INTERNATIONAL TELECOMMUNICATION UNION		

	Honolulu, 14 January 1996
The Internet and the Information Infrastructure: What's the difference?
Dr Pekka Tarjanne
Secretary-General, International Telecommunication Union
Pacific Telecommunications Council 18th Annual Conference, "The information infrastructure: Users, Resources and Strategies"
Ladies & Gentlemen,
1.  ABSTRACT

In a recent review, The Economist referred to the Internet as the “Accidental Superhighway”(1). This paper examines the thesis that the Internet could evolve to meet the industry’s vision of an “Information Infrastructure” or at least, that it is the closest we are likely to get this side of the Millennium. 

2.  The Internet as marketplace
In July 1995, The Economist introduced its first ever survey of the Internet with the following statement: “The explosive growth of the Internet is not the result of a fad or a fluke, but the result of a digital free market unleashed”. Netscape founder Marc Andreesen, one of the superstars of the Internet, and one of the few to have exploited that digital free market profitably, has described the Internet as “... a platform for entrepreneurial activities - a free market economy in its truest sense. Its a level playing field where people can do anything they wanted to”.(2) 
These are bold statements which deserve investigation. Could it possibly be true that the telecommunications industry, so long a bastion of monopolies and cartels, has finally surrendered to the free market? The quick answer to that question is “not yet”. The telecommunications industry is still a long way from the free market. Even in that “free-est” of free markets, the United States, the majority of local communication services are still supplied under monopoly conditions, and attempts to change that position are encountering strong opposition. But increasingly it seems to be the case that the question of who owns and provides the network is less important than who is allowed to use it, and what services they can provide over it. The Internet is a perfect example of the benefits that can be realised when network builders begin to release their iron grip over the activities of network users. The United States may not be the most liberal telecommunications environment in the world, but at least it has some of the most permissive regulations for the use of leased lines and private networks. That is one reason why the Internet has flourished their first.

The United States is widely recognised to be the test-bed for the future development of fast, high-capacity communication facilities— information infrastructures —which are being built to handle the ever increasing tide of multimedia (voice, data, image, text and video) traffic. Ironically, while the United States maintains a position in international fora of strong opposition to the use of subsidies for industrial development, it has itself subsidised the development of information infrastructures to the tune of several billion dollars, most recently through the National High-performance Computer Initiative. 
Information infrastructures are being built in the hope, as much as the expectation, that a huge market will develop for tradeable electronic information. In one sense, a huge market already exists. The info-communications industry itself, defined here to cover the telecommunications, computing and audiovisual sectors, is an immense market. In 1994, the info-communications sector generated revenues of US$ 1.43 trillion, equivalent to 5.9 per cent of the world’s global domestic product(3) . To put it another way, for every US$ 1’000 the world earns and spends, US$ 59 is created, directly or indirectly, by the info-communications sector. 
But if US$ 1.43 trillion revenue per year sounds like a large number, consider the US$ 2.3 trillion which is traded each day on the private inter-bank network run by SWIFT. Of course, the SWIFT network is an industrial strength network with a high emphasis on security and reliability. The Internet currently has neither of these two characteristics. Internet messages are delivered on a “best effort” basis and sometimes go astray. The network can grind to a halt for hours at a time. But nevertheless, it is here that the real potential for the Internet as marketplace lies: in being a channel for electronic commerce. 
The Internet is rapidly becoming a commercial marketplace where you can buy just about everything from a pizza to a plaza. The ITU itself has jumped on the Internet bandwagon. Since we started selling electronic subscriptions to our technical Recommendations in July 1995, in our “ITU Publications Online” service, we have notched up sales of around half a million Swiss Francs. More importantly, we provide a service to our membership which they have been demanding for several years. If the ITU did not provide an online service, our members would soon go elsewhere to write their standards. In a virtual world, the services provided by the ITU —meetings, document production, translation, information dissemination —could be virtually provided virtually anywhere. The Internet may have created a market for us today, but it could easily take it away tomorrow if the ITU fails to remain competitive.
3.	THE INTERNET AS A BANDWAGON
I referred a moment ago to the “Internet bandwagon”. I used that term intentionally to illustrate one of the most endearing features of network economics, namely the principle of increasing returns to scale. The first question an organisation or an individual must ask when considering when to join a new network is “who else is on it?”. People and organisations join the Internet because the others they want to communicate with are already there. The Internet is successful because it is successful. If that sound like a tautology, consider some statistics. The Internet is currently doubling in size every year. At the start of 1994, ITU estimates there were some 26 million addressable users connected to the Internet. The figures for 1995 are not yet in, but given the hype surrounding the introduction of the Microsoft Network (MSN), together with the introduction of Internet-based services by the established online service providers, such as CompuServe, America Online, Prodigy and Delphi, the chances are that the number of users has doubled again.
Figure 1: Up, up and away
Estimated growth in Internet users, millions

