USER CHARGES FOR INTERNET - THE NEW-ZEALAND EXPERIENCE

New Zealand's research and educational network connects to Internet vi a an expensive trans-Pacific link to FIX-West. Initially subsidized by NASA, the link it, now self-funding. The link is managed by a consort ium of universities and research institutes, which has instituted a vo lume based charging regime to recover total operating costs from the p articipating institutions. Individual sites pursue independent policie s for recovering these costs from users, so that Internet users in New Zealand face a variety of pricing regimes. New Zealand therefore prov ides a useful laboratory for examining the impact of pricing on Intern et usage. This paper documents the evolution of New Zealand's Internet pricing scheme and the cost recovery policies utilized by the main si tes. The characteristics of the traffic to and from these sites is ana lyzed. We attempt to assess the impact of pricing regime on demand for Internet services using monthly data on traffic across the internatio nal link. Comparisons are drawn with the experience of Australia and C hile. Our results provide some insight into the likely impact of comme rcialization on the future of Internet.