1. THE IMPACT OF FEDERALISM ON THE ICT MARKET OF TELECOMMUNCATIONS AND
PUBLIC INTERNET
ROSALIE N. MESSINA
St. John's University
Running head: THE IMPACT OF FEDERALISM ON THE ICT MARKET OF TELECOMMUNCATIONS AND PUBLIC
INTERNET

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What I found most striking about the Part 1 of Cowhey and Aaronson’s piece
was their description of the American political institution. Specifically, the impact of
federalism on ICT markets, and the impact that past presidential administrations
have had in shaping the marketplace of telecommunications and publicly available
Internet. The authors set forth the idea that there have been two past eras in which
ICT markets have transgressed. The first began post-World War II, and the second
began in 1984 after the breakup of the mobile provider AT&T, and lasted until the
new millennium in 2000.
Prior to the 1960s, telecommunications and broadcast required separate
networks. Major IT users were governments and large enterprise buyers. However,
the 1960s challenged this unilateral model, which gave little access to the public.
The result was modularity, a conceptual breakthrough that addressed the argument
between those who intended to make connecting equipment to networks possible,
versus those who wished to keep the network privatized, honing its integrity. A
result was the expansion of the market of programmers who could write computer
code independently of large computer companies. (Cowhey, 22) Public policy in the
United States helped drive this market revolution, which lead to an opening of new
networks, user demands and responses to pre-existing policies. In this way, the US
differed from most other large nations at the time, whose networks were dominated
by vertically integrated, government-owned firms.
The theory during the first era of the technology and market revolution of the
United States was that policy evolution could move quickly if economic interests and
political institutions are aligned. (Cowhey, 30) This meant that the government

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sought to distinguish which network services should be available for public use, so
that the benefits of ICTs could be consumed by the masses, not remain monopolized
by a few large enterprises. This would foster the creation of value-added
technologies and competitively provided services that wouldn’t undermine the
service of a general public network. While initially successful, this lead to the
second era, which was characterized by slow economic growth and high inflation in
the 1970s.
As a result, there was now a deregulation of public utilities. To combat this,
price caps were designed to foster pro-competitive interconnections that existed
between new entrants into the market, and also kept prices in check. This strategy
was first implemented during the Clinton administration, where
telecommunications policy was instituted to show a clear support of pro-
competition and pro-innovation in the technological world. The effect of this policy
was a push for technological and economic efficiency. In fact, George W. Bush
worried about the potential embarrassment of America’s lagging position on the
deployment of broadband, if such reforms to promote technological and service
innovation for ICT were not instituted. However, three policies emerged that
proved politically successful: 1) price adjustments of local services, 2) regulatory
forms to promote ICT innovation, and 3) a new sensitivity to employment efforts
that can be created by publicly available networks.
In all, Cowhey and Aaronson purport that market governance began with the
development of two ICT markets: a monopolized telecommunications market, and
the development of the computer and software industry. Ultimately, US political

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policies on public network availability shaped the success of ICT development and
its market economy.