Introduction: the Internet and network economics

The Internet is the most important new network of the last part of the 20th century. As 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. Originally developed through grants by the US Department of Defense (DOD) to connect disparate computers of its research division and its various contractors, the Internet served the academic community for over a decade before reaching the wide public in the mid-1990s. Internet communication is based on common and public protocols. Presently, hundreds of millions of computers are connected to the Internet.

The Internet exemplifies to the utmost “network effects”, that is the fact that the value of a connection to a network increases with the size of the network. The Internet was not the first or last of electronic networks, but it is definitely the largest on earth in terms of hosts (computers) connected to it, content stored in them, and bits of traffic traversing it every day. Many electronic networks pre-dated the Internet, some with very sophisticated protocols compared with the Internet. But the strength of the Internet in terms of size and simplicity of its basic protocols forced pre-existing proprietary networks such as AOL, Prodigy, AT&TMail, and MCIMail to conform to the open standards of the Internet and become part of it. Competition in the provision of services is vigorous on the Internet.