in cyberspace was an incomplete version of what life really is. So long as the online world remained tethered to the real world, jurisdictions would be able to enforce their rules-through cooperation with other jurisdictions,13 unilateral enforcement,14 or the regulation of supporting infrastructures like international financial networks.15 To these critics, Barlow's vision should remain just that: a vision. But imagine a world in which Barlow's vision became real: a digital realm where people interact, buy products, sell their services, maintain relationships, and actively engage in their community with little linkage to the physical world. In this place, one could create a new identity whenever her old persona grew tiresome, or exploit weaknesses in the underlying software architecture to create opportunities for arbitrage, or even cause monetary spillovers into the real world. And all attempts to subjugate this realm to the real world's rule of law would ultimately be in vain. …

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