Lecture 2 The growth and development of the Internet: history, infrastructure,   institutions and protocols. The Economics...
<ul><li>to inform you about the important stages in the development of the Internet, the  applications  that run on it and...
<ul><li>Rohlfs, J H (2003) Bandwagon effects in high-technology industries. MIT Press, Cambridge, MA, especially chapters ...
Practical 2 1 explanation of some key  terms  and consideration of their relevance to our understanding of the growth and ...
<ul><li>the  Internet  and the  World Wide Web  are not the same thing </li></ul><ul><li>the importance of  protocols  - t...
The Internet is an  interconnected set of computer networks  across the globe that work together under a common set of rul...
Internet backbone networks, ISP etc.
From ARPANET to Internet 1969  ARPANET  - a single network with 4 nodes (funded from US Defense budget) 1973 work began on...
The original ARPA network
Internet traffic (2005) as depicted by  TeleGeography Inc.
A more detailed depiction of Internet traffic  from TeleGeography Inc. (2006)
http://www.telegeography.com/maps/internet/images/europe_map_large.gif
JANET - the Joint Academic Network  in the UK
Source: The Guardian Friday 1 st  February 2008 http://image.guardian.co.uk/sys-files/Guardian/documents/2008/02/01/SEA_CA...
A  protocol  is an agreement (set of rules) between the communicating parties ( peers ) on how communication is to proceed...
Q Why is it important? A  It enables computers on different networks, designed by different vendors, to work together in d...
<ul><li>1964 Paul Baran (RAND Corporation) publishes paper on  packet-switching  networks </li></ul><ul><li>1974 Vint Cerf...
<ul><li>Early core  applications </li></ul><ul><li>File Transfer  FTP  ( SSH  is usually now preferred) </li></ul><ul><li>...
<ul><li>Every computer on the Internet has a unique  </li></ul><ul><li>IP address  - under the currently dominant  IPv4  s...
The State University of New York at Stony Brook provides a service whereby you can find out the IP number of the Internet ...
DNS  is the hierarchical domain-based naming scheme and distributed database system for mapping host names and e-mail dest...
ICANN  (Internet Corporation for Assigned Names and Numbers) coordinates the assignment of IP numbers and Internet domain ...
<ul><li>The  top level domain  covers two identifiers, separated by a dot </li></ul><ul><li>generic type or group  (gTLD)-...
Sub-domains  can then be created lower down the hierarchy by those responsible for that level e.g. userweb.port.ac.uk  ICA...
<ul><li>Access to remote  information  (e.g. data sources, e-commerce, video on demand) </li></ul><ul><li>Person to person...
<ul><li>via </li></ul><ul><li>copper wires </li></ul><ul><li>cable </li></ul><ul><li>fibre optics </li></ul><ul><li>microw...
<ul><li>architecture is a set of  layers  and  protocols </li></ul><ul><li>the purpose of a layer is to carry out services...
<ul><li>layers need to </li></ul><ul><li>identify senders and receivers </li></ul><ul><li>have rules for communication (pr...
<ul><li>Local Area Networks (LAN) </li></ul><ul><li>Wide Area Networks (WAN) </li></ul><ul><li>internets </li></ul><ul><li...
<ul><li>different software models: </li></ul><ul><li>fat client  software </li></ul><ul><li>thin client  software </li></u...
<ul><li>E-mail  client  software - examples </li></ul><ul><li>Outlook </li></ul><ul><li>Pegasus </li></ul><ul><li>Eudora <...
<ul><li>Simple Mail Transport Protocol (SMTP)  (outgoing mail)  encodes every e-mail message as a sequence of ASCII charac...
<ul><li>1971 -  Ray Tomlinson   of Bolt Beranek and Newman Inc. (BBN) invents the first e-mail program to send messages ac...
The World Wide Web is a collection of inter-linked  documents  and associated files that are made available to people with...
<ul><li>1965  Theodore (Ted) Nelson   sets up project  XANADU  to establish a world-wide distributed library of informatio...
