The Legacy of the Federal Communications Commission’s Computer Inquiries

I. INTRODUCTION II. COMPUTER I (1966) A. The Setting 1. A Better Mouse Trap 2. Western Union 3. Big Iron and New Networks B. The Issue C. The Policy 1. Classification 2. Regulation 3. Safeguard: Maximum Separation D. Legacy of Computer I III. COMPUTER II (1976) A. The Setting B. The Issue C. The Resolution 1. Basic versus Enhanced Service Dichotomy a. Basic Services b. Enhanced Services c. Adjunct Services d. Protocol Processing e. The Telecommunications Act of 1996 and "Information Services" 2. Safeguards a. Maximum Separation to Structural Separation b. Unbundling D. Layers E. Legacy of Computer II IV. COMPUTER III (1985) A. The Setting B. The Issue C. The Resolution 1. Comparatively Efficient Interconnection 2. Open Network Architecture 3. Litigation 4. Enforcement D. Legacy of Computer III V. CONCLUSION I. INTRODUCTION In the 1960s, the Federal Communications Commission ("FCC" or "Commission") awoke to the reality of powerful computers running communications networks, and communications networks over which humans interacted with really powerful computers. Computer services were a disruptive technology. They were substitute services for traditional incumbent communication services. They were highly competitive, highly innovative, and had low barriers to entry. They showed every promise of playing a vital role in the United States economy. In addition, these computer network services were dependent upon the underlying communications network. Thus, the unregulated computer services were simultaneously substitute services for the traditional regulated communications networks and also dependent upon them. Meanwhile, the communication network services were using gigantic mainframe computers ("big iron") to run their networks. During network peaks, mainframe computers were preoccupied with operating the networks. During off-peaks, these computers had excess capacity. The telephone companies knew a good thing when they saw it and wanted to get into the computer services market, taking advantage, in part, of their inexpensive excess off-peak mainframe capacity. Thus, the telephone companies became simultaneously the supplier of the crucial transmission capacity and a competitor in the computer services market. The FCC has struggled with the regulatory treatment of computer networks over communications networks ever since. In 1986, the Commission stated: The regulatory issues spawned by the technical confluence of regulated communications services and unregulated [computer networks] have been among the most important matters this Commission has dealt with over the past 20 years. Indeed, during this period, we have addressed these issues, in one proceeding or another, on a virtually continuous basis, as we have sought to revise and refine our regulatory approach in light of rapidly changing technological and marketplace developments. (1) The history of the FCC and the computer networks, particularly the Internet, is now thirty-five years old. To say that the FCC does not regulate the Internet is to miss the lessons of this history. While it is true that computer networks are unregulated, computer networks were very much a part of the Commission's policy. They were the intended direct beneficiaries of the Computer Inquiries. Safeguards were imposed on common carriers for the benefit of computer networks. In addition, this is not a history of technologically biased regulation, segregating one computer from another based on the technology employed. Rather, this is a market policy, segregating competitive markets from noncompetitive markets. Finally, the conceptual framework follows a Layered Model of Regulation. …