The Internet's sustainable advantage

The article explains why the Internet is cheaper to operate than the phone network on which it runs. In large measure, the success of the Internet in the US (where nearly three-quarters of Internet users are located) is due to a regulatory anomaly: many residential telephone customers don't pay for local calls; they connect to their Internet service providers for free. This aspect of the Internet caught the telcos asleep at the wheel. ISPs offer flat rate pricing. Thus, the marginal cost of Internet access for Americans is zero. Since it's free, some people just log on and stay on 24 hours a day. Internet services like PointCast and Real Audio encourage this. Needless to say, telcos are not happy; they get clobbered twice. Their customers get nothing but busy signals when surfers spend hours online, and they lose long distance traffic as e-mail messages replace faxes. So the phone companies have little to show for the Internet boom. Will excess demand force higher charges? Will higher charges reduce usage, unclog the network, and speed communication? The authors doubt it. Cyberspace provides a sort of black hole that simply expands to gobble up increases in traffic. Internet economics can only improve. The Internet takes advantage of the marginal cost of sending a message. It breaks messages down into small packets of information that can be sent individually across the network through any path that has the momentary capacity to carry them; sharing is always cheaper and no amount of re-regulation will undo this basic fact of life.