If I have recalled the details correctly, the dot-com boom saw the laying of a great deal of fibre-optic cable in anticipation of increased traffic volumes. Unfortunately for the network infrastructure providers and telcos, this traffic did not materialise as quickly as they hoped, and so they were left to bear a huge capital cost while they waited for the revenue to come in.

Over the past five or so years, that spare capacity has been slowly diminishing, and it may not be long before demand exceeds supply at peak usage times. Things will rapidly get worse as China and India log on and when the long-anticipated boom in mobile internet usage finally materialises.

Many observers believe the arrival of the iPhone from Apple will usher in this boom. This would be an enormous relief to carriers, who have seen their voice revenues erode and so are anxious to make more money from digital content.

So, demand for additional bandwidth is only going to increase, which means we either invest significantly in both upgrading existing capacity and installing new fibre-optic cables, or accept that the “unlimited” use of the internet will have to come to an end.

Technology can play a part in reducing bottlenecks by, for example, distributing cached content closer to the consumer, but without new capacity the only solution will be to ration what there is. That raises the spectre of download caps for consumers, or the imposition of a two-tier service.

A number of large ISPs are already investigating the possibility of charging large content providers for “priority” access to their customers. Any such move carries the risk of being viewed by customers as a form of extortion, but the ISP would be quite within its rights to do so.

Far less clear from a legal point of view is the question of whether an intermediate ISP has the right to restrict the data flowing through its networks. There is no universal contract that governs the use of the internet. ISPs may have individual peering agreements, but a small ISP in, say, Melbourne, Australia, is unlikely to have an agreement with an ISP in Washington, DC.

So can a big backbone carrier unilaterally impose traffic shaping or other restrictions on the traffic between them?

I think we will need to see a radical reshaping of the basis on which the internet operates or a universally agreed set of acceptable practices or standards before this can happen. A piecemeal imposition of regional or localised traffic restrictions would raise some extremely complicated legal issues, resulting in a great deal of uncertainty and costs for all.