How the Internet Became Commercial: Innovation, Privatization, and the Birth of a New Network

by Shane Greenstein

In less than a decade, the Internet went from being a series of loosely connected networks used by universities and the military to the powerful commercial engine it is today. This book describes how many of the key innovations that made this possible came from entrepreneurs and iconoclasts who were outside the mainstream―and how the commercialization of the Internet was by no means a foregone conclusion at its outset.

Shane Greenstein traces the evolution of the Internet from government ownership to privatization to the commercial Internet we know today. This is a story of innovation from the edges. Greenstein shows how mainstream service providers that had traditionally been leaders in the old-market economy became threatened by innovations from industry outsiders who saw economic opportunities where others didn't―and how these mainstream firms had no choice but to innovate themselves. New models were tried: some succeeded, some failed. Commercial markets turned innovations into valuable products and services as the Internet evolved in those markets. New business processes had to be created from scratch as a network originally intended for research and military defense had to deal with network interconnectivity, the needs of commercial users, and a host of challenges with implementing innovative new services.

How the Internet Became Commercial demonstrates how, without any central authority, a unique and vibrant interplay between government and private industry transformed the Internet.

Genres: History, Technology, Business, Nonfiction

488 pages, Hardcover

First published October 27, 2015

Reviews

[Jeffrey Hart · Rating 5 out of 5]

This is a really good book. Shane Greenstein argues here that the commercialization of the Internet was a success because many factors combined to assure that there would be “innovation at the edges.”

The first part of the book focuses on the transition from the Internet as primarily a tool for the Department of Defense and its contractors and for scientists and engineers in academia to a fully privatized cyberspace for everyone to use. He correctly observes that most histories of the Internet have focused primarily on the creation of the Internet and not on its commercialization. So the first task of the book is to describe in detail how the transition was made. The National Science Foundation (NSF) was in charge of setting the rules for privatization. Tim Berners-Lee and Robert Caillau at the European Center for Nuclear Research (CERN) pioneered the World Wide Web by creating hypertext markup language (HTML). Two Internet-specific governance institutions were created to ensure that technical excellence would be the main criterion for improvements in the Internet and the Web: the Internet Engineering Task Force and the World Wide Web Consortium. The US government set up a system to ensure that domain names would be issued in a fair and rational manner (more or less).

The rapid migration to the Internet by businesses was facilitated by a number of policy decisions, technological innovations, and a general mood of experimentation. Key policy decisions included the breaking up of the telephone monopoly of AT&T, the FCC’s Computer Decision II, and the federal antitrust actions against IBM (pre-Internet) and Microsoft (post-Internet). Key technological innovations included the creation of the TCP/IP protocols, HTML, LAN and WIFI technologies, and advanced search engines.

Most of the important innovations occurred at small companies, some of which became large subsequently. Large corporations could have blocked some of the factors behind the Internet’s success but generally decided that doing so was against their interests. IBM developed “middle ware” to help their business clients migrate to the Internet. Microsoft developed a browser (Internet Explorer) and web-friendly interfaces and applications to defeat what Bill Gates considered to be the biggest threat to their core business – Netscape. Intel decided to integrate WiFi capability into their chipsets for laptop computers. Large corporations participated in forums to create standards without dominating them (with a few notable exceptions).

Google took advantage of a superior search engine to become a leading Internet advertiser. Greenstein uses the example of Google to show how government policy (in this case, the funding by NSF of research at Stanford) played an important role in the commercialization of the Internet.
There is an excellent chapter on the origins and consequences of the dot.com boom and bust. I was pleased to read a detailed description of the browser war between Microsoft and Netscape (building on the earlier work of David Yoffie and Michael Cusumano). Also, Greenstein includes a brief discussion of the importance of bulletin board services (BBS) companies in the privatization of the Internet. Although most of them did not survive, some became Internet service providers (ISPs).

The book is notable for the absence of discussion about a number of topics. There is no mention of the dominance of cable and telecommunications firms in providing access to broadband networks. There is virtually nothing here about the recent controversies over net neutrality, pornography, malware, gambling, and taxation. Greenstein is intent on explaining the success of commercialization (a worthy enterprise), not on examining the consequences of that success. Luckily there are many works that tackle these important subjects, and in any case it was clearly not the author’s intention to cover everything.

In conclusion, this is a fine book on an important set of issues that have been dealt with in only a spotty manner in earlier works. The scholarship is impeccable. The bibliography is suitably long and thorough. References to interviews and conversations with key players can be found in the footnotes. The book would be suitable for use in college courses for advanced undergraduates and graduate students together with books like Janet Abbate’s Inventing the Internet.

