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In 1990, it would have been hard to imagine the commercial Internet. The Internet we know now began as a network of computers from research laboratories and college campuses. It had no market orientation: its software was free, and its function was more important than its appearances and user-friendliness. But somehow, from there, the Internet became the world’s commercial hub. The Internet boom turned out to be one of the greatest episodes of technological growth in U.S. history, and it changed the way that people live, work, and play.
More important, the Internet’s meteoric rise provides an extraordinary story of how a highly technical nonprofit experiment became a viable business enterprise. The unexpected transformation did not come out of a centralized effort to make the Internet commercial but, rather, through a series of innovations from the edges—from varied participants with differing ideas, needs, and desires for what it would become. By benefiting from multiple perspectives without the control of an overseeing entity, the Internet was able to flourish into an unrestrained network that could indeed be everything to everybody.
THE FIRST SERIES OF TUBES
What we now call the Internet began as a series of loosely connected engineering projects, some of which were funded by the military. Much of that was channeled through a project organized through the Defense Department and its Department of Advanced Research Projects Agency (DARPA), which focused on fostering pathbreaking inventions. The Internet was just one of the many projects that DARPA worked on. Building off prototypes for a network of networks, it pushed the boundaries of network computing in the 1970s and early 1980s. From this unusual origin, the Web expanded to cover more locations and more research laboratories.
In 1985, a piece of the project was spun off for use by the National Science Foundation (NSF). The NSF invested in the technology for a variety of reasons. Principal among them was a desire to stretch the network’s capabilities to aid in research and higher education. The NSF envisioned a large-scale network for researchers, professors, and students from a variety of disciplinary backgrounds. Much of the NSF’s investment aimed at making basic tasks easier, such as sending e-mail and transferring electronic files, and at making sure that both could be done reliably over long distances. The NSF also aimed to use the Internet to connect supercomputers together over vast expanses, thus boosting their capacity.
By 1990, the NSF had rationalized the processes and infrastructure of the nascent Internet. Its work made the Internet viable for use in every university, community college, and research institute. Around this time, the NSF’s administrators realized that government and university employees possessed no special or unique skills for operating the vast majority of the Internet’s processes. And so the NSF began to consider how to privatize the network, spinning it off to private industry.
THE COMMERCIAL TURN
When the NSF published its final plan to privatize the Internet in 1994, few could imagine what the network would become. Its users at the time were researchers, professors, and students, and the Web was a few years old; the NSF had never imagined the Web as a commercial space.
But as more people used it, more applications became clearer. Helping those new ideas become reality was the fact that there was little government oversight and guidance for what the Internet should look like. The Federal Communications Commission (FCC), for example, discouraged telephone monopolies from interfering with the growth of its data networks. Meanwhile, no specific sector was designated to help shape the commercial Internet’s growth. In fact, government policies—both antitrust actions and regulatory decisions—deliberately encouraged a lack of centralized decision-making, enabling multiple participants from multiple generations and backgrounds to have significant influence in the Internet’s development.
The regional networks that had supported the Internet in universities became the starting point for what would become the commercial long-distance data lines that traversed the country and connected cities. Students and faculty soon developed software and processes that later turned into electronic commerce and electronic mail. Students who got their first exposure to the Web and the Internet in school went on to found computer-related companies and start businesses. The Internet Engineering Task Force (IETF), the primary organization responsible for a set of technologies that supported the development of new functions for the Internet, remained open to suggestions from anyone with enough technical background to explain their ideas to their peers. The World Wide Web Consortium (W3C) was established to govern and promote standards across the Web, and it too remained open to the public. The IETF and the W3C built technologies that anyone could use and for any purpose, even if few firms knew what exactly they were to do with the newly privatized network.
In fact, many leading technology firmswere not prepared for the Internet. Few understood the value of the nascent network, and they failed to anticipate what their customers would use the Internet for. Communications firms, for the most part, focused their attention elsewhere—on emerging telephone technologies such as Integrated Services Digital Network (ISDN), for example—despite little demand for these new services.
Some organizations, however, were early adopters. They were often commercial outsiders—organizations that were unknown entities in the communications sector. Bulletin board systems (BBS), for example, provided an early look of what the Internet would become by the late 1990s. They provided custom software that allowed computers to connect to broader networks of files, news servers, and even video games. BBS were, in effect, a blueprint for Internet Service Providers (ISPs), which today offer inexpensive and accessible methods for connecting individual computers to a broader worldwide network. Before they morphed into ISP giants, though, the early networks made the most of their outsider status in the communications industry and were able to help orchestrate the next generation of the Internet’s development without much corporate interference.
