Abstract

The extremely rapid emergence of the Internet as a mass communications service and its concomitant commercialization has stirred great interest in creating a broadband infrastructure, both in the US and worldwide. The concept of a national, even global, network linking citizens and governments, friends and neighbors, customers and firms, schools and students appears new and exciting, almost unprecedented to many. Whether this will occur, and how it will play out, appear as great uncertainties.

Central to this uncertaintly is the role that public policy will play in the deployment of interactive broadband networks. In virtually all countries, networks of all kinds have been tightly regulated (or owned outright) by governments. This pervasive public intervention into the market is often justified by economies of scale or universal service. Indeed, we have heard concerns as the Internet has expanded that it must be made available to all to ensure that everyone has access to the skills and information to succeed in the 21st century.

In this article, the arguments for government intervention are critically reviewed and assessed. It is argued that the appropriate model for the Internet is to permit and encourage market forces to drive the development of this new resource. Relying on government regulation is both unnecessary and likely to lead to inefficient outcomes and a significant slowing of Internet growth.

Telecommunications; Regulation; Public Policy

JEL Classification: L96, L86, L51