Internet economy

[Future of the Internet workshop] OECD Discussion Forum -- Mike Nelson first round of answers


[Future of the Internet workshop] OECD Discussion Forum -- Some initial thoughts on OECD discussion, Mike Nelson.

1. The Internet is now a critical infrastructure and a global platform for communication and commerce. What should be the role of governments in its development and management?

The Internet is both a critical infrastructure and a medium for creativity, entertainment, and communication.  The reason the Internet has fostered so many new, exciting applications is because it--unlike other infrastructures--has not been regulated (or owned) by governments.  In Europe and elsewhere, there is a debate over whether the Internet should be subject to broadcast regulation or telephony regulation or both--since VoIP, Webcasting, and Internet radio sort of resemble (and sometimes compete with) traditional services.  However, the Internet is fundamentally different.  Unlike over-the-air broadcasting or cable television, there is almost no limit to the number of "channels" that can be broadcast over the Web.  Likewise, the economics and the technology of Voice over IP are fundamentally different than circuit-switched telephony. 

Those who argue that there needs to be "technology neutrality" or "policy coherence," need to understand that the Internet is a new type a medium--a "many-to-many technology" unlike anything we've seen before.  Rather than starting with the assumption that the Internet should be brought under existing regulatory regimes, we should try "zero-based regulation."  I would argue that the correct regulatory model for the Internet is the model we use for paper.  No one controls what I write on the pages of my diary or on a cocktail napkin or in a letter or in a brochure.  No one tells me what color ink, what font type, or what size paper to use.  In an increasing number of countries, governments do not try to control what newspapers publish.

So if the Internet is as ubiquitous, versatile, and unregulated as paper, what is the role of governments?  First, research, education, and training.  Second, promotion of the use of Internet, particularly for e-government services.  Third, promoting competition by enforcing antitrust laws and adopting policies that lower barriers to entry (through spectrum policy, trade policy, providing access to public rights-of-way, etc.).  Fourth, supporting development and adoption of open standards (by embracing open standards for government applications and through IPR policies that promote openness).  And, of course, government law enforcement agencies have a key role to play in prosecuting criminal use of the Internet (and paper).

2. The Internet is challenging existing business models. How can we ensure there is sufficient investment to meet the network capacity demands of new applications and of an expanding base of users?

Governments should not be in the business of choosing between competing business models.  Instead, they should foster a competitive marketplace where different companies can try different approaches.  This is much easier with the Internet than with traditional telephony services.  We'll see the full range of approaches: Sender-pays, receiver-pays, advertizers-pay, governments-pay.  The key is to ensure the Internet stays an internetwork--that companies can't create "walled gardens" and "lock-in" customers.  This does not require price regulation.  This does not require details "Net neutrality" regulations.  It requires promoting innovation and competition.

3. Innovation is taking place at the edges of the network. How do we ensure that this continues and how can it be enhanced?

Competition, innovation, and open standards.  This requires that government policymakers get more involved in development and promotion of open standards (and oppose standards that might be used to restrict competition.)  The design of standards for IPv6, cyber-security, authentication, and new Internet services will shape the Internet for years to come.

4. The Internet is perceived as not being secure, nor does it protect privacy. What steps should be taken to improve security and privacy and by whom?

Compared to where we were ten years ago, the Internet is far more secure.  There has been steady improvement in the technological solutions available and the number of different choices for consumers.  Unfortunately, as the value of transactions taking place over the Internet has increased, the Internet has become a more attractive target for criminals and organized crime.  And while security technologies are improving, many consumers and companies are not using the solutions that are available.  Many consumers don't know which proprietary technologies to purchase.  Here again, wider adoption of open standards (and open source solutions) could help accelerate the spread of better security tools.  The recently announced Project Higgins initiative ( ) is one example.

5. Ubiquitous networks are being deployed. What are the drivers of these developments? What will be the impacts on individuals and society?

The first driver in the development of the Internet was providing access to remote computing resources.  The second driver is e-mail and communications, which remains the main reason most Internet users first get connected.  The third driver is content.  Many people in the entertainment and content industry think that downloading commercial content is the most important driver.  But it's not.  Consumers want access to commercial and non-commercial content--and they want to share their own Web logs, photos, and video clips.  A new driver, that will become increasingly important is collaboration and distributed computing.  New tools, such as the Grid and Web services will turn the Internet into a platform for sharing and processing information.   The Grid and Web services is likely to unleash even more new "game-changing" applications than the Web.

Michael R. Nelson
Director, Internet Technology and Strategy
IBM Corporation