Mutual Advantage

Virtual Consumer column from Ethical Consumer magazine Jul-Aug 2011

The founders of the Internet didn’t set about creating a giant network, rather they defined a standard that enabled already existing networks to be connected together. That’s why it’s called the Inter-net. The connections are made in places called Internet exchanges where networks exchange data through peering arrangements – I’ll take the data your users want to send my users if you’ll do the same in exchange. In many cases no money changes hands.

For peering to work, it’s vital that these Internet exchanges are operated in the interests of all the networks that use them without favour, and that everyone accepts the same set of rules. That’s why many of the world’s Internet exchanges are mutual, owned by the networks that use them. Rather than having votes in proportion to the number of shares like in ordinary investor-owned companies, the members each have one vote as in a cooperative. This makes it much harder for any one network, no matter how big, to take control.

A similar principle applies to the domain names – like - that make the Internet work. In the UK a company called Nominet looks after all the names that end with ‘.uk’, Nominet is a not-for-profit owned by the businesses and organisations that register names with it, mostly Internet service providers and hosting companies. The rationale again is that Nominet must act in the interests of all its members and no one company, no matter how many names they register or how big they are, should be able to dominate. Because of its monopoly position and the explosive growth of the Internet, Nominet has tended to accumulate large profits. Initially the response was to cut prices but more recently it has created a charitable trust, which funds research and education projects.

The Internet is a giant marketplace where ultra-free market principles often apply. Its rapid expansion has helped businesses like Google, Amazon and Facebook grow at an extraordinary pace and this has lead to intense speculation and the creation of investment bubbles like the dot com boom at the turn of the century (a phenomenon that may be about to repeat itself). The Internet revolution resembles the growth of capitalism during the industrial revolution 200 years ago. And yet at the core of the Internet a different model thrives, based on cooperation and mutual ownership. Politicians who seek to regulate and control the Internet would do well to understand this.