October 21, 1996
Economics of Internet Bandwidth
By Bob O'Donnell
As the Internet continues to get overwhelmed by its own popularity and the pipes that
route the Internet's data continue to overflow, potential solutions to the bandwidth
problem are being worked on at a furious pace. Many companies are touting technological
solutions that will widen the pipes and increase their efficiency. Others are working on
dividing the load by developing products and services for virtual private networks, or
extranets, that will take some of the traffic off the main Internet.
But even those solutions may not be enough. Part of the reason is that the Internet is
experiencing enormous growth not only in new users, but also in the amount of bandwidth
consumed per existing user. I don't have solid data to back this theory up (if anybody
does have some, by the way, I'd love to see it), but it just seems logical that as people
start using Internet telephony, videoconferencing, automatic content delivery, and
intelligent agents to get more out of the Internet's existing resources, the bandwidth
usage per individual has to be skyrocketing.
Combine that with the fact that companies are starting to look for, or even demand, a
certain quality of service from their Internet Service Provider -- which usually
translates to a guaranteed amount of bandwidth -- and you've set the stage for what will
probably be a major factor in reining the Internet's explosive growth: paying for
bandwidth. If corporations and individuals were billed for the amount of bandwidth they
consumed, versus the amount of time online, they would probably start taking a serious
look at what types of applications and services they really needed and scale things back
accordingly. This, in turn, would keep the Internet's back-breaking growth in check.
I realize that this idea will probably generate some incredibly negative response;
after all, many of us have gotten quite used to flat fee unlimited access service and
would not like to see it curtailed, but I have to wonder how long that economic mode can
survive. It's simple supply and demand. When you have a commodity in limited supply
(Internet bandwidth), you charge more for it to keep the demand in line with the supply.
And let's be honest, is it really fair for bandwidth-hogging users to be subsidized by
those using less of the Internet's bandwidth?
The problem extends beyond individual users as well. InfoWorld columnist Bob
Metcalfe has proposed that the ISPs themselves consider per packet chargeback systems for
routing each other's traffic over the Internet. If more large customers of ISPs start
demanding a certain degree of bandwidth to ensure that their business can perform some of
their operations on the Internet, it seems logical that ISPs will have to buy guaranteed
amounts of bandwidth from each other to ensure that their customers' service is maintained
throughout the 'net.
Already some of the major telcos, in their role as ISPs, are saying that corporations
are going to have to pay extra to get a guaranteed amount of bandwidth for their Internet
traffic. [See Hot
Seat Interview with John Gerdelman.] My guess is that this paying for bandwidth
pricing model will eventually spread to other ISPs, and we'll all soon be looking at
Internet access costs in an entirely different way.
It's somewhat ironic, but ultimately not that surprising, that economic realities would
start to play a role in the Internet's development. Up until recently, it seems anything
related to the Internet was perceived to be immune from the realities of normal business
(just look at the endless flow of money into Internet startups or the enormous market
valuations of Internet-related companies that have yet to earn any money) and that
technology could provide a solution to any problem the Internet faced. But real-world
economic developments, like the notion of paying for bandwidth, are bound to be an
increasingly important part of the Internet's future.
©
Copyright 1996, by InfoWorld Publishing Corp., a
subsidiary of IDG Communications, Inc. Reprinted from InfoWorld,
155 Bovet Road, San Mateo, CA 94402. Further reproduction is prohibited.
