A Short History Of The Internet

I am not by any measure old unless you ask my nieces, but I remember when we had no internet and my niece's minds boggle at that, they think I must be ancient. How could you survive without the internet they asked me, in their minds the concept of no internet is pretty much science fiction and the thought of not having internet access scares them.

I was hooked on computers ever since the Oregan Trail was first released, back then you had to manually code all of your applications in BASIC if you actually wanted your computer to be useful or even do boring things like bleep at you. The only alternative to typing hundreds of lines of code was to load up a cassette tape which was prerecorded with a series of beeps, whistles and when played back, telling your computer what to do.

You see those beepy pre-recorded sounds were EXACTLY what the internet sounded like the first time I heard it. No that wasn't a typo, I heard the internet before I ever actually saw it, so much so that I still believe that my cable internet is fake internet on the basis that its eerily silent all of the time. No, I don't hear the internet because I am some sort of internet whisperer, we ALL heard the internet before we ever actually used it back then, its how we knew the internet was coming, it's arrival heralded by a series of high pitched screeches and digital burbles that came to you from down the phone line.

In the old days, we didn't really have internet service providers (ISP's), we just called each other up over the phone and had our computers burble and screech at each other, this was called a handshake and as crazy as it sounds, it was how you connected your computer to 'the internet' back then. The problem was that you needed to be technically minded (know UNIX) to know how to do that in an age when techies were not really a thing yet and so for a while at first, geeks were the only people on the internet. Geeks, spooks, the military and universities were the only people on the early internet.

The early internet was very crude, it was mostly individual machines talking to each other over the phone lines at first, the phone companies did not even know this kind of early internet traffic was passing over their telephone networks at first, although they caught on pretty fast. Before ISP's you had to have an account at a university or government agency to connect to the internet, but the internet began accepting commercial traffic in the early 1990s and there was an agreement with commercial internet users that they had to honour the peering protocol of swapping data free of charge. This meant that if they wanted their traffic to pass over other organizations 'bits of the internet', they had to accept other peoples traffic over their own bit of the internet, the basis of modern net neutrality.

In 1994 the National Science Foundation took the internet into its own hands and commissioned four private companies to build public access points, strategically positioned in San Francisco, Washington DC, Chicago and New Jersey came under the direct control of WorldCom, Pacific Bell, Sprint and Ameritech who became the first ISP's.

As internet traffic increased over time, those public access points became congested with traffic and the major telco's around at the time began building out their own internet backbone, composed of faster private access points. Initially, the larger and more dominant backbone providers honoured the peering protocol and worked out peering agreements with smaller ISP's, meaning they would all exchange each others internet traffic for free. This changed when in 1997 UUNET, Sprint and AT&T broke the peering agreement and started charging smaller ISPs to gain access to their networks, the beginning of the very first net neutrality battles.

In those early days of the ISP industry, there were hundreds of commercial internet service providers in the United States and according to PC Magazine at the time, the average monthly connection fee for each account was roughly $17.50, with an additional charge of $3-4 an hour for the time that you were connected. Even back then this was quite expensive and connecting to the internet for long periods of time could quickly run up your phone bill.

There wasn't much fun to be had on the internet back then, it was mostly still just geeks, business people, universities and the government using it. For a lot of people, it still didn't make any sense to use the internet, especially as you still had to connect using a command line, or a proprietary graphical user interface. The internet browser along with HTML to build web pages had not quite been invented yet and IBM/Microsoft was still in the process of building internet technology into their operating systems and hardware.

An Early History of the ISP Industry

Things rapidly progressed of course, and throughout 1995 the ISP market in the US heated up and quickly became very competitive. At that time the dominant ISP's were Netcom and UUNET, each with annual revenues of around $40-50 million to give you an idea of the market size back then. While Netcom was busy pioneering the worlds first flat-rate internet pricing for the US consumer market, Netcom was busy signing up business and corporate customers. It wasn't just these two who were beavering away building the early internet, you also had large interexchange carriers (telco providers) like AT&T and MCI as well as thousands of much smaller regional ISP's.

The early ISP market was very fragmented, it contained lots of different kinds of companies all innovating and developing the early internet in different ways to serve the different requirements of its users. Business and consumer internet users wanted two completely different things back then, consumers wanted low-cost access above all else, they were sick of paying a small fortune every month to use the internet, but businesses were much more focused on reliability and speed.

Boom & Bust

The number of internet service providers increased from about 1400 in early 1996, to around 3000 ISP's in 1997, a literal explosion of competition in the market and by 1998 there were an estimated 4500 ISP's in North America. A lot of them were small mom and pop operations that served consumers and business in local markets, these guys survived back then by reselling the internet services of much larger ISP's.

As the market began to consolidate towards the end of the '90s, these small operators began merging with telephone companies in order to stay in business and provide their customers with a single source for internet and phone connections. Then you had much bigger ISP's who grew through acquisition, one of the biggest was Earthlink with around 320,000 customers and they rapidly grew by buying other smaller ISP's and merging them into what they called the Earthlink Network, which allowed the smaller ISP's keep their brands and identities in their own markets, but meant that Earthlink handled all the billing. paying the ISP's for new customers and providing things like startup CD's and marketing materials. Earthlink was really one large ISP, but it looked like a thousand smaller ones back then, with many going bust in a fiercely competitive climate.