<ul><li>1989 - creation of the  World Wide Web  and HTTP at CERN(Geneva) by  Tim Berners-Lee  and others </li></ul><ul><li...
Sir Tim Berners-Lee
 
<ul><li>telnet  allows you to login to other remote computers on Internet to which you have access rights </li></ul><ul><l...
transferring files from computer to computer on the Internet FTP  File Transfer Protocol - first established 1971 FTP and ...
<ul><li>There is no single body in overall charge, but the following all have important roles </li></ul><ul><li>ICANN  (In...
<ul><li>Many people have argued that the Internet should not be governed by a private (US) company (ICANN) but by a multil...
The Internet Software Consortium conducts a semi-annual survey of the  number of Internet hosts  (see next slide). But Zoo...
 
Source: International Telcommunications Union website, accessed 15th August 2007.  http://www.itu.int/ITU-D/ict/statistics...
Source: Bandwagon effects in High-Technology Industries, Jeffrey H Rohlfs, MIT Press 2001
<ul><li>Other measures: capacity, web pages  </li></ul><ul><li>There are problems with all these metrics (see my links pag...
Some important concepts (see Rohlfs) <ul><li>Network externalities </li></ul><ul><li>Complementary bandwagon effects </li>...
<ul><li>Network externalities  - the value of the Internet to any one user is an increasing function of the total number o...
<ul><li>Varian (2004)  interprets the Internet boom of the late 1990s as an example of “ combinatorial innovation ” – “com...
<ul><li>Metcalfe’s Law  -  the value of the Internet to any one user increases as the square of the total number of users....
<ul><li>Lower transactions costs  -  automated systems can vastly reduce transactions costs  </li></ul><ul><li>Global reac...
Source: PIU Report on e-commerce Reduction in transactions costs Cost to bank - typical US funds transfer transaction ($)
Convergence, transition and diffusion <ul><li>Convergence : Internet, telecoms, TV, etc. </li></ul><ul><li>Transition : di...
Internet diffusion and the digital divide (1)
 
Internet access is more unequally spread than income Top 20% of people (by income share) have 86% of GDP 93% of Internet a...
<ul><li>To what extent can the phenomenal growth of the Internet in the last decade  be explained by economic factors? Use...
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  1. 1. Lecture 2 The growth and development of the Internet: history, infrastructure, institutions and protocols. The Economics of the Internet and the Digital Economy ENET (U10988)
  2. 2. <ul><li>to inform you about the important stages in the development of the Internet, the applications that run on it and the associated protocols </li></ul><ul><li>to familiarise you with some key points about the technical infrastructure of the Internet </li></ul><ul><li>to highlight the role of some key people and organisations </li></ul><ul><li>to look at the growth of the Internet and consider factors (especially economic ones) that can account for this growth </li></ul>Today’s objectives
  3. 3. <ul><li>Rohlfs, J H (2003) Bandwagon effects in high-technology industries. MIT Press, Cambridge, MA, especially chapters 5, 13 and 14. </li></ul><ul><li>Rohlfs, J H (2001) Bandwagon effects and the Internet. Strategic Policy Research Inc. http://www.spri.com/pdf/reports/its2001/jhrbandwagonpaper.pdf </li></ul><ul><li>Varian, H R, Farrell, J and Shapiro, C (2004) The Economics of Information Technology: An Introduction. Cambridge </li></ul><ul><li>Odlyzko, A (no date) The current state and likely evolution of the Internet. http://www.research.att.com/~amo </li></ul><ul><li>Greenstein, S (2003) Jumping on bandwagons. http://www.kellogg.northwestern.edu/faculty/greenstein/images/columns.html </li></ul>Reading
  4. 4. Practical 2 1 explanation of some key terms and consideration of their relevance to our understanding of the growth and development of the Internet 2 identification of the role of some key people 3 identification of the role of some key organisations 4 Internet metrics issues Follow up work for the week
  5. 5. <ul><li>the Internet and the World Wide Web are not the same thing </li></ul><ul><li>the importance of protocols - the standards or set of rules that enable computers to communicate with each other </li></ul><ul><li>the adaptable nature of the Internet and its institutions </li></ul><ul><li>The importance of network externalities and complementary bandwagon effects for the take off of the Internet </li></ul>Some points from last week
  6. 6. The Internet is an interconnected set of computer networks across the globe that work together under a common set of rules or protocols (the TCP/IP suite). “ The name Internet refers to the global seamless interconnection of networks made possible by the protocols devised in the 1970s, the Internet protocols, still in use today.” (Vint Cerf, 1995) The Internet
  7. 7. Internet backbone networks, ISP etc.
