for all of the subscribers. The cost of the link depends on both the capacity of the physical link and the compensation that must be paid to other Internet providers to carry this traffic to the rest of the Internet. The cost of these links can be a major issue in small communities where it is difficult to provision additional capacity for broadband. So there is an incentive not to oversize that link. The economics and business planning of this capacity are similar for a cable or a DSL system.

The fact that the links from the point of presence to the rest of the Internet are often a source of congestion illustrates an important point. The number of users whose traffic must be aggregated to make the total traffic load smooth is measured in the thousands, not hundreds. So there may be a natural size below which broadband access systems become less efficient. For example, if it takes 10,000 active users to achieve good smoothing on the path from the rest of the Internet, then a provider who gets 10 percent of the market,19 and who can expect half of his users to be active in a busy hour, needs a total population of 200,000 households as a market base in a particular region.

Even if the broadband local access links themselves are adequately provisioned, bottlenecks may still exist, owing to such factors as peering problems between the broadband service provider and the rest of the Internet, host loading, or other factors. Performance will also be dependent on the performance of elements other than the communications links themselves, such as caches and content servers located at various points within the network (or even performance limitations of the user’s computer itself). These problems, which will inevitably occur on occasion, have the potential to confuse consumers, who will be apt to place blame on the local broadband provider, whether rightly or wrongly.


For an examination of the smoothing phenomenon, see David D. Clark, William Lehr, and Ian Liu, “Provisioning for Bursty Internet Traffic: Implications for Industry Structure,” to appear in L. McKnight and J. Wroclawski, eds., 2002, Internet Service Quality Economics, MIT Press, Cambridge, Mass.

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