Non-Redistributing Prices and Exclusion in the Evolution of the Internet

By Uranga, Mikel Gomez | Journal of Economic Issues, December 1998 | Go to article overview

Non-Redistributing Prices and Exclusion in the Evolution of the Internet


Uranga, Mikel Gomez, Journal of Economic Issues


The Internet is evolving. Exponential growth in the number of new networks and users has been observed in recent years. This phenomenon is closely related to greater penetration of commercial relationships in the networks. While greater integration of business and trade in the network is responsible for this growth, it is also presenting increasingly greater hindrances to its own expansion.

The main qualitative changes observed in the Internet's current situation are a consequence of (1) the change in the values held by network participants, and (2) the transition from public support of the network to its privatization and the participation of businesses. This last aspect has negative consequences for those countries that have not yet reached a certain level of economic development or a minimum level of telecommunications network coverage.

Initial development of the Internet in the United States was marked by a culture of sharing rather than competing. In other words, a university spirit and more altruistic principles prevailed. However, these principles cannot be maintained in a world where science is increasingly commercialized and where governments' and big corporations' knowledge and classified information can be accessed by anyone who can hook up to the network.

Development of information highways(1) generally requires implementation by public authorities in at least five main areas [Vedel 1996, 26].

A Social Objective: Universal Service

This paper will focus on whether or not participation in the Internet extends to all groups and areas in the present phase of its development, or, to the contrary, whether it shows marked tendencies to "exclude" certain social groups and underdeveloped nations.

Universalization is the name that has historically been given to a system of providing access to telephony services in favorable (and subsidized) conditions to all groups and areas. This universalization has been a key social objective. The proposal set forth in this article is that the universalization principles that have prevailed in conventional telecommunications should be transferred and maintained to render and supply Internet access and services.

Universalization of the services provided through telecommunications networks means making network access conditions favorable to certain social groups and areas that are cut off from the central dynamics of economic development. Liberal market criteria, such as those recommendations that service prices should correspond to the computed costs incurred in their provision, mean that those sectors or areas for which supply of service is more expensive should pay higher rates. This often means that those sectors with lower purchasing power are required to pay proportionally more with respect to their budgets than those with higher purchasing power.

The universality principle must be precisely defined in a wider sense than in the European Union Directive 97/EC ONP (on interconnection). It should contemplate access for users whose social needs are specifically related to low income, including those who are below the established poverty threshold or jobless individuals with low coverage or low pensions. The scope of universal service should reach all geographic areas in the different countries and should contribute to improving territorial cohesion.

Privatization of telecommunications affects the opportunities for the spread of networks. Where a country has undeveloped telecommunications infrastructure networks, privatization of the national operator will have more negative effects on achieving universalization of telecommunications services.(2) In the case of the Internet, leading computer telecommunications and audiovisual firms have the capacity to encapsulate science and technology to obtain higher profits, but this would be at the cost of not extending (universalizing) the network potential throughout the community and the world. …

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Non-Redistributing Prices and Exclusion in the Evolution of the Internet
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