Wharton Chapter 5 -

This chapter dealt with what role the government can play in existing and emerging technologies. Discussed was the evolution of the Internet and the role that government played along the way until it stepped out of it completely. Government can encourage emerging technologies, such as those with a strong military or national security application. It can also stifle technologies due to moral or potential legal dilemmas.

The government plays a big role in many emerging technologies either by way of directives (military), standard setting (TV standard), regulation (FDA), or subsidies where the government will not necessarily subsidize a technology as a whole, rather specific companies. The Korean government subsidizing DRAM production is one of the many factors that has pushed the worldwide price down and affected Micron and chip industry. These are seen as protectionist and/or interventionist.

Public concern about effect of technologies may spark an outcry for regulatory solutions. Pornography on the Internet is a great example. Families were worried about how easy it was for young children to find adult content and demanded government regulation which was eventually denied.

The most important of the 10 lessons to me was that regulations that have the intent to promote competition or objectives have unintended side effects or even the opposite effect (pg 122). These types of regulations can produce side effects such as increased prices, decreased production, or the slowing down of innovation. Companies lose incentive to be innovative if they aren't free to earn a return on their investments. This can hurt the industry and all consumers of those products.

Even the threat of an emerging technology industry becoming regulated by the government can be enough to stifle progress and innovation. Regulation of an emerging industry can take place before the industry has a chance to develop and mature and mandates could be in effect that require providing technology services to every household, such as is the case with power today. This could create monopoly franchises. The argument then becomes is the good or service essential to all Americans to provide equal opportunities. Many argue that the Internet meets that criteria and as a result could result in market protection for providers. The ability of regulators to properly assess the market and technology can be questionable.

Comparing Microsoft to a power or telecom company that controls the content and conduit was something I had never considered. I always thought the lawsuits against Microsoft for making Internet Explorer part of the operating system were silly, since everyone had the option to download Netscape or Opera at the time. However, understanding the concept of vertical integration now makes those complaints a little more legitimate, but apparently not to the DOJ who didn't prosecute.

I don't believe that Internet providers will ever be regulated due to the relatively low barrier to entry to the market given the wireless technologies available. An absence of wireless technology would likely draw regulations due to high infrastructure costs, but that is not the case. Companies like Clearwire are likely to attract other companies into the market who see a potential for profit. According to money.cnn.com on May 8, 2007,
(http://money.cnn.com/2007/03/08/technology/pluggedin_mehta_clearwire.fortune/index.htm)
Clearwire will be trying to compete head on with the likes of Qwest, Verizon, and cable companies who are trying to get customers to bundle services. More competition without the limitation of expensive physical infrastructure will produce a healthy competitive market.