20 Years from NSFNET

April 30, 2015

CSIS Speech

We are gathered here to celebrate the role each of us had getting the Internet off to what might be called a good start 20 or so years ago.

Well, that would be an understatement.

From single digit penetration of the American household market and infinitesimal presence in global consciousness two decades ago, the Internet has wrapped the world in intelligence. We touch it now primarily through smartphones operating on interlinked digital wireless networks undergirded by earth-encircling fiber. In five years, four out of every five adults on the planet will have a smartphone and all will use it communicate on this great platform.

Almost all economic and social activity now occurs in and through the Internet.

Of course those who had some hand in the Internet’s commercial birth twenty years ago know that pretty much everything that has occurred was predicted by one or more of us in the dawn of this connected age.

Unfortunately, prescience is commodity. It’s planning what to do about the future and executing on the plan that creates real value, however.

Everyone knows what people, firms and countries are destined to accomplish, but hardly anyone knows how to become Jack Ma, or Google, or Silicon Valley.

I’m here to talk about how the United States government planned for the commercial and social future of the Internet starting not 20 but 22 years ago (the technical breakthroughs occurred much earlier), and why the United States government needs a new plan for the next 20 or 22 years.

The United States government developed an Internet plan in a series of meetings starting in late 1993. We knew very early in the meeting cycle that the plan had to be about the Internet, as opposed to circuit switched communication, because by late 1993 the CERN laboratory in Switzerland gave away for free the software invented by Tim Berners-Lee (such as HTML and HTTP-IP that became the standard for formatting and transmitting digital content, creating the World Wide Web. And by the end of the year, the Mosaic browser, developed by Marc Andreessen, age 22, and colleagues at the supercomputer laboratory at the University of Illinois, had become what we would know call the killer App for everyone’s PC to become a website or to “surf” a website. (Gore spotted their Mosaic browser soon after its creation.[1] )

The government plan then had a goal: namely, to have the Internet as a platform subsume all other communications platforms, change the market structure and governmental approach to the dominant communications platform, and thereby to improve the standard of living for everyone in the world as well as enhancing the capability to human beings to solve problems involving collective action.

Also to make the NFL Draft the focus of most male-owned computer screens in the USA, and I believe that part is coming true right at this moment.

Al Gore chaired and ran these meetings, usually in his office and at least once at his home on Observatory Hill. Memory tells me that we had about a dozen or more one to two hour meetings. At least a dozen people were in and out of the sessions. They led to these conclusions:

— Gore’s unveiling of the overall plan at a general level first at Royce Hall at UCLA, then in Buenos Aires to the ITU, by March 1994;

— in a WTO planning meeting in Casablanca that spring that led to a global telecom treaty reached among 69 countries in 1997,

— A set of White House proposals called the National Information Infrastructure initiative, or NII. Its global counterpart, the Global Information Infrastructure (GII), represented the foreign policy of the Internet. Ira Magaziner, a White House champion of all I speak about here, deserves huge credit for his role, which in turn led to multiple executive, foreign policy and legislative accomplishments, including (my favorite) a tax holiday for e-commerce.

— a White House legislative proposal that eventually became integral to the February 1996 bipartisan Telecommunications Act signed in the Library of Congress (I have a signing pen on my wall but it was the first law enacted officially by digital signature),

— and a series of fairly recondite FCC regulatory actions that permitted ISPs to borrow the exiting telephone network for free in order to spread Internet dial up access as fast as possible by lowering the cost of access toward zero and instigating a huge increase in PC acquisition.

Part of the plan was the privatization of NSFNET in 1995, the event we celebrate today. Another part was the creation of ICANN and the adoption of a multistakeholder model for Internet governance. The alternative was to have the FCC set standards and license piece parts of the Internet. Instead we chose to have the FCC decide interconnection, and market structures (working with the FTC or DOJ). Part of interconnection was reliance on the FCC to make sure that all computers, or if you will, all web sites, could connect to the Internet. That’s the shortest description of Net Neutrality you will ever hear. The FCC has always had a version of Net Neutrality in place. Occasionally the D.C. Circuit has obliged the FCC to restate such rules. Most recently the FCC, with the public support of the President, has issued an up-to-date guarantee of the openness that has always been part of the core purpose and methods of the Internet. That rubric will spread through most countries’ regulatory regimes, I hope, and will assure that openness is the common paradigm for all nation-state governance activities with respect to the Internet.

The motive behind the 1993–94 plan was this: the government wanted U.S. businesses, schools, libraries, and households to lead the world in adopting the new medium. If Internet access grew quickly in the United States, we reasoned that U.S. firms would have a jump start in creating value on the new platform. The winning firms and early users could also create an “Internet culture” that prized American values such as entrepreneurial competition[2], democracy, and freedom of expression.[3]

The Clinton administration had come into office seeking economic growth through increased competition both domestically and overseas. At the same time Japan’s economic success in the 1970s and 1980s — as illustrated by the tremendous gains made by Japanese firms against U.S. rivals in markets ranging from automobiles to electronics — suggested the power of activist government policies that anticipated business cycles and advances in technology. Meanwhile, the collapse of the Soviet Union and end of the Cold War offered new hope for global free trade not only in goods and services, but also in information.

