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Back in the late 1990s, New Economy evangelists trumpeted the dawning of an era in which technologically backward governments and other authorities would yield to the unstoppable power of technology. There was always something ironic about this claim. For the Internet, along with the semiconductor industry that made personal computing possible, was incubated and nurtured by the federal government. And Internet service providers and software companies routinely lobbied government agencies in an effort to improve their competitive position. In this regard, the New Economy wasn't exactly new, according to Debora Spar, a political scientist by training who teaches at the Harvard Business School. The creation of vital new technologies and the riches they spawn has always been something of a public-private joint venture. "Business," she writes in her intriguing and well-crafted new book, Ruling the Waves, "is inherently political and politics is -- and has always been -- marked by the interests of commerce." Spar backs up this claim by shrewdly identifying four stages in the recurring cycle of new technologies and then describing how this public-private dynamic played out in arenas such as the telegraph, radio and digital music.

First comes innovation, "marked by laborious exploration and the sudden thrill of discovery, a relatively commercial free zone where most of the excitement is from fellow enthusiasts." (Think the Internet circa 1989.) But once a technology leaves the lab and bursts into the public eye, "a whole new cast of characters moves onto the frontier." In this second phase, commercialization, pioneers are followed closely by "pirates" -- copycats, quick-buck artists, borderline outlaws. (Think the Internet circa 1999.) In phase three, creative anarchy, disputes over property rights, the lack of coordination or standards and ruinous competition extract a cruel toll. These factors help usher in the final phase: the rules. Coalitions of consumers, competitors or government officials press for government regulations, industry protocols, laws or treaties that impose order. "New markets need new rules," Spar writes, "if they are to flourish, and their creation is a distinctly political art."

Such insights could easily result in a dreary tome on the historic role of the Federal Communications Commission. But Spar smartly tries to "yank the Internet out of the spotlight of the twenty-first century and back to its older and dimmer roots." Possessed of a great facility for describing the origins, development and effects of complicated technologies, she offers appealing, accessible portraits of pioneers such as Samuel F.B. Morse and "pirates" such as Rupert Murdoch and Napster founder Shawn Fanning.

Spar starts with a relatively ancient technological cycle. Portugal's Prince Henry the Navigator made possible the innovations that led to the exploration of the Atlantic in the 15th century. Such well-connected pioneers as Columbus and Magellan opened up trade routes with heavy government involvement. But colonization and the commercialization of the high seas proved a boon to pirates, who pillaged at will, frequently with the approval of their sovereigns. As with modern-day cyberspace, there existed in the 16th-century Atlantic Ocean "a gap between geography and law." Once the emerging global trade in goods and humans grew too valuable to leave to the pirates, the great European powers finally imposed rules. They built navies and began to discourage pirates. In 1856, seven European nations signed the Declaration of Paris, which banned privateering.

In discussing the similar cycle that encompassed the development of the original information superhighway -- the telegraph -- Spar shrewdly teases out the different paces and modes of development in the United States and Europe. In 1838, when telegraphy innovator Morse showed his invention to Congress, he was laughed out of town. Undeterred, he and other pioneers built the networks that delivered "lightning." Pirates -- upstart competitors armed with competing patents -- were quick on the pioneers' heels. But the telegraph systems they constructed weren't compatible with one another. Throughout the early decades of telegraph anarchy, however, the U.S. government limited its involvement to the enforcement of patents. The rules period in the U.S. finally grew out of the need of investor-controlled entities to guarantee their futures. In the 1857 Treaty of Six Nations, the leading American companies banded together to renounce competition in favor of cooperation.

In Europe, the experience could not have been more different. The governments of France and Russia quickly took control of the telegraph in the 1840s and 1850s. Great Britain explicitly aided the endeavors of Scottish cotton merchant (and member of Parliament) John Pender to construct the Eastern Telegraph Company, which stretched to India, Africa and Australia. And as early as the 1860s, European governments ironed out international agreements dictating protocols and standards.

As frequently happens with such high-concept, history-based books, the stories become more complicated as they approach the present. Spar's acronym-filled treatment of Rupert Murdoch's efforts to bring satellite television to Great Britain in the 1980s reads like a business-school case study. And when she focuses on the Internet in the final three chapters, her carefully constructed model breaks down. While the obligatory chapter on Microsoft covers familiar terrain, for example, it is difficult to conclude whether Bill Gates is an innovator, an order-seeking pioneer or a chaos-inducing pirate, capitalizing on the brilliance of other innovators -- or all three. Nonetheless, Spar's solid research and confident prose convincingly prove her broader contentions about the symbiotic relationships between business and government. And her descriptions of the differences between European and American approaches to technological development are truly illuminating.

The rise of the New Economy, with its profitless companies, grand claims and stratospheric valuations, was a period in which longstanding commercial and investing rules were broken with abandon. Now, as the House of Representatives holds hearings on Napster, and state governors and established retailers clamor for Internet taxation, it is clear that we are embarking upon a new, contentious and, ultimately, necessary era of rule making.