  8. 8. From ARPANET to Internet 1969 ARPANET - a single network with 4 nodes (funded from US Defense budget) 1973 work began on linking networks “ Internetting ”; first international links to UCL and Norway 1985 NSF takes over the backbone for interlinking networks (still government funded but by now more academic than military) 1995 NSF funding stops - commercial companies take over the Internet - by then it consists of over 50,000 networks connecting over 5 million computers
  9. 9. The original ARPA network
  10. 10. Internet traffic (2005) as depicted by TeleGeography Inc.
  11. 11. A more detailed depiction of Internet traffic from TeleGeography Inc. (2006)
  12. 12. http://www.telegeography.com/maps/internet/images/europe_map_large.gif
  13. 13. JANET - the Joint Academic Network in the UK
  14. 14. Source: The Guardian Friday 1 st February 2008 http://image.guardian.co.uk/sys-files/Guardian/documents/2008/02/01/SEA_CABLES_010208.pdf
  15. 15. A protocol is an agreement (set of rules) between the communicating parties ( peers ) on how communication is to proceed. Protocols
  16. 16. Q Why is it important? A It enables computers on different networks, designed by different vendors, to work together in delivering various applications; e.g. e-mail, file transfer, remote login (telnet), use of the web etc. TCP/IP was the key to turning the Arpanet into the Internet The TCP/IP suite
  17. 17. <ul><li>1964 Paul Baran (RAND Corporation) publishes paper on packet-switching networks </li></ul><ul><li>1974 Vint Cerf and Bob Kahn publish paper describing TCP </li></ul><ul><li>1978 Vint Cerf and others separate the TCP and IP functions </li></ul>TCP/IP key dates
  18. 18. <ul><li>Early core applications </li></ul><ul><li>File Transfer FTP ( SSH is usually now preferred) </li></ul><ul><li>Terminal access (remote login) Telnet </li></ul><ul><li>Electronic mail (E-mail) SMTP, POP3 </li></ul><ul><li>Newsgroups Usenet </li></ul><ul><li>The World Wide Web HTTP </li></ul><ul><li>More recent Internet applications include: chat systems, instant messaging, videoconferencing, video and audio streaming, Voice over Internet, peer-to-peer file-sharing, IPTV etc. They all have their associated protocols. </li></ul>Internet applications and their protocols
  19. 19. <ul><li>Every computer on the Internet has a unique </li></ul><ul><li>IP address - under the currently dominant IPv4 system it consists of four numbers separated by dots </li></ul><ul><li>e.g. 198.137.240.100 </li></ul><ul><li>identifies the main host computer at the White House </li></ul><ul><li>Because of the massive growth of the Internet the new IPv6 system has been introduced </li></ul>The IP address
  20. 20. The State University of New York at Stony Brook provides a service whereby you can find out the IP number of the Internet computer you are connected to. http://www.sinc.sunysb.edu/cgi-bin/MyIP Why not try it? Find your IP number
  21. 21. DNS is the hierarchical domain-based naming scheme and distributed database system for mapping host names and e-mail destinations to IP addresses. Domain names are easy (for humans) to remember names for the computers on the Internet i.e. those that have been assigned IP numbers DNS - Domain Name System (1)
  22. 22. ICANN (Internet Corporation for Assigned Names and Numbers) coordinates the assignment of IP numbers and Internet domain names . http://www.icann.org/ DNS - Domain Name System (2)
  23. 23. <ul><li>The top level domain covers two identifiers, separated by a dot </li></ul><ul><li>generic type or group (gTLD)- e.g. .com, .ed (or .co and .ac) </li></ul><ul><li>country codes (ccTLD) - e.g. .uk, .nl, .jp, .cn </li></ul>DNS - Domain Name System (3)
  24. 24. Sub-domains can then be created lower down the hierarchy by those responsible for that level e.g. userweb.port.ac.uk ICANN has recently (June 2008) announced a relaxation of the system of domain names DNS - Domain Name System (4)
