I agree with most of what Tom says here but I have to quibble with his final paragraph:
Oh, and one more thing: it’s probably worth noting that one of the greatest technical (and economic) triumphs in recent memory — TCP/IP and the suite of other protocols and standards that powers the internet — was designed by having a bunch of really smart engineers get together, execute an RFC process and then issue an ISO standard more or less by fiat. This is not to say that markets can’t help us arrive at good solutions — cable vs. DSL vs. FiOS is a good example of such a market working (or would be if the regulatory picture weren’t so complicated). But it ought to be acknowledged that markets are not always an optimal tool for making technical decisions. In fact there are now pseudo-centralized organizations that take responsibility for many of the technical standards that power our world, and nearly all engineers agree that we’re vastly better off for it.
The history of the Internet is something I’ve been researching lately, so this is a question I know something about. And I think Tom’s only telling part of the story.
It’s certainly true that the TCP/IP protocol suite was developed because some military researchers asked some really smart computer scientists to get together and write a new networking protocol. The spec was revised a few times (probably the most important being splitting things into a TCP layer and an IP layer) and then approved by the military, which proceeded to force every user of the ARPANET to switch to it in January 1983. So far, this is consistent with the “central planning” theory.
The problem is that in February 1983, the Internet had nothing like the ubiquity it enjoys today. I just returned all those books to the library so I can’t cite chapter and verse off the top of my head, but in the mid-1980s there were a ton of competing, proprietary network architectures around. A bunch of telecom companies had gotten together and created a standard called X.25 that was widely used for long-haul networking (including France’s Minitel. IBM, which then dominated the server business, had a proprietary networking architecture called SNA. Other hardware vendors had competing proprietary networking architectures. Novell was founded in 1983 and would soon dominate the business networking software. For consumers, going online meant logging on to CompuServe, and later Prodigy and AOL.
I think it would have been easy to envision, ex ante, a scenario in which any of these technologies could have grown to occupy the niche currently occupied by the Internet. Yes, the federal government heavily subsidized the Internet in its early days, but IBM and telecom companies had no shortage of funds to push SNA and X.25 respectively as alternatives. TCP/IP spread like wildfire because it was well-designed, and because its open architecture made it easier to deploy and more flexible than the alternatives. But the only place where TCP/IP was imposed “more or less by fiat” was on the ARPANET, which was a relatively insignificant network of a few hundred hosts. The rest of its growth was, if not exactly the result of market competition, certainly closer to market forces than central planning.
Had the government set out in the 1970s to create the networking architecture of the future, we would have ended up the same place France did. The reason TCP/IP turned out so well was precisely because no one realized it would be the future of world networking, and so its designers were free to take risks with relatively few political pressures. It was precisely because the choice of networking technologies was not “pseudo-centralized” in the late 1970s and early 1980s that TCP/IP had the opportunity to be developed and win a “pseudo-market” competition against networking standards that had much more formidable backers.