Network externalities and universal service obligation in the Internet

This article examines the shape of network externalities for the 'broadcasting services' that can be offered by the Internet, It argues that, because of these network externalities, the marginal value of an added participant to the network could be quite high as the percentage of the population that is connected approaches 100%. Lessons are drawn for the desirability of a Universal Service Obligation for the Internet, and it is shown that it is preferable to subsidize the senders of broadcasting messages rather than the receivers. (C) 2000 Elsevier Science B.V. All rights reserved. JEL classification: L51; L96.