The Internet and the Case for Deregulation

Whenever a liberal touts the economic record of Bill Clinton, I point out a very simple truth. When Bill Clinton entered office less than ten percent of the people used both the internet and cell phones. By the time he left office, both were used by more than 90% of the people, and in some cases, the technology was combined. Now, unless someone points out Bill Clinton's role in this dynamic, I will continue to believe that Clinton was the recipient of being in the right place at the right time while the world revolutionized around him. In my opinion, the growth and explosion of the internet came from the power of the innovators that lead it. Furthermore, it grew because the government resisted all urges to try and regulate it as it grew.

Both the internet and the cell phone have been a wonder in dynamic change and innovation and both have benefitted greatly from the idea of deregulation. In fact, in the case of both, they benefitted from a lack of regulations to begin with. There is no doubt that the lack of hindrance of government regulators helped to allow the innovators that make up the internet and cell phone to spark to spark a revolution the likes of which we have never seen. The mass market appeal of the internet and cell phone grew in an exponentially quicker manner than any other revolutionary invention I can think of. Think about inventions like the car, the television, and the radio. All of these inventions took generations from invention until their appeal became common place in any home. The internet took less than twenty years for the same thing to occur.

When I was a stock broker (in the late 1990's), most of the technologies that are common places today were still being debated. There were two big debates in the technology world at the time. The first debate was over which technology would ultimately be the gateway to bringing the internet to the consumer: broadband, wifi, wireless, dsl, etc. The other question was which company would ultimately be the bigger beneficiary of the internet: the ISP provider like AOL or the one providing the gateway like AT&T. Both those questions have become irrelevant because 1) all gateway technologies have found enough niche to thrive and 2) the gateway companies figured out how to provide the ISP as well and vice versa. In fact, most debates over the future of the internet become obselete within six months because that's how quickly the technology gets revolutionized.

The overwhelming majority of the credit for the remarkable innovation of this technology of course goes to the innovators themselves, however the innovators were also never incumbered by the limits of regulation. Can you imagine what would have happened to innovation if some government regulator barred a company from providing ISP service if they were also involved in things like broadband? Consumers would have been forced to go to AT&T or their competitor to get internet service in your home, and then the consumer would have gone to AOL to use it. Regulators could have limited companies from providing all sorts of services and technologies if those companies also provided other services for fear that such cross marketing would create large monopolies. Instead, the internet, unincumbered by government interference, has taken on a life of its own to the point that even the players in it can't control or predict its future.

The internet has become the ultimate technological frontier, and both the technology, and everyone serving in it, have benefitted from it. It is exactly the specific lack of rules and regulations that have created exactly the environment that has created unlimited and remarkable innovation that continues today.

The unregulated internet is not without problems. For instance, pornography has become one of the biggest beneficiaries of the internet, and there is little in the way of safeguards to make sure that it isn't minors looking at porn on the internet. Furthermore, the explosion of blogs and other websites have brought with it a lot of filth, innuendo, and smearing. Because many of these sites are anonymous it becomes difficult for the target to seek retribution. Finally, that which falls outside our own obscenity laws can easily find internet hosting by companies located in libertine countries like the Netherlands where there aren't the strict obsenity laws we have here. As such, all sorts of extreme pornography and racist sites originate from web hosting companies located in Amsterdam. Once the site is created though, it can be accesses anywhere and as such, it reaches into American computers.

Still, whatever negative outcomes of the landscape of deregulation in the internet, there is no debate that the explosion in technological advancement on the internet happened because the government resisted all temptation to try and regulate the innovation. There is of course also no debate that the internet is not the same as banking. Certainly, there is a level of regulation that must be applied to those that hold other people's money because that function carries a weight unlike that of just about any other function. Still, I hope everyone will remember the explosion in innovation that occurred on the internet as we begin to debate the era of regulatory reform that is about to be unleashed.