Internet Economics: Understanding Digital and New Media Markets

351 Pages·9.816 MB·English

by  Cellini P.

LUISS UNIVERSITY PRESS
PAOLO CELLINI
Internet Economics
Understanding Digital and New Media Markets

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Foreword to Internet Economics
by Vinton G. Cerf
Vice president and Chief Internet Evangelist, Google
Paolo Cellini’s book provides us with a fascinating view of the Internet as an economic
phenomenon and as a general-purpose artifact that is being put to work in an endless
variety of ways. It is a vast assembly of technology and institutions, driven by a variety of
business models (including non-profit and government cases), and sustained by the
collaboration of huge numbers of involved entities. Cellini applies economic and system
analytic tools to provide readers with a deeper understanding of the Internet’s character
and its role in our lives.
I want to focus on the notion of artifact for a moment. The term means, roughly, ‘made
by man’ as opposed to ‘found in nature.’ It seems reasonable to view the progress of our
species as the story of the artifacts we have created, applied, evolved and even abandoned
in favor of new ones. These are almost always enabling tools that make us more efficient,
more effective and more able to overcome human limitations. Artifacts often have
economic consequences since they may reduce costs, increase productivity, free time for
new endeavors, enable new ways of accomplishing old goals and way to accomplish new
goals.
It seems important to think broadly about the notion of artifact since we might also
include the invention of new institutions and practices that have effects similar to the
invention of new tools and technologies. Thus, institutional artifacts that include social
and institutional practices are usefully included in the broad sweep of this concept. Along
side the invention of stone hand axes, adzes and scythes, obsidian-flaked knives, bows and
arrows, spears and atlatls1, we may place the invention of tribes and tribal governance,
Hammurabi’s Laws, the organization and management of cities, farming practices, the
invention of money and the invention of Guilds. All of these are human inventions we
choose to call artifacts in this essay.
Human progress is the story of our invention and adoption of artifacts. The Internet is
simply another, rather large-scale artifact of human invention. What makes it so
interesting, as Cellini elaborates in this book, is its scale and the fabric of cooperation,
collaboration and coordination that allows it to work. There is no central control. There
are hundreds of thousands of independent networks, each operated independently,
collaborating on the basis of bilateral and multi-lateral agreements. Voluntary standards,
developed in an open and collaborative fashion in multiple fora, notably the Internet
Engineering Task Force (IETF), the World Wide Web Consortium (W3C), the Institute of
Electrical and Electronic Engineers (IEEE), among many others. The so-called TCP/IP
protocol suite2 binds the vast arrange of networks into the network of networks we call the
Internet. A system of institutions manages the Internet’s Domain Name System and
Internet Address assignment process: the Internet Corporation for Assigned Names and
Numbers (ICANN), the five Regional Internet Registries for numerical addresses3,
hundreds of top-level Domain Name Registries and independent Registrars, and the Root
Zone Operators who lie at the core of the mechanism for mapping domain names into
Internet Protocol addresses. The global Internet Society with its many chapters, houses the
Internet Architecture Board, the IETF, the Internet Research Task Force (IRTF) and many
chapters around the world for people interested in the use of the Internet and the
governance policies that affect its operation and application.
In addition to these administrative mechanisms, there are countless organizations,
businesses and individual contributors that provide a wide range of products and services
that rely upon or facilitate the operation of the Internet. The design of the Internet is called
layered because it is logically structured so as to partition responsibility for various
aspects of its operation to independent parties. Some organizations provide backbone
transmission and switching support for moving packets of data from source to sink in the
system. Some provide access to the Internet by fixed and mobile transmission systems.
Some provide the hardware and software that animates the components of the Internet.
Some make application software or provide services relying on huge server farms of
computers, sometimes called Data Centers.
The general-purpose Internet is largely application agnostic. Anything that can be
implemented by the exchange and interpretation of the data in Internet Packets is fair
game. As the Internet’s capacity has increased, new applications have become feasible.
The casual ability to enable devices to become part of the Internet has led us to the so-
called Internet of Things in in which devices become a part of the vast landscape of
programmable technology/appliances/tools/machines reachable through the global
Internet. This bears some relationship to a road system in which the technology of road
building and the actual construction of roads creates incentive for designing and building
vehicles that can use the roads for transport and buildings adjacent to the roads to house
residents, support business operations including manufacturing, service the vehicles on the
roads and the people in them. The road builders provide general constraints on the design
of vehicles that can use the roads and law enforcement tries to assure that the users of the
roads follow rules that contribute to safety and efficiency. While all analogs have
weaknesses, seeing the Internet as a system of interconnected roads supporting a wide
range of vehicles, users and uses and adjacent buildings, is not a bad metaphor for
thinking about its implications in the future.
Like many other technologies, the Internet changes the costs or speed with which
communication of information can be accomplished. In addition, because the information
flowing on the Internet is machinable4 the users of the Internet are able to apply the
Internet’s vast computing capacity to find and process an increasingly wide range of
information. Barriers to trade are reduced, delivery of digital content is speeded up,
discovery of others with common interests is facilitated, ability is maintained, and
important business and personal relationships are enhanced. Of course, all neutral
technologies also can be abused and the Internet is no different. It is this agnostic aspect of