Source:	ITU World Telecommunication Indicators Database, Internet Society.

Of course the application which has animated the Internet is the World Wide Web. The Web has brought graphics, hypertext links, pictures, corporate logos, video clips, and computer animation to the Internet. This has played a crucial role in transforming the dry, ASCII text files that characterised the Internet five years ago into the multimedia, entertainment platform of today. To return to the question posed by potential new joiners, “who else is on it?”; one can now respond that just about every Fortune 500 company is on the Internet in some capacity, and that some 60 or so Public Telecommunications Operators around the world now provide Internet access. 
One ancillary benefit that the Web has bought is in opening a new source of revenue, namely advertising. This has at least partly solved the dilemma of whether or not information on the Internet “wants to be free”. Web sites which are supported by advertising can appear as free to the user, while still paying the wages of those that established them. Consequently entertainment and education applications, for which the public is generally unwilling to pay directly on the basis of their usage, can be supported indirectly by their purchase of advertised products and services. Although online and Internet services currently come bottom in the top ten entertainment services in the United States, with an average use of just 3 hours per year, it is rising fast and has the highest ratio of spend to use. If the problem of developing a suitable funding mechanism can be solved, then the Internet bandwagon can really roll.
Figure 2: Entertainment USA
Hours and dollars spent on different entertainment services, USA, 1994

Source:	Veronis, Suhler & Associates, “Communications Industry Forecasts”.

