The internet is a huge network with a lot of technology. The amount of technology can be some what frightening. However technology can be put aside and the internet can be viewed as a network in which different web pages are connected to each other. Understanding the internet as a network will help you understand why the internet is changing many if not all of our businesses and industries. In this chapter I will talk about the myth of six degrees, which will hel you understand how connected as a network the internet is.
The six degrees
The Long Tail
The price of processing capacity contiues to decrease, the same applies also to the price of transmission speeds and combined with a network which is searchable, this creates new markets in particular for webcommerce. The Long Tail describes how this market has emerged.
The dilemma of the Commmons and the reallocation of rights
Companies seek for a competitive advantage. In many cases the source of a competitive advantage has been in unique resources. This is known in literature as a resource based view of the firm.
However in a world connected by the internet with ever growing communication speeds and processing capacity, which is due to Moore´s Law (https://en.wikipedia.org/wiki/Moore%27s_law), there seems to be a move away from unique resources towards sharing. The question of what is a non rivalry good and what is public or should be publicly available needs to be readdressed (see definition of public goods (https://en.wikipedia.org/wiki/Public_good).
A look into history will reveal several debates on public vs private or questions of ownership and rights. Should the user be allowed to open his or her wlan to other users? Should the telephone number be the property of the local telco or of the user (number portability), should computer source code be propriate or open? In the information age the question of rights has to be readdressed. This debate is evident in the traditional copyright vs creative commons issue. For societies to remain competitive they will have to think in which way they will change their laws. This discussion is clearly visible in our communities.
Six Degrees, scale free networks and flat rate
Have a look at the following video https://www.youtube.com/watch?v=5YyJSb-OGVU explaining the science behind six degrees of separation. The video will argue that human networks are very clustered and for human networks to be tightly connected you need people to have random acquaintances.
Many social networks also have preferential attachment (see wikipedia for definition). This means e.g. that popular people tend to become more popular or when clicking on a YouTube video you will opt for the more popular ones.
In 20016 I defended my PhD thesis. In my thesis I argued that the text message is a barrier to mobile growth and I argued that the transaction based business model of the mobile operators is inefficient and that operators should move away from a transaction based business model toward a flat rate business model.This migration has to a great extent taken place.
Flat rate is the same as a marginal zero price. In other words if you pay e.g. 20 Euro´s per month for all you can eat data, the marginal cost of looking at a YouTube video or looking into a twitter message is zero.
A populistic way to explain this business model is the following. Imagine you are a follower of the US president on twitter. would you pay a cent to read a tweet he has sent? Would the president pay one cent per receiver of his tweet. Neither would pay. therefore it is the marginal zero price, which has a great effect, and also ensures that average distance between two random nodes in a network remains small.
When I finished my thesis in 2006 there was no social media. Facebook was just about emerging so was twitter and Whatsapp etc. So you might be interested in how I came up with the idea.
Here is another way to understand it. Research is all about the data you collect and what interpretation you give to the data. Here is some data from the time 2004 to 2008 (so some fo this data is after I finished my Phd)
Remember that in c 2004 the tect message was very popular ( a 30 billion dollar global business) and that the consumer paid per transaction (e.g. 6 cents per message). Operators were all talking about how to increase revenue per user i.e. get more money from the customer.
One member of the parliament in Finland on one Christmas sent a lot of Christmas cards. They were all personally signed.How many do you think he sent. The answer is a surprising 18000. He did not have to pay anything (the tax payer paid) and it just goes to show that if we have to pay nothing (marginal cost zero) we might have the need to communicate with as many as possible. In the present parlaiment of Finland this is no longer allowed, the parliamentarian has to pay personally for the Christmass cards he sends. This piece of data is from physical networks and one can ask what happens when one moves from physical to virtual.
Another piece of data is from c 2005. One operator made a mobile subscription in which the owner of that subscription could send as amny sms messages for a flat rte price as possible. After one month the operator contacted two users saying that they were missusing the service. It turned out that these two were dating and sending each other 10 000 messages per month. Again there was data that marginal cost zero would lead to a situation were communication would explode.
Originally I had bumped into the phenomenon when living in Japan in 1996 to 1999. In 1999 the Japanese were the first to start with the mobile internet. They contemplated having the SMS service (text message), but at the last moment switched from sms to email. They also automatically gave the user an email address phone number @ oprator e.g. 12332452@nttdocomo.jp. This again led into an exlosion in messaging. In this particular case to advertisers spaming all the mobile phones.
Connecting this data to the theory (see the video on six degrees of seperation) and the understanding that social networks are highly clustered (we are friends with the friends of our friends) and that individual with huge networks will allow for the network distance between two random persons to shrink, led to asking the question what would happen if instead of transaction based pricing one would have flat rate pricing?
One should also keep in mind that because of More´s Law the capacity both computing and communication on the internet is continuously growing. Hence exlosion in communication might not congest the networks.
With this thinking, I concluded that the business model of the mobile operators is wrong and inefficient,
The only problem was that this challenged the thinking of among else Nokia, which at the time was regarded as the crown jewel of the community in Finland.
Be careful with the concept of flat rate. You will today find flat rate on e.g. wikipedia, but it talks nothing about the efficiency of information flow through the network. It simply talks about what the user pays. This is also known as a subscription based model. In your mind try and keep these two issues seperate. 1) flat rate allows for efficient flow of information through a network 2) Flat rate aslo referred to as subscription based pricing makes understanding price simple to the user. Two totally different perpsectives one is network centered the other user centered.
The Digital Landscape 