Managing The Internet as an Economic System

The Internet is by far the fastest growing economy in the world in terms of the number of users and information providers. Currently there are over 30 million users with an estimated 100% annual growth. As an economic system we can view the information providers, including entertainment, news, educational services, etc., as producers and the users as consumers. The Internet is already experiencing traffic jams and, given the growth rate of The Internet and the need to provide real time services in future, this will become a severe problem if proper coordinating mechanisms are not designed and implemented. We have developed a priority pricing mechanism based on General Equilibrium theory in economics, and we use a measure based on the collective benefits obtained by the users to evaluate the performance of the system. We have developed simulation model to test the validity of our approach and to show the gain in efficiency induced by pricing. We present some results with a non-priority pricing scheme and show substantial improvements versus a free access policy. Furthermore, we address the issues concerning the development of new accounting/billing methods, cross subsidization of services, infrastructure investment, development of smart agents for dynamic scheduling and users’ job management, and the possible competitive market structures which will evolve over The Internet.