Access link bandwidth externalities and endogenous Internet growth: a long-run economic approach

The evolution of end-users' access link bandwidth over time arrives exogenously in network economics and it is typically attributed to technological advances in the area of networking. In this paper, we explore the broad issues associated with developing an economic model of access link bandwidth growth. In the proposed model bandwidth of the access link grows endogenously based on the increasing performance and quality of service requirements of the emerging Internet applications that have resulted in massive increases in demand for access capacity rates. A significant consideration of this model is that bandwidth exhibits substantial externalities or spillovers since decisions on bandwidth levels made by a single user affect all other user levels of performance. The main conclusions are that access link bandwidth externalities determine the rate of access bandwidth and Internet growth, that integration of separate networks into a universal multimedia networking technology managed by a single administration scheme and the integration of bandwidth provisioning into aggregate markets will increase the rate of growth, and that having a large user population is not sufficient to generate growth. Copyright (C) 2011 John Wiley & Sons, Ltd.