Dotcom boom could just be starting

THE internet boom will return - and it will be bigger and more profitable than the first time round. They sound like the views of a web nerd - or a lunatic. But this amazing assertion comes from respected US economist W Brian Arthur.

Conventional wisdom is that internet investment died when the high-tech bubble burst two years ago. But Arthur insists: 'History suggests that such pessimism is misplaced.'

And the economist, whose research was used in the legal battle aimed at breaking Microsoft's software monopoly, adds: 'The information revolution's best days might actually lie ahead.'

On 10 March 2000, the technology-rich Nasdaq index peaked. In that same month, investors scrambled to buy shares in internet bucket shop Lastminute.com amid predictions that the company's value would double.

Youthful co-founders Brent Hoberman and Martha Lane Fox became the goldrush pin-ups. Their images were splashed across the pages of both tabloid and broadsheet newspapers. The pair even appeared in a National Portrait Gallery exhibition, 21 Leaders For The 21st Century. The rest, as they say, is history. The Nasdaq has plunged by two thirds, fortunes have been lost and everyone has become extremely wise after the event.

But now some economic historians who have studied market cycles rubbish the idea that the golden era of the internet is over. Arthur recently wrote that the tech boom was 'merely one in a series of technological revolutions that have been occurring since the mid-18th Century'.

Each revolution - industrial (1760-1820), railway (1825-1875), steel and electricity (1875-1920), manufacturing (1910-1970) - spawned stock market bubbles that subsequently burst.

'If we lay the information revolution alongside the railway revolution, year for year, we'd now be somewhere around 1850 - just after the railway investment mania of 1845 and its crash in 1847,' says Arthur. Within 65 years of that particular market bubble bursting, Britain was to see its railway network expand from 2,148 miles to 21,000 miles - and some serious money made.

According to economists who agree with Arthur, technology must become so user-friendly that people do not think twice about it. In that respect, the internet is being absorbed into everyday life, despite slow download times and quirky graphics.

Once the glitches are ironed out, so the theory goes, the real money will be made by the players left standing. Craig Barrett, chief executive of Intel, the world's leading microchip maker, says: 'The internet is just beginning. This first phase has been more rewarding for business-to-business transactions. A phase in the future will make it bloom fully for consumers.'

And contrarians among Wall Street's brethren who prefer to buy 'when the streets are running with blood' are starting to take an interest in internet names that have infrastructure in place and the financial clout to soldier on. They include retail site Priceline.com, portal Yahoo! and Microsoft, which, with $36bn in cash could buy any internet company it wants. Forrester Research, which follows technology trends, estimates that online business will more than triple to reach $7 trillion by 2006 - equal to 27% of total trade in the US.

If this estimate is correct - and the economic historians think it is on the right track - then the Internet boom at the turn of the last millennium could prove to be a mere prelude to the serious money still to be made in cyberspace.