Digital Tornado: The Internet and Telecommunications Policy

Citation: Federal Comm. Comm'n, "Digital Tornado: The Internet and Telecommunications Policy" (OPP Working Paper No. 29).

The Federal Communications Commission (FCC), Office of Plans and Policy released its working paper entitled "Digital Tornado: The Internet and Telecommunications Policy" (OPP Working Paper No. 29) in March 1997. The FCC working paper addressed three overlapping telecommunications policy areas that relate to the Internet: law, economics and public policy.

The working paper reviewed some of the major Internet-related issues that had already come before the Commission, such as whether or not the FCC has the authority under the 1996 Telecommunications Act to exercise regulatory jurisdiction over specific Internet-based activities. The paper concluded that the FCC "can and should greatly limit the extent to which its actions interfere with the functioning of the Internet services market."

The working paper identified certain specific policy goals that should guide the FCC in its consideration of regulation for the Internet: (1) promote competition in voice, video, and interactive services; (2) facilitate network investment and technological innovation; (3) allow all citizens to benefit from advanced technologies.

Section I of the paper suggested that the Internet is a feedback loop, that is, a constantly expanding spiral that creates the conditions for its further growth. According to the authors, the Internet spiral is driven by four factors: (1) deep convergence which represents the impact of digital technology in breaking down barriers between different services and networks; (2) the interaction of Moore's law ("the maximum processing power of a microchip, at a given price, doubles roughly every eighteen months") and Metcalfe's law ("the value of a network is equivalent to the square of the number of nodes") leads to plummeting costs and soaring performance for the Internet; (3) the market rewards innovation by attracting both the people and financing necessary for further innovation; and (4) unfettered competition pressures companies to take advantage of market opportunities and to utilize more efficient technologies.

The three recommendations the FCC made for government policy were: (1) government policy should be forward looking, recognizing that the Internet will continue to grow, and that government should not impose traditional limitations; (2) government should harness the potential of the Internet to help achieve public policy goals (for example, by meeting the demand for bandwidth instead of restraining it); and (3) government should promote one network instead of many networks.

Section II described the characteristics of the Internet.

Section III examined whether existing FCC regulatory and statutory requirements should apply to Internet services, recommending that the government exercise caution in imposing preexisting statutory and regulatory classifications on Internet-based services.

Section IV explored the economics of Internet use, concluding that the Internet puts great pressure on networks that carry Internet traffic, and concluding that the FCC needs to facilitate the building of high performance networks that are optimized for data transport.

Section V considered the extent to which users can take advantage of the Internet, reemphasizing the FCC's past goals of universal service in telecommunications, emphasizing that such goals need to be reassessed, and recognizing that schools, libraries and users who would otherwise be unable to access the Internet, should be able to benefit from the Global Information Infrastructure.

Section VI concluded that opening the communications sector to competition will be the "greatest contribution that government can make."