Industry Consolidation

As with any rapidly emerging industry, the multiple players and the fragmented market gradually began to consolidate. The telephone companies and the internet backbone providers all began to merge and be acquired, with long-distance telephone carrier Worldcom buying UUNET parent company MFS for $12 billion, creating the second-largest internet backbone in the USA. Then the largest regional telephone provider in the US, GTE Corp (aka General Telephone & Electric Corporation) bought internet backbone provider BBN Corp for $616 million, a phenomenal sum of money in the late 90's that was only dwarfed by the Worldcom acquisition of UUNET.

E-Commerce Makes An Appearance

By the end of the '90s, the e-commerce industry was rapidly growing and businesses were interested in working with ISPs who could provide the audience and reach. The old peering protocol came back into fashion as ISP's made peering arrangements with their competitors so that they could carry each other's traffic and widen their respective internet backbone networks as customers became much more focused on things like network access, reliability, performance and capacity.

The Raging Noughties

By the year 2000, the ISP market looked very different from just five years before, with Earthlink, PSInet, Mindspring and UUNET the top four national internet service providers for businesses. In the consumer market, a whole different set of ISPs were vying for dominance with Excite@Home, The Microsoft Network, Prodigy Communications and America Online (AOL) ranking in as the top four consumer ISP's. Back then AOL was the largest player with around 20 million subscribers (thanks to their blitzing the entire country with startup CDs for a good decade), closely followed in second place by Earthlink with 4.7 million subscribers, with Microsoft and Prodigy in third and fourth place with 5 million and three million subscribers respectively. In early 2000 and for the first time anywhere on the planet, millions of internet users were regularly going online.

The ISP Wars

As the noughties got into full swing, the ISP Wars began with fierce competition between large and small ISP's who were, in turn, being turned over by the internet backbone providers, the people who actually owned the infrastructure upon which the internet ran. Although nobody really owned the internet, the infrastructure that ran the internet was owned by a small group of very large corporations and control of the internet infrastructure gave them the power to tax smaller ISPs for access to networks and to charge them for operating the network access points where the ISP's traded traffic (packets) with each other. The bigger ISP's like AOL were able to negotiate better deals than smaller players and the result was less competition in the market, with higher barriers to entry and many more consolidations, mergers and bankruptcies.

The end result of the ISP wars in the noughties was less choice for consumers and business internet users, but even though the ISP market back then was dominated by larger players, consumers and businesses could still choose from an estimated 7000 ISP's in 2002. There was still at this point plenty of market share to go around with consumers favouring smaller regional ISPs who were offering value-added services like web design and e-commerce services in order to compete with larger ISPs who could guarantee wide reach and faster, more reliable internet access.

Present Day

Today we would struggle to imagine a time when, depending on your region, you could choose from any one of potentially hundreds of ISP's. In 2020 the consumer broadband market is an effective duopoly in some parts of the country, controlled by the two of largest ISP's that own their own internet backbone, Comcast and AT&T. Consumer internet speeds are ridiculously low in some parts of the country because of this, despite their users paying some of the highest internet access fees in the country.

AT&T's merger with Time Warner in 2016 only consolidated the already massive hold they had on the US internet market and was one of a string of deals that further placed control of the internet into fewer corporate hands. In 2015 Comcast had to abandon its $45 billion dollar bid for Time Warner after the FCC opposed the merger on the basis that it would create an ISP with 'too much control' over what Americans do and watch online.

In 2016 the FCC also approved the merger of Charter Communications with Time Warner to create the second-largest broadband provider in the US with SEVENTY PERCENT control of the high-speed internet market and just a short time later the FCC green-lighted the AT&T and Time Warner merger for a whopping $85 billion dollars. Finally, let's not forget about Verizon buying AOL for $4 billion dollars, Verizon buying Vodafone's chunk of Verizon Wireless for a whopping $130 billion to create the largest wireless internet provider in the US.

What Does This Mean For You?

In a nutshell, it means higher prices and fewer choices for end-users, as businesses and consumers struggle to negotiate better rates with ISP's who control huge swathes of the US internet market. This meant depending on where you are based in California alone, your internet bills could vary by as much as 50%, with two-thirds of Los Angeles residents living in areas served by sometimes just one internet service provider. Weak competition yields high prices and places little pressure on ISPs to upgrade networks in order to offer faster internet and better service. In LA County, for example, fibre-based services (faster internet than DSL or cable) are available in less than a quarter of the census blocks, but in other countries, like France, internet users have a choice of at least six providers with coverage approaching 100% for fast fiber optic internet connections.

If you are a business or consumer internet user trapped in one of these no competition areas, you are out of luck and are just expected to deal with it, at least until Google Fiber decides it wants to move to your city, which it probably isn't just yet. You are literally being held to ransom and forced to pay higher bills for lower quality internet service.