This week Marketplace Tech is exploring South by Southwest Interactive, the tech-oriented event that draws tens of thousands of people to Austin, Texas. That audience comes to talk about what’s next in tech and to pitch their ideas.

Steve Case is no exception. The billionaire and AOL CEO turned venture capitalist is here to advocate for tech hubs outside of Silicon Valley. We sat down with him to talk about the past, present and future of the Internet.

Twenty years ago, AOL had just hit 1 million subscribers. That feels like centuries ago, not decades ago.

It was a long time ago. I agree with that. And we had actually been at it for more than a decade at that point. We started AOL 30 years ago this year. At the time only 3 percent of people were online, and they were only online an hour a week. It’s also worth remembering it wasn’t until 1982 that it was even legal for people to connect to the Internet. The first wave of the Internet in the 70s and 80s was restricted to government use and university use, so scientists and educators and bureaucrats could use it, but real people couldn’t.

What’s shocked you about the way the online world has changed since you first got in the game?

Well actually, what shocked me the first time was it actually took longer than I thought for the idea to take hold. PC manufacturers didn’t want to build in communications modems, because they thought, “Most people don’t want this, so why would we add that?”

Every start up needs a true believer

Every concept needs a tribe of true believers.

Speaking of which, talk to me about Washington

Well Washington, actually, is emerging very quickly as a hot start-up center. It was not true 30 years ago when we started AOL in Virginia, across the river from D.C., and now you see the debates around net neutrality and other things, and the government role is heating up again. I think key parts of our economy are going to require more interaction with the government as a regulator and a customer. The government spends more money on learning and health than any other organization. It’s going to require a different kind of entrepreneur.

You mention net neutrality. How do you feel about that issue? Where do you come down on it?

I think it’s important. AOL could not have been possible without breaking up the phone company. The key ruling there said that companies like AOL could connect to the telecom system. Up until then, they couldn’t.

Is Facebook the next AOL?

In some ways it is, because our core was always people. Facebook has taken that baton and developed a strategy with a broad global footprint that’s really been quite impressive.

It seems like they’re trying to build a place where you go to do everything. In the early days it seems like AOL was similar. You were going into a space that was controlled by one company, even if there was plenty of community within that space.

That’s partially true. Our strategy was really to be the Internet and a whole lot more.

Were most of your users getting outside of it?

In the early years the vast majority of the use was custom services that were exclusive to AOL. Over time the broader Internet services got more traction. But even when I stopped running the company 15 years ago, the majority of the services used were the services that were part of the AOL package of unique services.

Tell me about the third wave of the Internet.

The first wave was 1985 to 2000. That was really building the Internet. And the second phase, over the last 15 years, has been building on top of the Internet. But the next phase, the third wave, is going to be integrating the Internet more seamlessly and pervasively in our everyday lives.

We’re asking a lot of people what they’re here to pitch. What’s your pitch?

It’s really what we’ve been talking about. I think there’s a new wave of innovation that’s about to break. And it’s going to be around this third wave of the Internet, which is disrupting sectors like education and healthcare and energy. If you’re an entrepreneur in St. Louis or Des Moines or Minneapolis or Pittsburgh, you’re gonna have great opportunities to build companies on the back of these trends, but you need to know what battle you’re gearing up for.

And, because we couldn’t resist…