The Internet and the free market

Today's IT debate is about how the Internet should be managed.

In one camp are those who argue that the Internet's underlying telecommunications backbone should be viewed as a quasi-public good that should operate more or less like a road, open equally to all. In the other are the major telecomms players, which think they should be able to use their own property as they see fit and thus be free to favour one firm over another, as most other companies do.

If you have followed this issue, you know that both sides can make reasonable technical and legal arguments. The IT industry loves to tout the value of free markets, but in this case, the freedom to use a content-neutral Net and the freedom of companies to pursue their own ends are in conflict.

In the 1920s and 30s, under the strong, sometimes ruthless leadership of Thomas Watson, IBM crushed its many tabulating equipment rivals to gain a near-monopoly position.

Then, in 1981, IBM inadvertently passed the baton of near-monopoly power to Intel and Microsoft by putting their products at the heart of its PCs. However, in the early 1990s, networking became the IT industry's new centre of gravity.

While customers rejoiced, this unforeseen emancipation has never sat well with the major telecomms players, which see themselves as the rightful heirs to the IT industry's monopoly tradition.

There are now two main questions: do the telecomms companies have sufficient clout to change the way the Net works? And if they do, would their unlicensed pursuit of their own gain prove seriously detrimental to the development of the Web as a whole? While these threats can't be taken lightly, there are enough doubts to suggest that a wait-and-see policy is once again the best way forward. The major telecomms players have never demonstrated that they can move quickly or deftly enough to work the Web to their advantage, and there is no point in government intervention before any real harm has been done.

Is the IT industry mature enough to have fully open competition without excessive monopoly power? It will be very interesting to find out.

David Moschella is global research director at the Leading Edge Forum, a Computer Sciences Corp company

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