Why are pricing issues the key to infrastructure investment and future growth of the Internet ? TheEconomics of network management

Why are pricing issues the key to infrastructure investment and future growth of the Internet? The Economics of network management I t is not surprising that researchers in network technology are utilizing ideas from the field of economics since it provides the conceptual understanding of underlying constructs such as usage and resource allocation. Proper resource allocation plays a key role in improving network performance. There are two primary approaches to economic resource allocation: quantity limits, and pricing. The former has the advantage of low accounting costs. However, it requires central administration and, for network users wishing to purchase more quantity than allocated, a pricing schedule has to be developed. The pricing approach does not enforce any quantity limits. Instead, users self-select the quantity they are willing to purchase at prevailing prices. The pricing approach decentralizes the resource allocation problem but has higher accounting costs since usage needs to be monitored and billed. The role of pricing as a resource allocation mechanism will be examined here, since central administration of quotas would be difficult in a global network. Furthermore, a pricing mechanism may still be needed to meet user demands in e-commerce. While the short-term role of economic pricing is to manage the network resources more efficiently, in the long run it could play an important role in the design of new network protocols. For example, new technological developments with priority classes in the IPv6 Internet protocol [3] will present the challenge of defining an economic basis for priority allocation. The Internet traffic-pricing problem for e-commerce subsumes traditional telecommuni-cation pricing policies and is much more complex. Traditional telecommunication systems offer a single quality level for their services on a given type of network, for example, the ability to carry voice data at a desired rate on a telephone network. However, in e-commerce there is a rich collection of services that require different levels of service quality over the same data communication network. For example, during a telnet session a user requires a high-speed and low-volume data transfer for real-time interaction with a server. On the other hand, a video conference needs clarity and coordination in picture and sound, necessitating a much more complex set of service quality attributes, such as synchronization of information sent via different interoperable applications (video, audio, and text). In addition, audio and video applications require high-volume and high-speed transfers with low variability in data transfer rates. These …