The Cloud is not a technology. It is a business model that creates consumer monopolies. This model employs a variation of the adage that it takes money to make money. Cloud startups raise venture capital which they spend to attract consumers with low prices and convenient delivery. Some startups spend too much, too soon, with too little effect. VCs stop subsidizing their losses, and they go belly up. But successful cloud startups win dominant markets by devouring the sales of pre-cloud competitors. These winners collect “monopoly rents” – the term VCs use. The Cloud’s business model is to take millions and turn them into billions.

Ironically, The Cloud’s consumer monopolies are built on the graves of two technological monopolies.

This is anti-competitive behavior, and we have every right to protest because The Cloud traces its existence to the taxpayer-funded research that developed the internet. That research began in the late 1960s and early ‘70s when U.S. leaders wanted a communications system that could survive a nuclear first strike and enable them to launch a counterattack. In the ‘90s, then-Senator Al Gore and President George H.W. Bush put this thankfully unused military network on a civilian track. With bipartisan support, they funded the academic computer scientists who built what became the backbone of the internet. Two public sector scientists made vital contributions. European computer scientist Tim Berners-Lee devised a system of www.whatever.com addresses – virtual locations where text, video, and other digital content could be pulled together in one place. U.S. computer scientist turned venture capitalist Marc Andreessen developed a browser to take users to these web addresses. It is by leveraging these taxpayer-funded technologies that The Cloud enables consumers to order products made in China and get them home-delivered the same day.

Ironically, The Cloud’s consumer monopolies are built on the graves of two technological monopolies. The first was the old-fashioned telephone system. It was a tangle of wires plugged into switchboards. Those switchboards connected the senders’ wire to the receivers’ phones and vice versa. These switchboards also served as the toll booths where the phone company could extract its monopoly rents. The internet never had switchboards or toll booths. The absence of centralized control points was the genius behind its survivability. Internet technology allowed information traffic to find its way around chokepoints or breaks in the network so that senders and receivers could always communicate.

The mainframe computer was the second monopoly that had to perish so The Cloud could form. In the mainframe era, a person or business needing data processing submitted a work order and waited for one of these relatively rare machines to perform the task. In the ’70s and ’80s, personal computer applications like spreadsheets and word processing began to reduce reliance on the mainframe. By the ’90s, desktop computers had evolved into powerful workstations because they could process more data when connected via electronic networks. In those open frontier days of the internet, software and hardware entrepreneurs were free to create thousands of network-based computer apps that enabled millions of businesses and professionals to make products and deliver services faster and more cheaply.

During this era of technological innovation, spurred by the death of monopolies, Congress passed the Telecommunications Act of 1996 to deregulate the information industry. Congress acted in the bipartisan belief that in the New Economy, technological competition would prevent the monopolies that had led to the antitrust laws of the Industrial Economy.

But today, we live in a Consumer Economy. Nearly 70% of the Gross Domestic Product involves buying or selling goods or services rather than making things. So even big, established brick-and-mortar firms find it tough to compete with The Cloud. Small, tech-savvy businesspeople know they can’t beat The Cloud, so many join it by renting “storefronts” from cloud companies that create virtual malls where consumers congregate. But in addition to paying monopoly rents, these subservient sellers must accept whatever terms and conditions The Cloud imposes to reach consumers on the public network. Contrast that with the pre-cloud internet. It had no terms and conditions, only technical protocols for how to plug in a new device or test a novel app. Innovation flourished because anyone could try a notion, quit if it flopped, improve it if it showed promise, and even make big money if the idea proved useful or popular.

Today we need another jolt of the freewheeling innovation that the internet was built to allow. Business license applications are soaring as millions of Americans either leave or lose traditional jobs and go it alone. Their ingenuity and sweat equity could and should transform eCommerce and eServices – once we reboot the internet and restore the open access built into its technology. I’m not alone in this belief. There are folks out there now developing open technologies and business practices. As a writer and small businessperson, I’d like to help these folks pool their efforts toward retooling our public network to help businesses grow from the ground up.

Thank you for your attention. Please share this where it makes sense, and/or use the contact box at the left to get in touch.