Throughout 1995, the most pioneering ISPs had helped demonstrate the power of the Internet, and so some businesses started taking advantage of this new communications system—even if that meant gambling on exactly how and why the Internet would prove useful for their companies. And again, innovation from the edges came into as the organizations determined for themselves how best to use this new tool. Most were outsiders, but a few companies managed to blend industry giants and unknowns. Netscape, for example, brought together computer programmers from the University of Illinois at Urbana Champaign who had developed an Internet browser with a team of venture capitalists and entrepreneurs. This partnership helped create the first broadly used Internet browsers.
Netscape pointed the way to new commercial opportunity with browser-based commerce, and venture capitalists quickly began investing in the spate of new firms who rushed to fill the void. As if triggered by discovery of a new vein of commercial potential, Netscape’s success catalyzed an Internet gold rush.
AFTER THE GOLD RUSH
The Internet’s first gold rush began in 1997 and continued for several years. Before it fully petered out, it was replaced with another wave of investment from across the economy. Some corporations invested in back-office computing; others invested in operations-enhancing enterprise computing in financial transactions, retailing and wholesaling, logistics, and media. This wave of innovation brought commercial expertise into a sector that was ready to experience its first boom.
The commercial corner of the Internet now had a value chain behind it. A set of regular routine processes transported data from server to browser, or mailbox to mailbox, across many, many companies. The system still remained open to the addition of new servers and browsers and made the requisite technical information available to any participant and for any purpose. This openness permitted both incremental and radical change—including radical change that would otherwise have encountered roadblocks at private firms. For example, it enabled Netscape both to propose an approach to developing user-oriented software to support electronic commerce—through a browser—and to execute those plans without anyone’s permission, even though the ideas departed radically from the plans of the leading software firm at the time, Microsoft.
More important, these investments reflected a known pattern for the deployment of major technologies: technologies do not become valuable merely because they become available. They need to be adaptable, too, and so considerable Internet investment aimed at tailoring technology to a wide range of circumstances was necessary. That, again, came from firms at the edges of the industry, who perceived many of the opportunities for adaptation. Firms such as Amazon, Hotmail, and eBay began as entrepreneurs in this era. Although each firm’s behavior may have seemed risky, venture capitalists accepted the risks and funded many pioneers, so that they needed only a few to succeed to pay back the investments.
The initial successes by eBay, Amazon, Yahoo, and others made many established firms nervous about the Internet for the first time, as it became clear that their commercial leadership and profitability could be threatened by upstart organizations with new ideas. Some of the earliest responses came from firms such as L. L. Bean and UPS. L. L. Bean took its order-fulfillment process, built for a catalogue mail-order business, and adapted it for the Web. UPS sought to save operator expenses by building a self-service Web site for users to track their packages, and it ended up with a tracking system that has revolutionized shipping. Both firms’ experiences became a model for many others who would follow.
The drive to stake a claim in the Internet’s early successes led many firms to encourage a high tolerance for exploration and to embrace outsiders and marginal actors. Some business users hired intermediaries, while others built their own Web processes. Still others bought the software built by entrepreneurial firms. In fact, many entrepreneurs came from computing, where technological races were common and the notion of scaling rapidly was praised. The setup encouraged entrepreneurs to spend large sums up front to gain leading functionality and to acquire users, deferring many revenue-generating activities for later (sometimes recklessly).
By 2001, what was once the domain of academics and computer sciences had become a commercial enterprise with enormous reach—by the first year of the new millennium, close to half of all U.S. households were online. Just under ninety percent of large- and medium-sized business establishments were. A project that was shaped by outsiders, scientists, and open-minded entrepreneurs ushered in a revolution that touched upon every sector of the world economy. And in so doing, it set the stage for unprecedented collaboration.
And despite financial uncertainty during the early 2000s, the Internet continues to develop, renew, and expand due to innovations at its edges. Some of the newest ideas in digital technology come from partnerships between graduate students and investors such as Google. Public partnerships with private firms helped give birth to the wireless Internet, and innovation from edges played a role again, as wireless capabilities became available in many area of businesses and households.
Throughout each era of the Internet’s history, innovation from the edges boosted demand for new services, lowered barriers to offering those services, and permitted an extraordinary display of market-oriented and decentralized decision-making. Innovation from the edges was given room to blossom, resulting in an Internet of varying needs, offerings, and opportunities. The Internet became much more than what it would have been if crafted by a single industry or government agency. Instead, it was allowed to take on a life of its own, driven by a plurality of influences.
There was not an advanced plan for the Internet from a single governmental organization, or from a commercial firm that anticipated making money from building and operating the entire system. Participants in the creation of the Internet did so with a range of origins and interests—and it is for that reason that the Internet today is as vibrant and dynamic as anything the world has ever seen.