New Internationalist

Privatizing Cyberspace

Issue 286

Privatizing cyberspace
The Internet started as a democratic free-for-all. But not for long. Nicholas Baran argues that
big business is quietly threatening to subvert the medium’s so-called democratic potential.

Electronic mail has become so hip it’s almost a fashion accessory. Ask any e-mail addict and you’ll get an earful on how it’s the biggest improvement to communications since the telephone. But hype aside, e-mail does have some real advantages. It eliminates the frustration of playing telephone tag and lets people easily share all sorts of information across vast distances. The Internet itself enables instantaneous access to databases and electronic publications around the globe and is a boon for students and researchers as well as ordinary curious and/or bored ‘surfers’.

Because the Internet has no central authority and is an amorphous collection of individual networks connected to each other, it is very difficult to impose censorship on it. Although this means that slick porno vendors and neo-Nazi hate groups share cyberspace with the Zapatistas, it also means that the free dissemination of information and ideas is virtually impossible to suppress.

So at first glance you might think that the Internet is one bastion of free speech and democracy that big business will never penetrate. Think again. There are now clear signs that the commercial development of the net and a take-over by corporate conglomerates is underway.

For example, few people know the Internet is now completely owned and operated by private enterprise. Until 1995 the US Government and universities provided much of the funding for the operation of the net’s ‘backbone’ lines – the major transcontinental telephone lines that carry Internet traffic. The Government paid a consortium of computer and telecommunication companies to operate the Internet.

Then the Government quietly pulled out and turned the operation over to a handful of communications giants and the long-distance phone companies. In the US they include major players like AT&T, MCI and Sprint. Internationally they include huge companies like British Telecom, Deutsche Telekom and Japan’s NTT. Regional telephone companies and cable television companies are also beginning to offer Internet service.

Because the ‘big boys’ like AT&T and MCI are just getting into the commercial Internet business, there is still room for ‘mom and pop’ service providers – small companies that lease lines from the phone companies and sell Internet access to consumers. These outfits typically offer unlimited Internet access for around $20 a month. As demand continues to grow and more capacity is required, the profit margins of these small companies will continue to decline. It is just a matter of time before the big phone companies squeeze the small players out by underpricing them. One small Internet service provider I talked to admitted that profit margins are already ‘very tight’.

The biggest obstacle to the survival of a ‘free and democratic’ Internet is that the telecom companies own the infrastructure on which the Internet operates. The Internet is already running out of room (complaints about busy signals and intolerably slow performance are common), and the telephone and cable companies are investing heavily to provide more capacity. This new capacity will appear in the form of fibre-optic cable which offers much higher transmission capacity than standard copper telephone cable that exists in most neighborhoods today.

The cost of wiring the US is estimated in the hundreds of billions of dollars. One way or another these companies intend to reap a return on their investment. It is clear that most consumers are unwilling to pay large monthly access fees (surveys indicate that $35 per month is about the maximum) and therefore the telecoms will turn to advertisers. Once advertising takes root on the Internet the democratic voices will be marginalized, much like progressive publications today are on the margins of the mainstream media.

Another technical advance which will boost commercialization of the Internet is the ‘electronic envelope,’ in which information can be ‘sealed’ until it is paid for by a credit card or some other electronic accounting system. A system called DigiBox is expected to hit the market soon. While digital envelopes may be a good thing for artists and writers whose works require copyright protection, it will turn the Internet into a commercial publishing and entertainment platform, dominated by companies with the most advertising muscle, much as the print publishing market is dominated today.

Like most new technologies the Internet is primarily used in industrialized countries. The biggest growth is in the US where the per capita ownership of personal computers (PCs) far exceeds that of any other country (about 20 million personal computers are sold annually there). And a personal computer is a prerequisite for gaining access to the Internet. In China PCs are priced close to $2000, about four times the average urban annual income of $480. But even in industrialized countries Internet access is a pricey proposition. Buying a PC, modem and software and paying a monthly access fee just isn’t an option for low-income families trying to make the monthly rent and put food on the table for their kids.

While full commercialization is probably inevitable, how the Internet will evolve is unclear. First of all few companies are actually making any money on the Internet yet. Most firms investing heavily in Internet-related projects are working with venture capital or have deep pockets like Microsoft and the big telecom companies.

Despite agressive marketing, consumer confidence remains a major problem. Transaction security is tenuous and most people still prefer reading the newspaper in an easy-chair rather than staring at a computer screen. But perhaps the biggest challenge and one that receives little attention is the enormous technical complexity of the Internet. And that will only increase as it grows. The big investors are taking huge risks in assessing what it will cost to compete successfully.

Take cable TV: the industry is investing heavily in converting its cable infrastructure to support Internet traffic. Coaxial TV cable now reaches 90 per cent of US homes (though only 60 per cent actually subscribe) and is now making inroads in Europe. Coaxial cable has far greater transmission capacity than the standard twisted-pair copper cable used by the phone system. You would think then that the cable industry is well-positioned to elbow its way in to the Internet.

But it’s not so easy. The cable industry faces daunting technical challenges. The present coaxial cable system is designed for one-way traffic – the consumer receives the TV signal but sends nothing back. The Internet requires two-way traffic – people sending e-mail back and forth, as well as other types of data. The conversion to two-way traffic is an enormous and complex project. Interference is a major problem as well as overloaded lines in heavily-trafficked neighborhoods. The cable industry may find a technical nightmare on its hands coupled with huge expenditures and potential losses. It’s a crapshoot and the outcome is far from certain.

Because the Internet’s future is unpredictable the transition to full commercial operation is going to take years. One possible outcome is that the Internet could evolve into a ‘two-tiered’ system in which high-speed access costs more and low-speed access is still available at an affordable price. It will be difficult, if not impossible, to restrict access to the Internet from a standard phone line and modem. However, more sophisticated services such as on-line movies or ‘virtual reality’ shopping malls may only be available to consumers paying high-access fees and having sophisticated equipment.

If this happens most text-based Internet data such as e-mail and ‘newsgroups’ would still be available through low-speed access – equivalent to today’s standard 28.8 modems. In this case affordable access would survive and gradually spread to low-income groups and to the Third World, but without the bells and whistles.

But the most likely way for a democratic Internet to survive is to keep adding users, particularly in Third World countries. Basic Internet access can be accomplished with older model personal computers and with inexpensive modems and software.

I am writing this article on an old Compaq bought in 1982 and worthless in the marketplace today. But it can connect to the Internet and I am sending the article electronically to my editor at the New Internationalist. Many old PCs end up in junk yards or collecting dust in warehouses. Many of them could still be used as Internet terminals.

The more people who get on-line, the harder it will be to get them off when the big boys figure out their pricing structure. There is hope yet for a robust and democratic international Internet.

Nicholas Baran is consulting editor for BYTE Magazine and author of Inside the Information Highway Revolution, Coriolis Group Books, 1995.   

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©Copyright: New Internationalist 1996


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