Wharton Chapter 5 - Public Policy and Lessons from the Internet

This chapter of the Wharton book discusses the role of government in emerging technologies and how they help/hinder this process. The chapter analyzes the events that occurred with the introduction and adoption of the internet and how the government handled these changes.

While the government has control to monitor, tax, and set policy to disrupt technologies, they also have the power to create technology infrastructure through institutional infrastructure and research infrastructure. The government can set standards and regulations on the technologies while also offering subsidies to help emerging technologies get started.

The government helped start the ARPA net in the late 1960’s for the Department of Defense. ARPA was stabilized and the NSFnet was born for the use of academic research. In 1990, ARPA was shutdown and moved to NSFnet. During this time, technology projects were nurtured and became a testbed for techhnology.

In the early 1990’s, the NSFnet changed due to three major developments:
· NSF net was no longer privatized and moved toward a for-profit model. NSF moved to pritized backbone and NSF no longer existed by 1995
· Protocols and standard for data to travel over the internet were invented and put into place by CERN. First web browser was built by NCSA for use on the WWW
· By the early 90’s, over 30% of US households owned a MAC or PC

Lessons from the Internet:
1. Government can play a powerful roles in shaping the development of a new technology in its earliest research stage (i.e. as seen in incubating this technology in ARPA and NFSnet)
2. Withdrawal of government support for a research effort is resisted by the beneficiaries as the effort gets closer to commercialization (subsidies disappear and universities, science labs, etc suffer)
3. Government can help manage the transition from public (educational institutions, research labs) to the private sector (commericialization) but everyone will complain. Government had trouble determining and regulating the information that should be available to the public sector (ie. hate or sexually explicit information).
4. Public concern about these new technologies on social mores and how the government should intervene to limit these impacts. These impacts including legal issues, intellectual property infringement, and national security must all be addressed by the government
5. Commercial and government interests will seek a government or legal response to disruptions caused by technology. These disruptions include cellular technology, broadband technology, and “hard” /”soft” networks. These entities want to know if these services are available to all, affordable to all, efficiently provided at a “reasonable quality”, and who is making all the money on these services (i.e. monopoly)
6. A new technology leads to demand universal service for all and the needs for governmental intervention. New regulations are set in place to provide a set quality of service on the technology (i.e. the cable companies outage example)
7. Dominant firms may treat customers poorly which leads to regulation. A monopoly can increase pricing structures on technology and lead to excess profits.
8. Regulation and Antitrust help prevent a single firm from gaining a “dominant market position” through a new technology. “Closed computing architecture” and vertical integration can all lead to an issue in public policy.
9. Technology leads to a firm’s dominance in a confined marketplace and there is need for political governance to prevent the firm from vertically integrating. The technologies can lead to a monopolistic approach in the market allowing a firm to push out the competition.
10. Regulations can have unintended side effects on emerging technology. Regulations can push competitors out of the market by creating unintentional barriers to entry.

These lessons when paired with the internet example truly show how an emerging technology can both grow and be stifled by governmental policy. Government policy can help emerging technologies become more widely accepted, integrated, and maintained through regulations and policies. These same policies can have a negative impact on the technologies as well (as see in Lesson 10).

The development of experimental pharmaceutical drugs may go through a similar process. The government gives subsidies to research institutions for developing drugs to cure the ailing people of the world. After the drugs become commercialized, regulation by the FDA is set in place to ensure the drugs are safe. The drugs are then allowed to be sold to other pharmaceutical companies as generics to prevent a monopoly in the marketplace.