Democratic Structures in Cyberspace
Interconnectedness of networks – The Market and the Internet
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- Universal service of the Internet - The last mile
Interconnectedness of networks – The Market and the InternetPositive network externality is the force driving the growth of the Internet. No one would care about the Internet if only one person were on the network. Each person's utility of being in the network increases tremendously when more and more people participate in using the network. A manifestation of this phenomenon is that the most popular applications on the Internet involve interactions between people. Email, chat rooms, newsgroups and html web pages gain positive network externalities when they are more readily available and accessible to the public. In the early days of ARPANET, no one could imagine a use for the network other than remote login applications. When email was first introduced, it quickly became the killer application, that is a wildly popular application, among almost all groups of Internet users. As more people use the Internet, more users are willing to develop new applications for the Internet. New applications attract new users, and the number of users on the net expands rapidly. This positive reinforcing force, symbiosis really, is only possible if the barriers of entry to the Internet market are low. The protocol TCP/IP is an open standard, which is to say that it is given to the public without cost. The equipment required to get online – a personal computer and a modem at present - is at present affordable for some, but by no means even most, Americans. The most important element for participating in the net is accessibility to the Internet Point of Presence. The Internet is a decentralized system so that centralized deployment strategy does not apply. Other communications systems, such as telephony networks, have been deployed under strong influence by governments. The expansion of the Internet, in contrast, depends almost exclusively on market forces. Commercial networks interconnect with each other and thereby gain positive network externalities, because they are benefited from the extra traffic that their customers generate across the networks. Thus it has historically been common practice for each carrier to carry each other's traffic without paying settlements to each other. Sometimes networks interconnect with each other by joining an Internet Exchange Point such as the Commercial Internet Exchange (CIX). Members of the CIX pay fixed membership fees to connect to the Internet, and they agree to carry other members' traffic voluntarily. Another Internet Exchange Point is the Metropolitan Area Ethernet-East (MAE-East). The AlterNet, PSI and SprintLink started the MAE-East, in which ISPs work out a set of bilateral agreements among themselves. It was unofficially reported that there were no monetary settlements between ISPs at MAE-East, and each ISP carries every other ISPs' traffic according to agreements between them without any additional monetary compensation. Insofar the same settlement practice is still used between networks. Internet connections can be obtained by paying a fixed sum to the backbone provider, or in some cases, networks are connected without exchange of money.119 The Internet market is structured such that each additional participant will increase the utility of the network. Costs are always settled on a lump sum basis, and the marginal cost of sending an extra packet is zero. This cost structure creates increased incentives to encourage use and participation on the Internet. As long as regional ISPs are able to recover their costs from their customers, they are willing to buy Internet connection from backbone providers and enter the business. Since ISPs settle their interconnection costs up front, their risks of entering the business are low. Market qualities like low barriers of entry, low business operation risks, and the continual expansion of the market have attracted and will continue to attract many service providers.
The Internet’s market structure has created sufficient incentives for ISPs to invest in and expand the Internet. Business competitions will tend to drive the price of internet services down to their marginal cost. Internet access will accordingly continue to become more affordable. There will continue to be a significant portion of the population that will be unable to afford the service and the government should therefore consider intervening to promote universal services. §254 of the 1996 Telecommunications Act introduced for the first time the goal of "universal service" into United States law. The old concept of universal access, which applied to telephone service, and which implied only that each citizen have access to a phone has become obsolete. New technologies, such as wireless phone services, cable television and the Internet, have pushed regulators to adopt the concept of universal services. In this information age, universal service is not merely a matter of connectivity, that is, access, but is also embodies concerns about the content of available information, knowledge of computers, and the costs of connection. The FCC has provided a guide with the following six principles to characterize the term “universal service”:
The FCC and the US government have an apparently strong commitment to providing advanced services, such as the Internet, to all citizens of the nation. While the government’s specific policies and programs are outside the scope of this paper, it is important to remember universal service as one area in which the law may have a tremendous impact on how and by whom the Internet will be used.
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