I don't believe that the Internet is shrinking, as the title of this article states. The Netcraft survey sees a reduction in the number of available domains. The number of domains has no coorelation to the size of the Internet. The reduction in the number of available domains could simply indicate that people are beginning to understand how to fully leverage the nature of a domain, so more domains are simply not needed. However, without more data the we can not determine which, if either, is the case.
Survey: Internet shrinks as domain numbers fall [IDG InfoWorld]