• The Internet turns information into tradable products
  • The Internet extends markets beyond State jurisdiction

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    The Internet extends markets beyond State jurisdiction

    Insofar as the Internet creates the means whereby intermediation can extend beyond the geographical boundaries of each country, it might appear obvious that markets will largely be able to evade State regulations. However, one could be dubious about: (i) the fact that technical means are sufficient to create a world market and (ii) even if such a world market were to exist, the inability of the States to monitor it.

    (i) The creation of a world market is often seen as unlikely, even in the medium term, for the following reasons:

    • the obstacle of language and culture: the strength of this argument varies greatly depending on the customer segments and the products being considered. It is probable that, in the case of the customers targeted in the short term by electronic commerce17 (individuals with a computer connected to the network) and if certain specific products are left out, cultural resistance will be limited18;

    • the efficiency of local markets: one might indeed estimate that, for daily purchases, the Internet is of little use - why shop on the network if it is more effective to go round the corner or to a department store? This argument confuses the selling process (order, payment, delivery, etc.) with the commercial intermediation as a whole which is principally constituted by the pairing19 of a demand (willingness to pay) with a supply (the product).

    (ii) Assuming that extended markets could develop on the basis of the Internet, would states be able to regulate them? Such monitoring would be difficult to implement, less for technical reasons (which are nevertheless often put forward as the main obstacle) than for political reasons:

    at a technical level, although, admittedly, every time a new technique is introduced, the police spend more time than the criminals to mastering it, one cannot see why, in the long term, legal procedures and police resources could not adapt to digital networks and use the methods of observation and data-processing they allow (perhaps there is more to fear in such new methods curtailing individual freedom);

    at a political level, the Internet development is in keeping with the current trend towards free markets;

    by demonstrating the particular regulations of each state and their inconsistency, the Internet strengthens the position of federal structures in their unifying strategy for cutting down on such local rules and regulations;

    by extending international trade, the Internet confronts regulations, allows them to be compared and sets up a kind of competition between them. The economies of states with restrictive regulations are therefore handicapped, which, in the long term, makes such states less prone to impose regulations;

    by acting as an initiator and model, the Internet is granted a kind of extraterritoriality. To enable it to develop and serve as an example, states are willing, for example, to remove taxes applicable to operations carried out through it20.
    It is therefore likely that the development of the Internet will go hand in hand with the setting-up of extended markets which states will be increasingly incapable of regulating. They will still retain the possibility of isolating their country from the rest of the world economy, but not that of supervising markets that will be evading their control.

    The Internet turns information into tradable products

    It has been seen above that the development of free markets for information products gives rise to a migration of value towards the generation of demand, an activity with decreasing returns. The Internet allows the implementation of precisely this type of procedure, which aims to monitor the conversion of general needs into strong impulses for specific products and services.

    The Internet economic model, therefore, appears paradoxical and unbalanced only because it is, as yet, incomplete. Strictly speaking, there is no Web economy - the Web’s services are currently forging the tools of tomorrow’s economy.

    Provision of such tools requires heavy investment which, for the time being, at least, is financed partially according to other models:

    • the mass-media model, i.e. the sale of an audience to advertisers: on the Internet, new forms of advertising, which are richer and more interactive than those of conventional media (press, TV, etc.) currently represent the major part of the revenues of large web sites;

    • the e-commerce model: in the case of certain products, printed catalogues may advantageously be replaced by catalogues which can be consulted on line. The placing of orders and payment may also take place on line.

    What currently exists on the Internet is only a transitory phase foreshadowing the “production of demand” model which will be characterized specifically by:

    1. the provision of free services. An Internet site offers users useful services, such as a search engine, data, news, e-mail, a host space, etc. with a view to gaining loyal and regular customers;

    2. the creation of nominative or statistical customer databases providing accurate profiles of each type of consumer and, if possible, of each individual customer; this can be achieved either by asking people to fill in on-line forms or by following the customers from session to session if they accept the cookies21 sent to them (or if they are unaware that their browser accepts them, etc.);

    3. the organization of these customer bases into communities led by leaders originating from the community itself. This is an essential phase in that the transition from need to desire is a collective process, consisting in invention but even more in imitation and fashion;

    4. the setting-up of the means whereby customers can become involved in the actual production of the products. This futurist model can currently be seen in assisting in the creation of Web pages and the organization of the collective production of freewares.

    Currently, Web site managers are investing vast sums of money typically, each year they lose half their turnover despite their relying on the mass media model and, more recently, the e-commerce model. Nevertheless, their stock-market valuation, which might appear to be excessive, can undoubtedly be explained by taking into account the customer-base capital they represent, which will soon make them essential intermediaries between producers and consumers. In such an economy, the loyal customer having agreed to give information about himself, the faithful customer, interested in being part of a community, is the essential resource. Links between sites form the currency exchanged between players, and the graph of such relationships describes the new industrial fabric.

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    The Internet extends markets beyond State jurisdiction

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