4.	THE INTERNET IN REAL-TIME
The next big development we can expect to see on the Internet is the promotion of real-time services as opposed to the standard store-and-forward services which currently dominate. Let me not be mis-interpreted: store-and-forward services — such as e-mail, bulletin boards, online databases or text retrieval — will continue to be the mainstay of the Internet for many years to come. But the bigger market opportunity lies in real-time services. At the moment, it is possible to receive near-real-time services: for instance, you can watch a video clip of President Nelson Mandela’s speech at the Opening Ceremony for TELECOM 95 on the ITU’s WWW Home Page(4), or, with some technical expertise and a lot of patience, you can make Internet telephone calls with a speak and listen delay of a few seconds. The current status of these type of applications is enough to satisfy the engineer but not the consumer. There are enormous problems — of service quality, of ease of use, of bandwidth — but the point is that these problems are ultimately solvable. Think not of where these services are today, but where they will be in five year’s time.
The development of real-time services delivered over the Internet represents a threat to established communication service providers. This is mainly because of the pricing mechanism which is being used. Access to the Internet is, for most purposes, based on a flat-rate fee. That means you pay the same whether you use the network for one minute per month or for the whole month. It also means that you pay the same whether the service is store-and-forward or in real-time. The paradigm of paying by the minute and by the mile, which is the foundation for most services offered by Public Telecommunications Operators (PTOs), is clearly being undermined. 
PTOs may not be losing much traffic to Internet Phone services at present, but they are losing a lot of sleep. The first generation of Internet Phone services offered limited functionality to computer users. The next generation offers inter-working between computer users and the public switched telephone network, or some reseller or callback operator offering services over the public network. That means that all 700 million or so users connected to the public telephone network are reachable from a computer with Internet Phone software, for little more than the price of two local calls, one at each end of the call.
Using the Internet for real-time applications could also threaten the revenue streams of future services, such as video-on-demand, music-on-demand or home shopping, which the PTOs are currently planning and testing the market demand. The Internet also provides a viable option for industries involved in the information distribution business, such as software, video distribution, compact discs or newspapers. Furthermore, in-company “Intranets”, using information search and retrieval systems made popular on the public Internet, could soon be replacing in-company bulletin boards or groupware. In each of these potential markets, the principle of increasing returns to scale applies. This implies that the more people use them, the more popular they will become. Thus the growth of the public Internet, and user familiarity with browsers, will promote the growth of parallel private Internets. The spread of Internet as an entertainment-based medium will greatly facilitate its acceptance for serious business purposes.
5.	THE INTERNET AS SUPERHIGHWAY?
So far in the examples, I have quoted, I have presented a fairly bullish assessment of what the Internet has achieved and what it could become. But what are the limitations? Will the Internet really evolve to match popular expectations of what the Information Superhighway should be?
•	The most obvious limitation is that the information contained on the Internet is unstructured, unsorted and difficult to find. It is easy to find information that is interesting, even fascinating, but finding the particular fact that you need is often frustratingly difficult. The Internet is like a library run by anarchists in which the trivial is filed next to the erudite;
•	A second problem is that the Internet comes without any quality of service guarantees. The time delays in accessing particular sites would be unacceptable in a fully commercial service. The danger of messages being intercepted, corrupted, or simply disappearing without trace is ever present. Nor is there any protection for the user of the quality, reliability or good taste of the information being accessed. The Internet’s reputation as a haven for smutty pornography may be undeserved, but it is difficult to shake off this image in the public’s perception;
•	A third problem is that the Internet Protocol is simply not optimised for multimedia traffic. It proves popular because it is cheap to the end-user, not because it is efficient. If you wanted to build an information infrastructure from scratch, you probably wouldn’t start out from the 1970s technology of the Internet, were it not for the fact of its established user base. Predictions abound that the Internet is on the point of collapse, overloaded with teenage home videos or high resolution satellite images. So far, these predictions have been confounded.
•	Finally, despite the figures I quoted earlier about the growth in use of the Internet, it nevertheless remains the case that some 97 per cent of Internet users are in the high-income countries which account for just 15 per cent of the world’s population. The distribution of Internet access is a lot less equitable than that of the telephone or the television.
Will these problems eventually lead to the collapse of the Internet as we know it, or will it continue to evolve? I foresee a number of possible scenarios for its development:
Figure 3: An unequal world
Percentage distribution of televisions, telephones and Internet users, 1994.

Source:	ITU World Telecommunication Indicators Database.

•	The most plausible is that the Internet will continue much as it is today, with incremental improvements in bandwidth availability and performance. The problems noted above may well act as a form of rationing in that those users that get easily frustrated won’t come back. Thus the supply/demand equation will be to some extent self-regulating.
•	A second scenario is that the Internet will splinter into a whole series of interconnected, but privately-owned, parallel Internets. These parallel networks would each be “owned” by a service provider who would guarantee a minimum level of service quality in return for some sort of usage fee. Many of these parallel Internets would be specific to one application, such as financial information, tourist information, sport or whatever. Increasingly, whole sections of the Internet would become closed to non-paying users as the commercialisation process continues;
•	A third scenario is that the whole thing will collapse under the weight of its own popularity as more and more real-time applications are developed. If quality of service deteriorates, the rate of people leaving the network might exceed the rate of those joining it, and the Internet will return to its original community of academics and enthusiasts.
•	A final possibility is that an alternative information infrastructure might emerge, perhaps using a different protocol from that of the Internet, and offering markedly better performance and which over time will come to replace the public Internet. This alternative network might start out from the intelligent television set rather than the computer and might be based around a cell-switched transmission standard, such as ATM, rather than a packet-switched standard such as the Internet Protocol.
Perhaps the great strength of the Internet as we see it today, is that no-one planned quite how it ought to look. The Internet is much greater than any one committee, interest group, or application. That is how it should be. Indeed, the very fact that no one could control its evolution, even if they wanted to, is the best safeguard we have as to its future evolution. The Internet is not the same thing as the Information Superhighway, but its the closest we are likely to get, this side of the Millennium.

REFERENCES