GT: "The Framework for Global Electronic Commerce" report surprised many people. One former critic of yours called it the clearest statement of global Internet freedom to date from any government source. Can you summarize what led you to conclude that the Internet should remain "a market-driven arena, not one that operates as a regulated industry?"

Magaziner: In general, markets are the most efficient allocators of capital, I think. It is only when markets can't function well, or there are market imperfections, that I think you need government to play a role in economic development. In the case of the Internet, or intranets in general, you have as close to an optimum market as I think we have seen. Consumers have almost infinite choices of venders and sellers to choose from. There is a very intensive and widespread competition, which will take place globally in most areas. So it lends itself to market-based solutions. And some of the reasons why we have traditionally regulated telecommunications or broadcast no longer exist with the Internet. In broadcast you had limited bandwidth, so you had to allocate that bandwidth. Therefore, we were essentially setting up an oligopoly, and so it was natural to regulate it.

With the Internet you have almost unlimited bandwidth. With telecommunications, there were natural monopolies set up because the infrastructure investment necessary, relative to the size of companies, was so great that they became natural monopolies. Again, that's not true of the Internet. You have significant size companies in telecommunications, computers, consumer electronics, software, publishing, broadcasting and so on all competing with each other globally. So it is a very significant competitive arena. Therefore, the reasons why you regulated telecommunications and broadcasting in the past don't hold for the Internet. For all those reasons, we think it is an environment which should function as a market-based environment.

One other aspect of this is that the technology and the market are moving very rapidly. Nobody really knows for sure where things are headed. On the other hand, government, by its nature, moves somewhat slowly and is somewhat inflexible when it does move. That may not be appropriate for the pace of the Internet and for the changeability of the Internet.

GT: As technologies converge -- telephone, broadcast, Internet, etc. -- the distinction between different sectors that were regulated and controlled in the past starts to blur. Questions arise: What is telephone? What is broadcast media? "The Framework for Global Electronic Commerce" report seems to signal a very different way of thinking about what the government's role should be in all these different sectors. Is there a fundamental shift here?

Magaziner: Well, I think there is the beginning of a fundamental shift. My personal opinion is that this shift ought to take place progressively over the next couple of years. I think that as convergence takes place, in telephony, broadcast and the Internet -- which it will -- I think that what we want to see is that they all become market-based industries rather than regulated industries. That is a fairly significant change from the past. But for the reasons I've mentioned -- the infinite bandwidth, the competitive nature of the market, the number of companies competing and so on -- I think it is appropriate that they all become market-based.

The difficulty we will have is in how you get from here to there, how you deregulate and make telecommunications and broadcasting market-based along with the Internet. There are a lot of complexities to that and there will be a lot of bumps in the road, I think, over the next couple of years in how you make that transition. You just can't decree it and say tomorrow it starts this way. That would be unfair to a lot of the companies. It would be unfair to a

Blake Harris  |  Editor