The privatization of the Internet's backbone network.

Author:Shah, Rajiv C.

Histories of the Internet abound (Abbate, 1999; Hauben & Hauben, 1997; Kahn & Cerf, 1999; Mowery & Simcoe, 2002; Mueller, 2002; Naughton, 2000; Salus, 1995; Schiller, 1999), yet a comprehensive account of the privatization of the Internet's backbone network does not exist. When it comes to describing the transition of control from the government to the private sector, the descriptions suddenly shift to the passive voice. It becomes unclear who the actors were and what actions they took to privatize the backbone network. The lack of coverage from the mainstream press led Project Censored to place the privatization of the Internet backbone in their top 10 list for 1995 (Jensen, 1997).

This article provides a history of the privatization of the backbone network. This is valuable because the privatization has not been scrutinized by either academics or the press. The privatization is significant for communication scholars for several additional reasons. First, it represents the transfer of an important communication technology to the private sector. The U.S. government spent approximately $160 million in direct subsidies over an 8-year period to fund the backbone network. However, the government likely spent 10 times this amount in developing the Internet through other public funds from state governments, state-supported universities, and the national government (MacKie-Mason & Varian, 1994). Eventually, the government transitioned the backbone network to private control. Unlike other communication technologies, the privatization of the backbone left few regulatory requirements. As is later pointed out, this has implications for concentration in the backbone industry as well as the government's ability to regulate the Internet. Second, a historical understanding of the privatization provides key insights into contemporary issues, such as the performance of the Internet, competition in the backbone industry, and the governance of the Internet. Finally, this is not the only privatization involving the Internet. The government is now transitioning the Domain Name System (DNS) and the Internet Protocol (IP) address system, both key components of the Internet, to private control. Therefore, any lessons learned from the privatization of the backbone network may aid these other Internet privatizations.

The privatization of the backbone network involved reshaping the National Science Foundation Network (NSFNET) into what is known today as the Internet. The actual privatization consisted of a shift from contracting out a government-subsidized backbone to relying on the market for backbone services. The first part of this article discusses this privatization process. The second part focuses on several important implications of the privatization. Also discussed is how the government lost an opportunity to ensure that societal values were considered in the design of the Internet.

To gain a thorough insight into the privatization process, the authors attempted to gather all known relevant primary and secondary sources. This was accomplished by consulting all known histories of the Internet, Congressional hearings regarding the NSFNET, press accounts, and the landmark compilation of primary documents, known as the Information Infrastructure Sourcebook (Kahin, 1993). To corroborate these sources and to provide additional historical depth, the archives of the com-priv mailing group were reviewed. This mailing group was devoted to discussing the privatization process and included leaders from both the government and private sector. Finally, several interviews were conducted to clarify issues raised by the primary and secondary sources.

The Privatization Process

The critical step in the creation of the Internet was the development of the NSFNET. The National Science Foundation (NSF) created this network to link their five supercomputing centers to a wider research community (J. D. Rogers, 1998). By 1986, the NSFNET was operational. It connected to regional networks, which in turn connected to smaller local networks such as universities. The structure of the NSFNET in connecting to the regional networks and the local networks is shown in Figure 1. Eventually the NSFNET connected more than 200 colleges and universities as well as other federal networks, such as the Department of Energy's Energy Sciences Network and NASA's NASA Science Internet (Office of Technology Assessment, 1993). The connection of all these networks via the NSFNET was known as the Internet.


The NSF initially contracted out the management and the operation of the NSFNET backbone to the team of MERIT, a consortium of Michigan universities, in conjunction with IBM and MCI. MERIT was responsible for the management of the project, IBM provided networking equipment, and MCI provided transmission circuits for the network. At the time, the NSFNET was supported by funds from the NSF, state, university, federal, and private sector (Computer Networks and High Performance Computing, 1988, pp. 66-67). The remainder of this section describes how the NSF went from subsidizing the backbone network to relying on the market for backbone services. This privatization process is analyzed in three stages. The first concerns the overarching consensus by the government to privatize the NSFNET. The second stage focuses on how the NSF proceeded to privatize the NSFNET. The last stage focuses on the actual privatization plan and redesign of the NSFNET backbone.

Privatization Plan by the U.S. Government

The emphasis on private ownership of telecommunications has a long history in the United States. In 1840, Samuel Morse received funding from the government to demonstrate a radical new communication technology, the telegraph. The importance of this technology led to calls for nationalizing the telegraph. However, Congress did not opt for nationalization and instead permitted private control over telegraph networks (Brock, 1981).

Little has changed 150 years later. The United States continues to have a history of privately owned telecommunication networks (Schiller & Fregoso, 1991). By the late 1980s, both political parties based their telecommunications policy on notions of deregulation and competition (Olufs, 1999). Experts in computer networks shared this view, whether they were telecommunication executives or academics. Leonard Kleinrock, a prominent computer scientist, told Congress in 1988 that any government-run network would eventually be transitioned to the telecommunications industry (Computer Networks and High Performance Computing, 1988). Similarly, Senator AI Gore introduced a bill in 1989 that acknowledged eventual control and ownership of the network by commercial providers (National High Performance Computer Technology Act, 1989).

There were no alternative proposals for privatizing the Internet, such as nationalizing the Internet. According to Lewis Branscomb (1992), Director of the Science, Technology, and Public Policy Program at Harvard University's John F. Kennedy School of Government, individuals and groups associated with planning the NSFNET "take it as a given that commercially provided facilities will be used for the network" (p. 26). In fact, the acceptance of private control was evident in Senator Daniel Inouye's proposal for reserving part of the Internet as a noncommercial space. His proposed bill, the National Public Telecommunications Act of 1994, Senate Bill 2195, did not seek government ownership of the network. He merely wanted to set aside 20% of the network for noncommercial use. However, his proposal met with substantial criticism and never advanced.

General guidelines for privatizing the NSFNET were developed in 1989 by the Federal Coordinating Council on Science, Engineering and Technology (FCCSET; Office of Science and Technology Policy, 1989). The plan called for a three-stage development process for the network. The first stage, which was already underway, was to upgrade networks to T1 (1.5 Mbs/sec) speed. In the second stage, the backbone was to be upgraded, while also providing "a base from which commercial providers can offer compatible networking services nationally" (Office of Science and Technology Policy, 1989, p. 35). The third stage was not expected until the middle or late 1990s and also involved upgrading the backbone. More important, the third stage was to "include a specific, structured process resulting in transition of the network from a government operation to a commercial service" (Office of Science and Technology Policy, 1989, p. 35). The FCCSET plan did not provide details for the privatization process. It did state that the NSF would serve as the lead agency for managing and coordinating the government's backbone network.

NSF Is in Charge

The NSF was responsible for the NSFNET. Although it had contracted with MERIT and its partners to manage the network, the NSF was still responsible for determining how the network was to be used. One critical issue concerned commercial use of the publicly funded NSFNET. The NSF's initial position as stated in its Acceptable Use Policy (AUP) prohibited the use of the NSFNET for purposes not in support of research and education (Kahin, 1992). This policy was consistent with the NSF's mission; the NSF reasoned that taxpayers would not want a government-subsidized network used for commercial purposes. However, it did relent in a few circumstances. For example, Internet pioneer Vinton Cerf, working for MCI, pushed the government to allow MCI Mail to access federal networks. The government allowed MCI and other providers limited access for "experimental use." The rationale was that these linkages would enhance research and educational uses of the NSFNET by allowing researchers to communicate with more people (Kahin, 1990).

Another purpose behind the AUP was to encourage the growth of commercial backbone companies. After all, the AUP forced commercial customers seeking...

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