  25. 25. <ul><li>Access to remote information (e.g. data sources, e-commerce, video on demand) </li></ul><ul><li>Person to person communication (e.g. e-mail, videoconferencing) </li></ul><ul><li>synchronous and asynchronous links </li></ul>The Internet puts you in touch with resources and people
  26. 26. <ul><li>via </li></ul><ul><li>copper wires </li></ul><ul><li>cable </li></ul><ul><li>fibre optics </li></ul><ul><li>microwaves (radio frequency) </li></ul><ul><li>communication satellites </li></ul>Network connections
  27. 27. <ul><li>architecture is a set of layers and protocols </li></ul><ul><li>the purpose of a layer is to carry out services for the higher layer in a way that is transparent to the higher layer </li></ul><ul><li>layers communicate with their peers according to known protocols </li></ul><ul><li>between layers there is an interface </li></ul>Network architecture
  28. 28. <ul><li>layers need to </li></ul><ul><li>identify senders and receivers </li></ul><ul><li>have rules for communication (protocols) </li></ul><ul><li>know about different available routes </li></ul><ul><li>have conventions about speed </li></ul><ul><li>identify and correct errors </li></ul>Design issues for layers
  29. 29. <ul><li>Local Area Networks (LAN) </li></ul><ul><li>Wide Area Networks (WAN) </li></ul><ul><li>internets </li></ul><ul><li>Tanenbaum also distinguishes Home Networks, Wireless Networks and Metropolitan Area Networks (e.g. based on cable TV) </li></ul>Size classification of networks
  30. 30. <ul><li>different software models: </li></ul><ul><li>fat client software </li></ul><ul><li>thin client software </li></ul><ul><li>Software as a Service (SaaS) </li></ul><ul><li>cloud computing </li></ul>client-server model
  31. 31. <ul><li>E-mail client software - examples </li></ul><ul><li>Outlook </li></ul><ul><li>Pegasus </li></ul><ul><li>Eudora </li></ul><ul><li>also web based e-mail systems such as </li></ul><ul><li>Gmail, Hotmail, Yahoo! </li></ul>E-mail clients
  32. 32. <ul><li>Simple Mail Transport Protocol (SMTP) (outgoing mail) encodes every e-mail message as a sequence of ASCII characters </li></ul><ul><li>Used to send e-mail messages from one server to another. Messages can be retrieved with an e-mail client using POP or IMAP protocols </li></ul><ul><li>Multipurpose Internet Mail Extension (MIME) </li></ul><ul><li>specifies how non-text may be transmitted by SMTP </li></ul>E-mail protocols
  33. 33. <ul><li>1971 - Ray Tomlinson of Bolt Beranek and Newman Inc. (BBN) invents the first e-mail program to send messages across a distributed network </li></ul><ul><li>1972 - Tomlinson adapts the program to run on ARPANET where it is immediately taken up with enthusiasm </li></ul><ul><li>1975 - John Vittal develops MSG , the first widely available e-mail program </li></ul><ul><li>1978 – the first incidence of “spam”! </li></ul>Key dates in the evolution of the Internet: Electronic Mail
  34. 34. The World Wide Web is a collection of inter-linked documents and associated files that are made available to people with computers connected to the Internet via a special protocol called HTTP ( HyperText Transfer protocol ) World Wide Web (WWW)
  35. 35. <ul><li>1965 Theodore (Ted) Nelson sets up project XANADU to establish a world-wide distributed library of information - he was the first to use the term hypertext (earlier inspiration from Vannevar Bush [1945]) </li></ul><ul><li>gopher system developed at University of Minnesota </li></ul><ul><li>mid 1980s - hypertext packages such as HyperCard (1987) and Guide were developed </li></ul>Key dates in the evolution of the Internet - precursors of the World Wide Web