The Internet seemed the perfect medium for the USA to adopt in those times: it encouraged domestic investment, U.S. expansion into international markets, and a global competition in technology and ideas. The new medium would compete against both television and telephony. U.S. firms, even if initially only glimmers in venture capitalists’ eyes, could beat Japanese firms to the punch. E-mail and web sites might spread democracy and free speech in an era of global reach.

The plan worked as we hoped, only faster than we expected. The rapid spread of the Internet ignited an economic and technology boom that stretched from 1994 to 2001. In those years, the private sector invested about $1 trillion dollars to replace the old information platform (analog television, fixed line telephones, voice) with the new medium (digital, computers, Internet, wireless telephones, data). Unemployment fell; real wages rose. Those who told President-elect Clinton in 1992 that burgeoning federal deficits could doom his Presidency were surprised when the technology boom eventually helped produce annual surpluses. [4]

In the newly digitized information and communications technology sector, ascendant U.S. firms (Microsoft, Intel, Cisco, Yahoo!, Qualcomm, and then in later stages, Google, Facebook, etc.) rose to achieve huge market capitalizations, and exercised great influence in business, society and culture. They outpaced their rivals in Japan and Europe. China was an exception because it created, largely by copying (that’s a euphemism) American firms and methods, a mirror version of the Western Internet ecosystem. Now China must be part of the new governance regime the Internet needs for its next 20 years.

We knew that too 20 years ago. That’s why the global treaty I mentioned was intended to be part of the WTO before China joined it.

Since I mentioned China taking things without paying for them, I imagine you will tolerate me inflicting on you a concise statement of the key FCC move that allowed Internet access providers to “borrow,” at no charge, the physical infrastructure of the existing telephony network, which was the largest and most expensive unified machine ever built.

Back in the day, the long distance companies had to pay the local Bells for the right to connect to customers. When calls went across state lines, the FCC regulated the payments as access charges. The long distance companies collected the money from customers, and paid it to the Bells. Access charges could amount to 30% to 60% of the price of a long distance charge.

During the break-up, Congressman Ed Markey urged the FCC to exempt from access charges business connections used principally to transfer information. In decisions known as Computer I and Computer II, the FCC created this “enhanced service provider” exemption. In the 1990s people connected to the Internet by disconnecting a phone line from a telephone and connecting it to a computer. Then the computer dialed a phone line that in turn connected to a network linked to other networks, and that network of networks constituted the Internet.

Obviously, the Internet crossed state lines, so the FCC exercised jurisdiction over the connections. But we used that jurisdiction to exempt Internet communication from access charges. As a result, Internet service providers did not have to pay local phone companies anything when they marketed access to the Internet.

For the White House, not to mention the FCC, developing a technology strategy at all broke with tradition. At least since Jimmy Carter’s election in 1976, virtually all Republicans and many Democrats had championed de-regulation and private sector ingenuity, while explicitly or implicitly communicating that government ought to have only a small role in regulatory oversight.[5] Getting out of the way was now supposed to be the job of government.[6] In this view, the United States had a clockwork economy that ticked perfectly well as long as government did not meddle with its gears.[7]

In the late 1980s and early 1990s, however, Al Gore had a different view, drawn from new growth economics. As explained by economist Paul Romer in a 1990 Journal of Political Economy article, the more information available on easily accessed networks, the more wealth would be created. Returns to scale would increase instead of decrease. Therefore, we figured, if the government “gave” the telephone network to the pioneers of the Internet, information and social welfare would expand according to Metcalf’s law — n squared is the value of connection and hence of value creation, where n is the number of Internet users — and everyone collectively would be very well off very quickly.

The telephone companies in other countries saw the opportunity that was not given to the incumbent telco’s in the United States and generally resisted the USA approach. But that’s another story, although one very relevant to the ultimate triumph of American firms in the new Internet economy. In any case, the U.S government strategy was not to promote a single firm; it was the medium we wanted to succeed.

Technological advances create forks in the road of history. At such points, government can choose whether to act for the public interest or whether to cede decision-making to the most powerful actors in the private sector. In many cases, the latter is wise. But private firms will act in the best interest of their shareholders, and that is not always identical to the long-range best interest of the country as a whole, or of the world.

Even when the government wants to advance the public interest by favoring a particular communication medium — or, as is currently necessary, favoring certain types of energy over others — the choices are not easy.

But the Internet has not proven ideal in all aspects.

In its most recent evolution, the ecosystem includes:

— vast centralized reservoirs of information about human behavior never before gathered by anyone at this scale. Both responsibility for past actions and inclinations toward future actions can be ascertained with high probability by the holders of these data banks.

— real time capability not just to view but to intervene in a great deal of human action. The interventions can be benign or well –intended, but also lethal and vicious. They can be by state or non-state actors.

