Back To All Lessons

Economics of Internet Access

You will learn why an understanding of shortages, supply, demand and the rationing function of prices is important as we encounter greater numbers of people logging on to the Internet. Find out how the FCC's new proposal of levying access charges on second residential lines and phone lines may affect you. After reading the introduction below, follow the links for Parts 1 and 2 to complete the lesson.

KEY CONCEPTS

Business, Consumers, Demand, Quantity Demanded, Quantity Supplied, Supply

INTRODUCTION

 

Part 1

Part 2

Exploration

Exploration

Invention

Invention

Application

Application

cerfClick on one of the formats below to hear an introduction to the topic of Internet access by Vint Cerf , Senior Vice President, Internet Architecture and Engineering, MCI Communications Corporation.

In late Fall 1996, a prominent Internet service provider began offering flat-rate pricing to high-volume Internet users. Subsequently, in early 1997, users reported busy signals at the ends of their modem connections. Was the change in pricing from base charge + per-minute charges to flat rates responsible for the glut of users accessing Internet? Experts believe that consumers responded to the new pricing scheme by logging on more frequently and for longer periods of time. Further, the new pricing structure attracted new users. The result? More frequent and longer connect times made it difficult for many people to use the service. Some frustrated consumers went so far as to sue the service provider because they had been charged for a service they had not been able to receive... and won!

RESOURCES

  • Father of the Internet- Vint Cerf:  This site provides a biography of the life of the so-called "father of the internet".
    www.icann.org/en/biog/cerf.htm

PROCESS

How can we use economics to analyze the issue of Internet access? How can the market system work efficiently to ration Internet access? How is Internet usage like air travel and interstate beltway usage? Understanding shortages, supply, demand and the rationing function of prices will help you learn how changes in prices lead to changes in quantity demanded.

Another issue related to Internet access is that of access charges the FCC is interested in levying on second-residential lines and business lines. Some accuse the FCC of attempting to levy a "modem tax"; Internet users are incensed by the very idea of such a tax. You can learn how certain taxes affect consumers and producers by understanding the concept of elasticity. They can determine who is hit hardest by the proposed "modem tax."

Work your way through the 'Internet Access' issues by completing the Exploration, Invention, and Application activities for parts I and II.

EDUCATOR REVIEWS