How The Government Saved The Internet

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Reed Hundt was chairman of the United States Federal Communications Commission from 1993 to 1997. He served under President Bill Clinton and currently serves as CEO of the Coalition For Green Capital.

The government had a critical role in fostering the growth of the Internet during its commercial infancy in the early 90s; I witnessed this first-hand at the FCC, when we worked with Al Gore and Congress to expand access and reduce barriers for this new medium. We thought it could become, and we wanted it to be become, the dominant medium for information exchange for the country and the world. Two governmental initiatives in particular, eliminating the interstate connection charges collected by the local telephone company and connecting classrooms and libraries to the web, greatly helped the Internet fulfill its destiny.

Some critics assert that the inability or reluctance of the American government to regulate the Internet proves that the absence of government permitted the innovation of the Internet to flourish. Very recently, Verizon is arguing in the Court of Appeals for the District of Columbia that not only should broadband be unregulated, but also any owner of a communications network (presumably wireless, wireline, cable, broadcast, satellite and wireline) has the right under the First Amendment to control what is sent over its network, to whom it is sent, and how much can be charged for the transmission – or in other words, almost no regulation is permissible under the Constitution, even if regulation were a good idea, which it is not, according to Verizon.

The skepticism, or in Verizon’s case, outright rejection of the role of government misses the importance of the government in clearing the way for the Internet to make its way through the bottlenecks and market power of the existing communications industry in the salad days of packet-switched technology as a commercial and social phenomenon. As a result, the proper role of government in the future of the Internet is also misleading.

On a weekly or bi-weekly basis, Vice President Gore convened a group in his West Wing office to outline the communications policy for the United States. The prevailing idea was that unregulated competition instead of regulated monopoly would be the fundamental paradigm for economic regulation of communications networks. That was a reversal of the approach of the 1934 Communications Act. This new paradigm found its way into the 1993 Omnibus Reconciliation Act’s grant of authority to the FCC to auction wireless licenses in a way that permitted the creation of a robustly competitive multi-firm wireless industry, supplanting the two-firm duopoly that had previously been in place.

In the case of the Internet, the new paradigm manifested itself in the Telecommunications Act signed by President Clinton in February 1996. When we at the FCC put that law into practice through regulatory authority, we took various specific steps to foster thousands of firms that provided Internet access. Ultimately, AOL emerged as the big winner, and of course was the only one that achieved movie stardom, but for all the ISPs in the dial-up age, it was critical that we allowed them free use of the telephone network without paying – some may recall that the first version of connecting to the Internet was the unplugging of the telephone line from the telephone and plugging it into the computer instead. We blessed this maneuver without charging the internet access companies the same three cents a minute that the long distance companies, AT&T, MCI, and Sprint, paid the local Bells for connection to the local telephone networks.

Using the internet for a half hour a day, a AOL customer would have had to pay about $30 a month directly or indirectly to the Bell companies, in addition to the $10 or so that AOL was charging. At those rates the Internet would have grown far more slowly, and the entire boom might never have occurred. Since the 1990s was the one decade since the 1970s in which every income quintile in America saw their income go up, this would have been an unfortunate alternative history. Moreover, every over-the-top company, from Yahoo! to Google and beyond, would have lacked the huge base of connected users that they had to pay very little to reach, and hence they would probably be worth mere fractions of what they are now worth, even assuming that they ever could have come into existence at all.

Underlying this and many other specific regulatory decisions too detailed to go into was the fundamental decision, reached under Gore’s leadership, that the Internet could and should become the dominant method of knowledge exchange for everyone in the world. This became a goal of international negotiations pursued by the Clinton Administration and was significantly advanced in a trade agreement signed by 69 countries in 1997.

In addition to adopting a pro-competition and pro-Internet regulatory, legislative, and treaty-based approach, the Clinton Administration sought to use the Internet to improve a suite of public goods. The most salient example was the introduction of the Internet into education. This was advanced by the hard-fought success in inserting in the 1996 Telecommunications Act a provision allowing the FCC to collect from telephone company subscribers several billion dollars a year which in turn it gave to school districts to pay for Internet access in classrooms. More than $20 billion has been spent on achieving this goal, and it has not been a minor reason why both education is being revolutionized by the Internet and why the youngest generation in America, whether growing up rich or poor, is Internet-savvy.

We Americans have much more to do to tap the potential of the Internet. The new goal is to achieve abundance – much more bandwidth carrying many more public goods in virtual form, to all of us everywhere anytime we want to be connected. The methods must be debated, but nothing in history suggests that government should play no role in opening the door to a better future not just for profit-seeking firms but also everyone in society.

[Image via Wikipedia]