NCPA - National Center for Policy Analysis

Technologies Converge In The Internet

December 18, 2000

There has been an explosion in business investment in the United States, dominated by spending for computers, software and communications networks. These new technologies are converging into a single communications system -- the Internet -- that may absorb all voice, computer and video traffic, says Newsweek's Robert J. Samuelson.

  • Between 1995 and 1999, business-equipment investment increased about 65 percent.
  • Three quarters of the increase occurred in high-technology -- computers and communications.
  • In 1999, the investment in new networks -- everything from fiber optics to mobile-phone towers -- was $99 billion, reports the Commerce Department, slightly exceeding the $94 billion investment in computers.

With this investment in new technology, the old voice-only communications system (AT&T's telephone network) is giving way to a network that can transmit anything convertible into digital signals -- data, voice (including songs) and video.

  • In 1984, a single fiber-optic strand carried about 50 megabits of data a second, says Anil Khatod, a top executive of Nortel Networks, the leading maker of optical networking equipment.
  • In 2000, the capacity of the same fiber-optic strand has multiplied about 32,000 times.
  • Stated differently: in 1984, it could carry the equivalent of about 700 phone conversations; now that exceeds 20 million.

Nortel's next generation of equipment -- due in a year -- promises to quadruple fiber capacity again.

Data transmission now exceeds voice traffic (the ratio is about 60-40, says Khatod, and growing wider every year). But prices are so low that revenues from voice services still exceed data's.

Source: Robert J. Samuelson, "The Gathering Tech Carnage," Judgment Calls, Newsweek, December 11, 2000.


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