Internet congestion

The Internet is a prime example of one type of good that is not handled well by an unaided market. Suppose you were given the following information:

• Two types of people use the Internet: business users and home users;
  
• There are 1 million users of each type;
  
• Each business user has a willingness to pay for hours of use given by P = 100 - 10Qb, where Qb is the number of hours she spends on line;
  
• Each home user has a willingness to pay for hours given by P = 4 - Qh/5, where Qh is the number of hours he spends on line;
  
• At low levels of traffic, when total user-hours is less than 10 million, the marginal cost of using the network is zero;
  
• After network traffic reaches 10 million user-hours, each additional user-hour causes $2 worth of external costs to other people. (That is, MCext = MSC =2!).

Please answer the following questions:

1. If there is no charge for using the Internet, how many total user-hours will business users spend on line? How many total user-hours for home users? Is the efficient? If not, explain in non-technical terms what is wrong with the situation and what features of the Internet create the problem.
2. Suppose a fee were charged per user-hour for access to the Internet. What should the fee be? Why? How many user-hours will each type of user spend on line now? How much revenue will the fee generate from each group? How much, in dollar terms, will it reduce the problem from (1)? How will different groups feel about the policy?