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Last Modified: 2000-02-14
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This file is a much-shortened executive summary of: http://e-conomy.berkeley.edu/pubs/wp/ewp12.html


Defending the Internet Revolution in the Broadband Era: Why Open Policy Has Been Essential,
Why Reversing That Policy Will Be Risky



François Bar, Stephen Cohen, Peter Cowhey, Bradford DeLong, Michael Kleeman, John Zysman


©Copyright, BRIE


America's stunning success in promoting the Internet revolution owes a major debt to determined regulatory action that encouraged all aspects of network openness and interconnection. America Online and other Internet service providers, not the Regional Bell Operating Companies, popularized mass subscriptions to the Internet. Personal computers, the Netscape browser, and Cisco, not AT&T, drove the architecture of data networking and the Web. All these innovations were possible because the Federal Communications Commission decided in the 1960s that the emerging world of data networking should not be treated like voice telecom services. Therefore, it exempted all forms of computer networking from much of the regulatory baggage--including fees to fund various cross-subsidies for voice telecom services--involving the telecom network. Regulatory policy forced open access to networks where the monopoly owners would try to keep things closed. The resulting competition allowed the FCC to free the service providers from detailed regulation that would have kept them from using the full capabilities of the network in the most open and free manner.

Thanks to the FCC policy of "openness" and competition, specialized networks and their users could unleash the Internet revolution. This assured the widest possible user choice and the greatest opportunities for users to interact with the myriad of emerging new entrants in all segments of the network. To be sure the FCC strategy emerged haltingly, but it followed a consistent direction. The Commission supported competition and innovation by keeping the critical network infrastructure open to new architectures and available to new services on cost effective terms.

Open infrastructure policy fostered user-driven innovation. Such user-centered innovation processes flourish in an environment in which users are granted access to a wide range of choices of facilities, services, and network elements. The rejection of a monopoly over network architecture was critical to these innovations. And, in a totally unexpected collateral benefit, the virtuous circle of policy and market innovation came to be recognized by the rest of the world as the right template for network competition and the growth of the Internet. It thus gave the US a voice in global policy that went far beyond its political and market power.

As Cable moves from "broadcast" to "broadband." the Cable infrastructure becomes a key element in digital video, data, and voice communications and all the issues about network openness return to the forefront. Unfortunately, in a misreading of its own history the FCC may abandon its successful policy just as a new generation of services, including broadband Internet services, are defining the future of networking and the electronic economy. The FCC is now starting to confuse the instruments of its successful policy with the logic of its strategy. That strategy, again, was to allow competition and innovation by keeping the critical network infrastructure open to new architectures and available to new services on cost effective terms.

The policy stakes are much larger than the competitive fates of particular groups of ISPs. The risk, if competition is not maintained, is to the continuing evolution of the Internet, to the core innovation in and the evolution of electronic network-based business, and therefore to the competitive development of the network economy as a whole. The consequence would be that the dynamic of expansion and innovation driven by the users, as much or more as by the network providers, will be undercut.

The relevant form of open access is access to the "last mile" to connect to the Internet for alternate ISP providers and other network users. Open access must be provided for each additional component of the communications and data network system, as it has been required of the communications system to date. The government should make clear the principle that if market power exists, whatever becomes the natural channel of Internet access will have to architect itself to allow competition. Openness should depend on clear policy principle, not on corporate discretion.


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Professor of Economics J. Bradford DeLong, 601 Evans Hall, #3880
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