Fast Internet: An analysis about capacities, price structures and government intervention

While about 20% of all private households in the US had access to the Internet in 1997, the Internet penetration in Western Europe was significantly lower with little more than 5%. A key factor to explain the different penetration levels in the US and Western Europe is the pricing policy. In the US the pricing is heavily influenced by regulation. The flat rate pricing for local service stimulated rapid growth of the Internet. However, the regulatory regime that helped the Internet to succeed is now threatened by the same success. A comparison of the Internet in the US and the videotex systems deployed in France and Germany in the 1980s reveals an astonishing number of similarities. But there remains one significant difference, the pricing policy. Today, the telephony access network is perceived as a bottleneck by Internet users. Users demand more speed. Given the expected growth of the Internet and the demand for speed, the US telecommunications industry invests heavily in the local loop and sets up another four national long-distance networks. These investors do believe that demand for capacity will make a quantum leap.