Cyberjam: The Law and Economics of Internet Congestion of the Telephone Network

J. Gregory Sidak & Daniel F. Spulber


In this article we evaluate the economic and legal implications of allowing ISPs to avoid paying for interstate access by taking advantage of the FCC’s access-charge exemption for enhanced service providers (ESPs). We agree with the FCC’s conclusion that the dramatic growth of Internet usage and Internet services create significant benefits for the economy and the American people. We discuss, however, that the ESP exemption creates traffic jams at the on-ramps to the information superhighway- what we call a cyberjam.

In Part II, we examine the role that competitive prices play in influencing supply and demand in the market for access to Internet services over the PSTN. In Part III, we examine the economics of network congestion. In Part IV, we examine the pricing of access to ISPs over the PSTN. In Part V, we consider property rights issues associated with the costs of the FCC’s tentative conclusion to continue the temporary ESP exemption. In Part VI, we argue that is unlawful for the FCC to order incumbent LECs to continue subsidizing ISPs through the perpetuation of the currently temporary ESP exemption from interstate access charges, or through any other artifice.

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