Internet traffic is approximately doubling each year. This growth rate applies not only to the entire Internet, but to a large range of individual institutions. For a few places we have records going back several years that exhibit this regular rate of growth. Even when there are no obvious bottlenecks, traffic tends not to grow much faster. This reflects complicated interactions of technology, economics, and sociology, similar to those that have produced “Moore’s Law ” in semiconductors. A doubling of traffic each year represents extremely fast growth, much faster than the increases in other communication services. If it continues, data traffic will surpass voice traffic around the year 2002. However, this rate of growth is slower than the frequently heard claims of a doubling of traffic every three or four months. Such spectacular growth rates apparently did prevail over a two-year period 1995-6. Ever since, though, growth appears to have reverted to the Internet’s historical pattern of a single doubling each year. Progress in transmission technology appears sufficient to double network capacity each year for about the next decade. However, traffic growth faster than a tripling each year could probably not be sustained for more than a few years. Since computing and storage capacities will also be growing, as

The public Internet is currently far smaller, in both capacity and traffic, than the switched voice network. The private line networks are considerably larger in aggregate capacity than the Internet. They are about as large as the voice network in the U.S., but carry less traffic. On the other hand, the growth rate of traffic on the public Internet, while lower than is often cited, is still about 100% per year, much higher than for traffic on other networks. Hence, if present growth trends continue, data traffic in the U.S. will overtake voice traffic around the year 2002 and will be dominated by the Internet.

The Internet is the latest in a long succession of communication technologies. The goal of this work is to draw lessons from the evolution of all these services. Little attention is paid to technology as such, since that has changed radically many times. Instead, the stress is on the steady growth in volume of communication, the evolution in the type of traffic sent, the qualitative change this growth produces in how people treat communication, and the evolution of pricing. The focus is on the user, and in particular on how quality and price differentiation have been used by service providers to influence consumer behavior, and how consumers have reacted.

The Internet is the main cause of the recent explosion of activity in optical fiber telecommunications. The high growth rates observed on the Internet, and the popular perception that growth rates were even higher, led to an upsurge in research, development, and investment in telecommunications. The telecom crash of 2000 occurred when investors realized that transmission capacity in place and under construction greatly exceeded actual traffic demand. This chapter discusses the growth of the Internet and compares it with that of other communication services. Internet traffic is growing, approximately doubling each year. There are reasonable arguments that it will continue to grow at this rate for the rest of this decade. If this happens, then in a few years, we may have a rough balance between supply and