— the capability for bad actors (state or non-state) to destroy fundamental functions of social life, including transportation, power supply, commercial transactions, property and privacy rights.

— in its avatar as the Internet of Things instead of people, the Internet is leading the way into an age of automation or robotics that can ease the pressure of work or strip life of meaning for most people. That’s a choice that the medium needs to empower all people to help make. We don’t want the machines themselves or those invested with economic or police power to make for us.

Under the pressures of the new issues, the governance system of the Internet is now fracturing. ICANN and IETF and other global forums are still necessary but they are not sufficient to cope with the expanding range of issues associated, not always accurately, with the Internet.

If the Internet is a public good, which it is, and if it is like Central Park, which it is, then it can be destroyed by crime and corruption. We must not let that happen. Police power has to be exercised, but collective action by users is also critical to maintain safe use of this great good medium. What treaty, compact and protocols have to be invented to assure a safe Internet? Merely asking for multistakeholder participation is only the beginning of this discussion.

This topic leads to sanctions. Bad users will have to feel they lose something important if they misuse the Internet. I make this point as to states and as to non-state actors. A government that pulls out of the global Internet in order to keep a lurch toward authoritarianism somehow out of the great global eye must know that it will pay a price for this breaking of the world’s common medium.

It is also the case that market structure, conduct and performance in the Internet economy matters even more than ever. The FCC and other government agencies needs to make sure that access to use the Internet is open and competitive. It needs to maintain or if necessary create incentives for upstarts to overturn existing market structures, or at least to try in the hope of a reward for their risk. It needs to assure that any web site no matter how start uppity or how poorly funded can at least seek an audience as against those whose past successes in life or inheritance give them the opportunity to buy a privileged position in the consciousness of the true intended beneficiaries of the Internet: everyone.

And what the FCC does, if it is done right, should be done by its counterpart agencies in China and in every other country. That might not be easy, to put the matter mildly, but it should be our goal.

At the end, the great advantage those who love this medium have relative to all other users of all other mediums in history is this: the Internet is all about collective action. Broadcast TV, radio, books and newspapers are all basically one to many and hardly any response permitted. The telephone network was many to many, but hardly any group connection is possible. The Internet, far more than any other form of human interaction, encourages, draws out, even demands, many talking to many about many things in the moment and also upon reflection and revision and re-thinking. This is just the coolest thing about the Great Web of Intelligence. And so in that many to many about much way of the Internet I truly believe that users themselves can make the change they want to see in the medium. We, us, can come to agreement about privacy, surveillance, criminal use, censorship and all the other acts that we won’t tolerate.

In this spirit, I’d like to see today mark the beginning of a new conversation about governance and a new way of ordering and promoting the fundamental freedom to connect that brought us all into a common pursuit twenty years ago.

— 30 —

[1] I vividly recall Gore staffer Greg Simon summoning me to the Old Executive Office Building to show me the Louvre on the computer, displayed there by the Internet instead of software hand-inserted into the computer. This was in that winter, not many weeks after Mosaic had hit the market.

[2] Synonyms included Schumpeterian competition and “creative destruction.”

[3] Culture is a web of beliefs and values that ties society together. See generally Geertz, The Interpretation of Cultures. That web is suspended on the architectures of technology, law, and demographics. See generally, Reed Hundt, In China’s Shadow: The Crisis of American Entrepreneurship, pp 25–26. Every new important technological architecture, or platform, changes culture.

[4] The surplus rattled those who wanted government to play a diminishing role in the economy, and took any government failure as more evidence that government should be smaller. Faced with the success of the Clinton Administration’s policies, Fed Chairman Alan Greenspan recommended in 2001 that the Bush Administration cut taxes to re-create a deficit. That was irrational — better to have spent the new revenue on infrastructure and research on clean energy solutions, both stimulating the economy and creating the public goods that would now be driving growth. Greenspan and the other Republicans had their way: still another effect of the outcome of the election of 2000. The Internet and the dot.com boom that it caused had created choices, even if the wrong ones were made.

[5] As of this writing in early 2016, Democratic political advisers were moaning about the fact that voters did not believe the Democratic Party offered policies that could help the middle class in economic terms. http://www.washingtonpost.com/blogs/plum-line/wp/2015/01/20/memo-to-dems-voters-you-need-to-win-back-still-really-dont-like-this-economy/. Our technology policy in the 1990s was specifically intended to produce benefits for the middle class; it did so.

[6] An Administration that trumpets its unwillingness to have any strategic view about a regulated economic sector typically is attempting to disguise its true inclination or is delegating its strategy-making to the firms in the sector that it chooses to favor. In other words, “no plan” is an unrevealed or outsourced plan. Perhaps unregulated sectors do not call for government strategies, but fewer unregulated sectors exist than Washington lobbyists would admit. In most sectors, for example, incumbents seek regulation to further their status as incumbents.

[7] This was the middle of the era of belief in the Great Moderation, a concept that did not survive the financial crisis of 2008–9.

One clap, two clap, three clap, forty?

By clapping more or less, you can signal to us which stories really stand out.