UNIVERSITÄT POTSDAM - Prof. Dr. Paul JJ Welfens

So flat rate pricing will lead to a steep rise in demand for private and corporate Internet
use. This will likely result in increased investment in transmission capacities, due to
time-related bottlenecks. The resulting employment effects will likely represent a rising
share of the predicted increase in total employed persons (using the broader Internet
use indicator) in the total information industry. Flat rate pricing at the retail level demands
the introduction of similar models in the wholesale sector or rather in relations
between dominant network operators and service providers (CAVE/ CROWTHER,
1999).
Meanwhile, there are indeed ways for Internet providers to influence the times
at which users access the system. One conceivable option is that of bonus points for
users who go on the Internet at off-peak times, where the bonus points could be used as
“admission fees” for buying information stored in user clubs or for free access to certain
services. Other user incentives are also conceivable in the interest of optimizing
Internet use.
According to a number of current studies, the cost of data traffic based on Internet
protocol are significantly lower than in conventional telephone traffic; orders of
magnitude of 1:10 and more are quoted. This creates interesting growth perspectives
for Internet telephony services and other Internet-based services. Still, the Internet expansion
potential hinted at here can only be realized if new types– albeit cost-oriented
by all means – of flat rate models are applied at the wholesale and retail level.
4.3 Telecommunications and Foreign Trade
International trade among OECD countries and worldwide has strongly increased after
World War II. Explaining trade traditionally rests upon differences in factors supplies
and relative prices on the one hand (survey CAVES / FRANKEL / JONES, 1990); on
the other hand Schumpeterian influences associated with product cycle trade or trade
with differentiated products plays a major role; the latter has stimulated models with
monopolistic competition (e.g. DIXIT / NORMAN, 1980; KRUGMAN, 1979;
LANCASTER, 1980; HELPMAN / KRUGMAN, 1990). Technological aspects also
are important for goods characterized by static and dynamic scale effects. A very important
link exists between per capita income and trade: on the one hand rising per capita
income will raise the demand for differentiated products; on the other hand an increase
in national output will raise the demand for intermediate and final products.
Thus the impact of a rising aggregate output can – with population given – reflect two
different links between trade and income.
From a theoretical point of view, transaction costs and information costs play an
important role for international trade, but little empirical research has been made about
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