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<strong>Should we be concerned that the economics of pricing on the Internet
won't sustain the development of the Internet?</strong>
<p>
With the number of users and host computers connected to the Internet roughly
doubling each year, and traffic on the Internet increasing at an even greater
rate, the potential for congestion is increasing rapidly. Moreover, at a
certain point Internet routers are simply unable to handle the load and will
"drop" packets, causing network "brownouts." Such brownouts are already
occurring.
<p>
The increasing levels of Internet use are also beginning to affect the
telephone network. Internet usage is placing unexpected demands on local
exchange carriers' switches, to the point that switch congestion is
threatening service quality for voice users.
<p>
This might not be such a big problem if we had an all-digital phone network
that was based on a packet-routing multimedia technology such as ATM. But we
don't, yet. So the hard question is: if there are costs for upgrading the
network to support the explosion of Internet and other data usage, who pays
those costs?
<p>
The FCC decided in the early 1980s that enhanced service providers, which
include Internet service providers, should not be subject to the interstate
access charges that long-distance carriers pay to local phone companies for
originating and terminating calls. ISPs are therefore treated as "end users"
and can purchase lines that have no per-minute usage-based charge for receiving
calls from their customers. The phone companies argue that the absence of usage
charges means that ISPs do not provide the revenue to cover the additional costs
they impose on the network.
<p>
I don't know what the full answer is to this problem. But I'm inclined to
believe our best guidance is to let technology, competition, and access
reform make the problem go away. We are working to open markets so that
these forces can operate most effectively.