National Policy Analysis Logo

 #246  

 May 1999




Don't Believe the Internet Know-It-Alls

by David Ridenour




"There is no reason for any individual to have a computer in their home."

-Ken Olson, President, Digital Equipment Corporation, 1977

 

The New York Yankees" Yogi Berra once said, "It's tough to make predictions, especially about the future." In few industries has this been more obvious than with the Internet.

Think back just a few years ago: Microsoft was preparing to roll out a heralded online service called Microsoft Network (MSN). Computer magazines were filled with sound and fury about the danger, inevitability or both of Microsoft becoming the Internet's emperor. In Washington, leaders huffed and puffed and the U.S. Justice Department went to the brink of major anti-trust action to force Microsoft to separate MSN from its Windows software.

But a funny thing happened on the way to the company's Internet coronation.

To paraphrase an old line, Microsoft gave a party and no one came. Today, after billions of dollars invested, MSN has a consumer base of only about 1.5 million. By contrast, America Online signed up almost that many subscribers in the last quarter alone.

Speaking of America Online, just a few years ago, when the nation was just being introduced to the glories of the Internet, people were actually predicting AOL's demise. With so much free information available on the Internet, many thought that Internet Service Providers (ISPs) like AOL that made money by charging for such services would whither on the vine and die.

Investors certainly feared this and AOL's stock price tumbled $75 to about $22 per share. But reports of AOL's death were quite premature: the company is now the undisputed online Internet king with more than 17 million subscribers. And AOL's stock rebounded too: A $10,000 investment in the company made just five years ago is now worth over $1.3 million.

The latest Internet craze is the hand-wringing surrounding AT&T's recent offer to buy the MediaOne cable company. With AT&T's recent acquisition of TCI, it now has a formidable platform to sell consumers a range of communications products, including local phone service and high-speed Internet access.

This has some observers singing an apocalyptic tune that AT&T will acquire a "stranglehold" over high-speed Internet access.

Such statements would be downright hilarious if not for one problem: they are attracting the attention of some lawmakers whose desire to regulate the economy is superceded only by their desire to appear on television talking about their desire to regulate the economy.

When AT&T announced that MediaOne had accepted its offer, faster than you can say "C-SPAN," Congressional chairmen announced hearings and issued press releases.

Since the Internet moves at the speed of light and Congress moves at the speed of -- well, a frog on Valium -- someone needs to make a very simple and obvious point to our learned leaders: stop hyperventilating and take a look at the reality of fast Internet service today.

Competition to create high-speed Internet services is perhaps the purest form of free enterprise today. Telephone and cable companies are scrambling to create high-speed access via the cable wire. Bell companies such as US West have unveiled fast digital line service.

Utility companies are in partnerships to use the electrical cable into Americans' homes as a "hot wire" for the Internet. And electronics firms such as Hughes have teamed up with America Online to create fast access service via satellites.

This competition guarantees consumers will have a variety of choices in the coming years ­ and at reasonable prices too. For example, US West, mindful of its emerging competition, recently slashed the monthly service price of its digital line service from $60 to $40.

The next time you hear a siren call warning about an oncoming monopoly by any company in any area of the Internet, relax. The laws of economics and, more importantly, the laws of common-sense tell us that such a scenario is not going to happen.

And the next time you cruise the Information Superhighway, be sure to look in your rear-view mirror. There are no wrecks as far as the eye can see. MSN's dominance, AOL's death, the supremacy of "push" technology across the Internet ­ all the wrecks predicted in the months and years past -- never occurred.

The Internet road is clear. Let's just hope lawmakers have the good sense to let the traffic flow smoothly on its own.


# # #

 

David A. Ridenour is Vice President of The National Center for Public Policy Research, a Washington, D.C. think tank, where he oversees the group's environmental and regulatory program. Comments may be sent to [email protected].



The National Center for Public Policy Research
E-Mail: [email protected]

Web: www.nationalcenter.org



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