NYU economics professor Nicholas Economides finds that the best way to describe the Internet is to look at the industries it's displacing.
Congratulations to the Internet, which, believe it or not, turned 35 years old this September. There's no denying that this invention, which started in a lab with the transfer of bits and bytes between two computers connected by a 15-foot cable and which only reached the average person in 1994, has caused the most revolutionary economic change since the steam engine. For our enjoyment, I have assembled, behind the curtain, the industries that the Internet is leaving in its wake. Mr. Internet--this is your life!
Our first visitor was shell-shocked by the advent of E-mail, which put our lives and our need for immediate gratification into overdrive. With laptop computers, BlackBerrys, and even cell phones now bringing E-mail to us instantaneously, the U.S. Postal Service is becoming obsolete. Snail mail is becoming the communications choice of last resort. Mr. Postman, come on out and introduce yourself to a crowd that rarely sees a postage stamp.
The family used to gather around our next guest to listen to Benny Goodman, Abbot and Costello, Amos and Andy, and Orson Welles. A younger generation can now download hundreds of songs from iTunes and stream audio collections posted from their favorite Web sites. That's why, in the last five years, more than one out of every 10 radio listeners between the ages of 25 and 34 have stopped listening. Ms. Radio, come on out and don't forget to bring with you the radio titans, Clear Channel, Citadel Broadcasting, and Cumulus Media, who've watched their share prices plummet 23%, 40%, and 26%, respectively, in the last year.
Like its compatriots, newspapers are also becoming a relic of a bygone era when people ran to their sidewalks in the morning to get the morning news. Now, news clips are E-mailed to our desks, and we can check CNN.com or Fox News Online 24 hours a day. In fact, fewer people read the newspaper today than when John Kennedy was president, with circulation falling by more than 7 million papers since 1990. Perhaps feeling the heat, reputable papers like Newsday, the Chicago Sun-Times, and the Dallas Morning News have all admitted to falsifying circulation numbers.
What's more, newspaper advertisers, seeing the writing on the wall, have started what one leading observer has called a "10-year migration of dollars" from newspapers to Web sites. Newspapers have watched their revenue from help-wanted ads, for instance, plummet by more than $3.7 billion in the last five years, while online job boards saw their revenue rise by nearly $700 million during the same period. Not to put too fine a point on it, but the Internet's birth marks the beginning of the end for the Newspaper Age. Let's have Mr. Newspaper come on out from behind the curtain to pass the torch.
It might be harder to guess who our final friend is because the Internet has only recently set its sights on it. With nearly 183 million telephone lines used today, nearly every American continues to have a home telephone. With the blessing of the White House, Federal Communications Commission chairman Michael Powell has adopted new rules that mark the end of telephone competition as we know it. As the Bell telephone monopolies reconcentrate their power, consumers are facing higher phone bills, fewer choices, and less innovation.
Given the pent-up demand for phone competition, it's not surprising to see the Internet come to consumers' rescue, as cable providers, the Bells' competitors, and new carriers begin to offer low-cost, reliable telephone service over the Internet using voice over IP. With unlimited long-distance and local phone service costing roughly $35 a month and dropping, the Bells' victory at the FCC could be short-lived. Would SBC, Verizon, Qwest, and BellSouth (who appear to be quaking in their boots behind the curtain) please come say hello to your newest and strongest rival?
With so many Industrial Age institutions of our old economy either strewn about on the sidelines or facing oncoming Internet competition, there are many Internet successes that send their regards but who couldn't be with us.
One happy fellow busily dancing in the streets is Google, whose recent IPO netted the search-engine leader $1.7 billion. EBay, Monster.com, and Match.com--all wildly popular sites--have also transformed their industry's old way of doing business. Buying, hiring, and dating will never be the same and neither will the industries feeding off them. They unfortunately were also too busy to join us today.
As the Internet moves into adulthood, only time will tell who we will bring out from behind the curtain as the Internet transforms our lives even more in the next 35 years.
Nicholas Economides is a professor of economics at New York University's Leonard N. Stern School of Business and the executive director of the Networks, Electronic Commerce, and Telecommunications Institute.
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