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THE LAST BYTE / TIMOTHY HAIGHT

The Risks Of Internet Competition

Why the best of times? Growth. Commercial success. Faster than we can think. This time last year, we were worrying about how to advertise on the Internet. Now the WorldWide Web is one huge infomercial, with more and more companies erecting their billboards daily.

Why the worst of times? Because now that people realize that there's money to be made on the Internet, competition threatens to mess it up.

Don't get me wrong. Competition does provide market tests of goods and services that, however imperfect, generally do better than what we produce in committees, which is really about the only alternative the human race seems to have come up with so far.

In the short run, however, competition can do nasty things, even if you have faith in its ultimate virtue. On the Internet, different security systems are emerging. WorldWide Web clients with one type of security won't be able to talk to Web servers with another type. Competition among access providers may result in arguments about how to pay for service settlements among them, which may result in sections of the Internet not being able to communicate with each other.

Competition can breed Balkanization. The same thing happened to the telephone at the turn of the century. In some cities, you had to have different receivers on your desk to reach different districts. That was settled in 1912, when the government gave AT&T its "natural" monopoly in exchange for a commitment to universal service and interconnection.

Certain Web browsers today use more simultaneous sessions on servers than others while providing quicker data access to users. But as a result, you may have more servers jammed with requests -- to the point where they stop accepting connections at all.

A similar thing happened to radio in the 1920s. So many stations went on the air and interfered with each other that the booming sales of radios experienced an absolute decline. That was settled in 1927, when the government began strictly licensing radio stations, mostly, as it turned out, to the benefit of the richest owners.

Today we're pretty tired of regulation, but the situations similar to what prompted it in the past still remain. So what happens?

The big winner may be Bill Gates. Microsoft will select the content providers and control the electronic environment of its new on-line service. Gates' electronic trains, therefore, will run on time. If the Internet gets fragmented or jammed, Mr. Bill will have an alternative with his proprietary Microsoft Network just a click away for most users, after they inevitably adopt Windows95.

If we want to maintain the free atmosphere of the Internet and the ability of information providers to run their own show on it, vendors competing on it may have to find ways to compete that don't threaten the underlying infrastructure with jamming or Balkanization. Users may have to choose vendors on that basis.

Today, we may have to exercise some committee -- like cooperation -- through the excellent institutions that have served the Internet well thus far -- to preserve the closest thing we've gotten yet to a free market in cyberspace. Otherwise, our short-run competitive instincts may leave us with a monopoly later.

Right now it is the best and the worst of times for the Internet. But it's up to us whether tomorrow is one or the other.

Timothy Haight can be reached at thaight@nwc.com.