  36. 36. <ul><li>1989 - creation of the World Wide Web and HTTP at CERN(Geneva) by Tim Berners-Lee and others </li></ul><ul><li>1993 - first publicly available web browser (MOSAIC) developed at NCSA </li></ul><ul><li>1990s - new browsers ( Netscape, IE ) - with helper applications and plug-ins for dealing with graphics, video etc. </li></ul><ul><li>1994 - W3C , the World Wide Web Consortium set up </li></ul><ul><li>2004 - Firefox launched by the Mozilla Foundation </li></ul><ul><li>2008 - Google launches its browser Chrome </li></ul>Key dates in the evolution of the Internet - the World Wide Web
  37. 37. Sir Tim Berners-Lee
  38. 39. <ul><li>telnet allows you to login to other remote computers on Internet to which you have access rights </li></ul><ul><li>e.g. I used to log in to the MIMAS computer at Manchester from Portsmouth using telnet to access data and to run econometrics programs </li></ul>remote access or terminal emulation telnet
  39. 40. transferring files from computer to computer on the Internet FTP File Transfer Protocol - first established 1971 FTP and FTP client software (e.g.. WS_FTP32) anonymous FTP today more secure protocols such as SSH are preferred file transfer
  40. 41. <ul><li>There is no single body in overall charge, but the following all have important roles </li></ul><ul><li>ICANN (Internet Corporation for Assigned names and Numbers) – manages domain names and IP addresses </li></ul><ul><li>UN (United Nations) – World Summit on the Information Society ( WSIS ) and the Internet Governance Forum ( IGF ) </li></ul><ul><li>ISOC (The Internet Society) – also the Internet Engineering Task Force ( IETF ) </li></ul><ul><li>W3C (World Wide Web Consortium) </li></ul><ul><li>We should perhaps also mention the regulators </li></ul><ul><li>Ofcom (UK) and FCC (US) </li></ul>Internet organisations and agencies
  41. 42. <ul><li>Many people have argued that the Internet should not be governed by a private (US) company (ICANN) but by a multilateral organization with international legitimacy and democratic processes – under United Nations control like the ITU (International Telecommunications Union) – some have suggested that the ITU should take over some of the functions of ICANN. </li></ul><ul><li>Kofi Annan set up a group called the Working Group on Internet Governance ( WGIG ) which presented a report to the second World Summit on the Information Society, be held in Tunisia in November 2005. Now available in book form “Reforming Internet Governance” </li></ul><ul><li>http://www.wgig.org/book-Launch.html </li></ul>Internet organisations and the United Nations
  42. 43. The Internet Software Consortium conducts a semi-annual survey of the number of Internet hosts (see next slide). But Zook (2000) cautions us about using this measure uncritically Internet metrics
  43. 45. Source: International Telcommunications Union website, accessed 15th August 2007. http://www.itu.int/ITU-D/ict/statistics/at_glance/KeyTelecom99.html The global number of Internet Users, 1991-2004
  44. 46. Source: Bandwagon effects in High-Technology Industries, Jeffrey H Rohlfs, MIT Press 2001
  45. 47. <ul><li>Other measures: capacity, web pages </li></ul><ul><li>There are problems with all these metrics (see my links page for more details). </li></ul><ul><li>But despite these concerns there is no doubt that there has been phenomenal growth in the Internet and its use - particularly since around 1994 - WHY? </li></ul>Internet metrics
  46. 48. Some important concepts (see Rohlfs) <ul><li>Network externalities </li></ul><ul><li>Complementary bandwagon effects </li></ul><ul><li>Interlinking </li></ul><ul><li>Interoperability </li></ul><ul><li>Common standards and protocols </li></ul><ul><li>Critical mass </li></ul>