[Jerrod · Rating 4 out of 5]

This is a great tale about the development of the internet with a focus on the 1980s and 90s. Greenstein has this idea of innovation from the edges in which non-dominant players in the market are the ones who innovate and eventually become the dominant players. This is somewhat over-applied in the book and a bit too much of a rip-off of Christensen's ideas from the Innovator's Dilemma, but it is useful at times. The main thread throughout the book is how government can encourage innovation. To hear it talked about in some circles, the eventual instantiation of the internet was akin to the Manhattan Project. This book is very much an antidote to that version of history. Greenstein does not provide the opposite fiction that the market did it all. Instead, he shows how a subtle actions (changing spectrum regulation from a focus on uses to a focus on signal interference) and the somewhat hands-off approach by regulators and administrators (i.e. allowing the internet to be used for non-academic purposes) led to the system that we have today (it's kind of an anti-Mariana Mazzucato Entrepreneurial State/Value of Everything). For my money, I would put most of the weight on why the internet took off like it did on the vigor of antitrust in specific areas, especially in the regulation of phone companies. Bulletin board services were able to become ISPs because of how phone companies were required to price the usage of their lines. Open-source culture definitely created at least some semblance of a meritocracy instead of being dominated by the whims of one or two companies.

One must remember that there was no one agency making all these things happen. The commercial internet arose out of the interaction between standards setting committees (I'm honestly surprised (and heartened) that standards setting committees (which consisted of engineers from many different companies) were not the basis of an overzealous antitrust lawsuit), decisions at the DOJ about how to regulate phone companies, how universities licensed their technology, and much more. There is no way the internet would have come about if it had been under the direction of one agency.

As a cautionary tale of government regulation and reform, see the regulation of short distance communication using frequency. The rules were Byzantine, with uses rather than rules for interference being the basis for regulation. A minor bureaucrat in the mid-1980s was able to push through rule changes that freed up spectrum that had been almost solely relegated to garage door openers and led to the ubiquitous use of Bluetooth and Wi-Fi technology. That government employee who pushed for deregulation ended up being quite ill-treated and pushed out of his position.

[Laura Carpenter · Rating 3 out of 5]

This is a pretty dry subject but the book is well written. I was particularly interested in seeing whether this book had applicable lessons for Blockchain technology development today, and it does. This book describes how "low frictions, decentralization and a diversity of views allowed for an especially potent impact from more entry and competition, enhanced as it was by innovation from the edges". (As a side note - I took the author's class on Technology and Operations Management at Harvard Business School)

[Abbas Saleem Khan · Rating 5 out of 5]

This is one of the most underrated books out there. I would recomend pairing this with 'The Fourth Industrial Revolution' by Klaus Schwab and 'The Art of Immersion' by Frank Rose as the thought foundation for the next 20-30 years.

[Liam · Rating 4 out of 5]

"[I]nnovation from the edges describes innovation being commercialized by suppliers who lacked power in the old market structure, who central firms regarded as peripheral participants in the supply of services, and who perceived economic opportunities outside of the prevailing view. This definition embeds three related interpretations -- stressing place, power, or perceptions." (11)

"The name Apache was a play on words: the first February 1995 effort involved bringing together a piece of software that involved many software 'patches,' a colloquialism for additional code to repair problems. That led insiders to refer to their won project as 'a patchy' piece of software." (120)

"IBM's experience illustrates the most important factor shaping business investment in the commercial Internet in the late 1990s -- the economics of business process innovations." (282)

"Many observers came to label this behavior a 'three-version strategy.' In the first version Microsoft experimented with features and learned about market demand. In the second, they responded to feedback by improving its features. In the third, they put all the lessons together, often to produce a hit product." (313)

[Meepspeeps · Rating 4 out of 5]

This book read like a textbook to me, but in a good dense way. I recommend every business student read it for its well-crafted detail about the history and economics of possibly THE greatest technological invention in USA history. I felt the drama and enlightenment of key moments, such as the early agreement on protocols so researchers could collaborate; Berners-Lee deciding to make components of the World Wide Web (www.) shareware, Gates believing there was no market for browsers, Jobs insisting that suppliers hit a certain low price point before selling in-home wireless routers, and even government policy such as the NSF grants that allowed broad exploration and experimentation to promote the creation of Google. If peeps don't have time to read the whole thing, the Epilogue is a perfect summary.

[Jack Laschenski · Rating 4 out of 5]

A grueling in depth study of the history of the creation of the internet.

From DARPA to the NSF to millions of websites is quite a journey.

Good government policy and innovation at the edge!

[Mills College Library]

384.3 G8156 2015