THE ECONOMICS OF INTERNET

The Economics of Internet

The Economics of Internet

Internet economics

At first glance, online marketplaces like Amazon and eBay seem to be a creation of mutual benefit. Ecommerce store owners gain increased exposure for their products, and the marketplaces gain an expanded product range without having to increase inventory.

On closer inspection, the mutual benefits remain, but the reality is more nuanced. Should you expand your presence beyond your online store and start selling your products on Amazon and eBay?

The answer is... it depends. A marketplace strategy may be a boon for some retailers and a bust for others. There are a lot of variables that need to be taken into consideration, including the type of products you sell, the intensity of competition in your category, marketplace fees and restrictions, and so on.The Internet is a global network of interconnected networks that connect computers. The Internet allows data transfers as well as the provision of a variety of interactive real-time and time-delayed telecommunications services. Internet communication is based on common and public protocols. Hundreds of millions of computers are presently connected to the Internet.

The vast majority of computers owned by individuals or businesses connect to the Internet through commercial 'Internet service provider's (ISPs). Educational institutions and government departments are also connected to the Internet but typically do not offer commercial ISP services. Users connect to the Internet either by dialling their ISP, connecting through cable modems, or residential 'digital subscriber line' (DSL), or through corporate networks. Typically, routers and switches owned by the ISP send the caller's packets to a local 'point of presence' (POP) of the Internet. Dial-up, cable modem, and DSL access POPs as well as corporate networks dedicated access circuits connect to high-speed hubs. High-speed circuits, leased from or owned by telephone companies, connect the high speed hubs forming an 'Internet backbone network' (Mcknight & Bailey 2008, p.12-19). The Internet is based on three basic separate levels of functions of the network:

The hardware/electronics level of the physical network;

The (logical) network level where basic communication and interoperability is established; and

The applications/services level.

Thus, the Internet separates the network interoperability level from the applications/ services level. Unlike earlier centralized digital electronic communications networks, such as CompuServe, AT&T Mail, Prodigy, and early

Residential broadband access networks and net neutrality

Users pay ISPs for access to the whole Internet. Similarly, ISPs pay backbones for access to the whole Internet. ISPs pay per month for a pipe of a certain bandwidth, presumably according to their expected use. Consumer A pays to his ISP through his monthly subscription, and provider B pays similarly. In turn, ISPs pay to their respective backbones through their monthly subscriptions. The present regime on the Internet does not distinguish in terms of price (or in any other way) between bits or information packets depending on the services that these bits and packets are used for. This regime, called 'net neutrality', has prevailed on the Internet since its inception. Presently, a bit or information packet used for 'voice over Internet protocol' ...