  47. 49. <ul><li>Network externalities - the value of the Internet to any one user is an increasing function of the total number of users [Rohlfs] </li></ul><ul><li>Complementary bandwagon effects - part of the value of the Internet derives from the availability of complementary products, services and applications (e-mail, web browsers, news and information services etc..) As the network expands there are increased incentives for the suppliers of complementary products [Clements (2004) calls this an indirect network externality ] </li></ul><ul><li>eCommerce – opening up of the Internet to eCommerce in 1994 - despite the hype and the bursting of the dot.com bubble the Internet continues to grow and expand into new areas </li></ul><ul><li>Ease of use – the World Wide Web, HTML and browsers </li></ul>Reasons for the rapid growth of the Internet and its use
  48. 50. <ul><li>Varian (2004) interprets the Internet boom of the late 1990s as an example of “ combinatorial innovation ” – “components in the new technology can be combined and recombined to create new products” (Weitzman (1998) had used the term “recombinant growth”). Similar ideas go back as far as Schumpeter (1934). </li></ul><ul><li>Standardisation (allowing interchangeable parts) is an important part of such processes - as had occurred before, for example with the production of automobiles. Complementary products had been important then too (e.g. roads, gasoline, oil) – indirect network effects. </li></ul><ul><li>But unlike physical products Internet innovation was based on recombining software code, which due to the open source approach that was usually adopted, were not constrained by shortages of inputs. </li></ul>“ combinatorial innovation” and “recombinant growth”
  49. 51. <ul><li>Metcalfe’s Law - the value of the Internet to any one user increases as the square of the total number of users. </li></ul><ul><li>DeLong’s Law - the most important and cheapest links are established first and it becomes increasingly costly to connect the last few users – also on the demand side those who believe they can benefit most and so have the greatest WTP connect first. </li></ul>Metcalfe’s “law” or DeLong’s “law”
  50. 52. <ul><li>Lower transactions costs - automated systems can vastly reduce transactions costs </li></ul><ul><li>Global reach - more customers are within “reach” (especially for information products that can be delivered as well as ordered and paid for over the Internet </li></ul>E-commerce and e-banking drivers
  51. 53. Source: PIU Report on e-commerce Reduction in transactions costs Cost to bank - typical US funds transfer transaction ($)
  52. 54. Convergence, transition and diffusion <ul><li>Convergence : Internet, telecoms, TV, etc. </li></ul><ul><li>Transition : dial-up to broadband; voice (circuit switched) to data (packet switched) traffic; fixed (wires) to mobile (wireless); analogue to digital, broadcast to on demand; passive downloading to interactive and user-generated content </li></ul><ul><li>Diffusion of Internet access across the globe and within countries – but still a digital divide? Negroponte’s $100 laptop and UN’s mobile phone initiatives </li></ul>
  53. 55. Internet diffusion and the digital divide (1)
  54. 57. Internet access is more unequally spread than income Top 20% of people (by income share) have 86% of GDP 93% of Internet access Bottom 20% of people (by income share) have 1% of GDP 0.2% of Internet access United Nations Human Development Report, 1999 Internet diffusion and the digital divide (2)
  55. 58. <ul><li>To what extent can the phenomenal growth of the Internet in the last decade  be explained by economic factors? Use relevant economic concepts and models to support your arguments. </li></ul><ul><li>Hints: </li></ul><ul><li>You would need to include the following concepts: </li></ul><ul><li>(i) network externalities (ii) complementary bandwagon effects (iii) critical mass (iv) interlinking (v) common standards and protocols </li></ul><ul><li>You would also mention eCommerce, and possibly file-sharing, Web 2.0 and other applications giving rise to complementary bandwagon effects </li></ul>Possible essay question

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