June 1996

Root Page of Article: The Three Laws of the Cyber-Economy, by Michel Bauwens

Law 2: The Price of Communication Will Tend Towards Zero

The Internet essentially means global communication at local cost. There are quite a few reasons for this. It is a combined result of the following factors:

  1. the early research subsidies;

  2. the free market environment in which the Internet operated (it was not subject to telecom monopolies);

  3. the distributed nature of the many networks comprising the Internet also distributes the costs;

  4. the Net's parasitic nature in terms of needed hardware and telecommunications infrastructure: as a protocol the Internet can use all existing legacy systems; and

  5. the Internet's nature as a dumb network not requiring heavy investment in centralized switching because its intelligence is in relatively cheap computer technology.
Though today's Internet telephony is still rather limited, we're only a short time away from the PC-to-telephone technology which will have a major impact on long distance pricing schemes. Arthur Clarke's prediction in 2001, that long distance would become free on December 31, 1999, suddenly is more science than fiction. In fact, a recent confidential report of AT&T'S strategic planners recently reported by David Bennembaum in MEME agreed that long distance is dead.

This almost-free communication will also change the economies of scale in business. While in the past only multinational corporations could afford virtual private networks and a global marketing presence, small and medium enterprises can now afford the same advantages.

The third law of cyberonomics deals with --the price of transactions.

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