The Internet and Other Networks: Utilization Rates and Their Implications

Information Economics & Policy 12 (2000), pp. 341-365

25 Pages Posted: 2 Oct 1998 Last revised: 11 Oct 2015

See all articles by Andrew Odlyzko

Andrew Odlyzko

University of Minnesota - Twin Cities - School of Mathematics and Digital Technology Center

Date Written: September 1, 1998

Abstract

Costs of communications networks are determined by the maximal capacities of those networks. On the other hand, the traffic those networks carry depends on how heavily those networks are used. Hence utilization rates and utilization patterns determine the costs of providing services, and therefore are crucial in understanding the economics of communications networks.

A comparison of utilization rates and costs of various networks helps disprove many popular myths about the Internet. Although packet networks are often extolled for the efficiency of their transport, it often costs more to send data over internal corporate networks than using modems on the switched voice network. Packet networks are growing explosively not because they utilize underlying transport capacity more efficiently, but because they provide much greater flexibility in offering new services.

Study of utilization patterns shows there are large opportunities for increasing the efficiency of data transport and making the Internet less expensive and more useful. On the other hand, many popular techniques, such as some Quality of Service measures and ATM, are likely to be of limited usefulness.

JEL Classification: L96

Suggested Citation

Odlyzko, Andrew, The Internet and Other Networks: Utilization Rates and Their Implications (September 1, 1998). Information Economics & Policy 12 (2000), pp. 341-365. Available at SSRN: https://ssrn.com/abstract=132770 or http://dx.doi.org/10.2139/ssrn.132770

Andrew Odlyzko (Contact Author)

University of Minnesota - Twin Cities - School of Mathematics and Digital Technology Center ( email )

127 Vincent Hall
206 Church St. SE
Minneapolis, MN 55455
United States
612-625-6413 (Phone)
612-626-2017 (Fax)

HOME PAGE: http://www.dtc.umn.edu/~odlyzko

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