Gordon Cook on Thu, 30 Mar 2000 04:16:08 +0200 (CEST)

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<nettime> May 2000 COOK Report on Internet Summary

[orig. To: com-priv@psi.com]

Commodity Market for Bandwidth Coming pp. 1- 8, 12, 15

Over the next 12 to 24 months experts predict that bandwidth will become a
commodity tradable in real time on commodities exchanges around the world. 
We interview Stan Hanks who was formerly VP of Research and Technology for
Enron Communications.  Currently he is very much involved in making the
commoditization happen.  (We have also interviewed Lin Franks of Anderson
Consulting and intend to publish that interview in our June issue.) 

As Hanks points out: If you get to the point where you have an oligopoly
of suppliers - which we pretty much do - and an increase in availability
combined with a historic decline in price, as well as a fair amount of
price elasticity associated with the thing in question, you start seeing
the development of commoditization. 

Hanks outlines in detail how a cost of about $2.75 cents per channel per
mile for OC192 capable lit fiber across a wide area network is derived. 
He then points out that because national networks average 25,000 route
miles of 144 fiber cables the initial cost of such a network will run to
multiple billions dollars.  This is a very hefty investment for something
whose wholesale price is declining at the rate of about 40% a year over
the past five years or so.  The problem is that when planning an
investment like this it is not possible to derive reasonably accurate
figures of income that might be expected from such investment.  Financial
exposure now is vast with no adequate way within the industry to manage
risk. Commoditization of bandwidth will provide the tools by which risk
can be managed. 

The first step that the industry can make in this direction is to
establish a benchmark price and uniform contracts.  Efforts are already
well underway to do this and success is anticipated well before the end of
the year.  Such a benchmark might be the price of a DS3 from New York to
LA or it might even be the cost of a wavelength of light on a DWM system
for a distance of 500 miles. 

A real commodities market will assure users that they will always be able
to get a supply of bandwidth, even at very short notice.  One may the
expert the internet business model to shift from the question will there
be adequate supply to the question of what it will do with the bandwidth. 
Having an assured supply at a predictable price will make it possible to
do many things with bandwidth that currently are not economic. 

Currently ISPs tend not to give the capacity planning problem adequate
attention. Their ability to turn up new bandwidth is hampered by the fact
that they don't have the financial management and projection kinds of
tools that enable them to go to their finance people and say if you give
me "x" dollars for new capacity I can give you "y" income within "z"
amount of time.  Before long financial analysts are going to be asking
senior carrier management what it is doing about the huge amounts of
unmanaged risks it carries on its books.  Suggestions are being made that
the way to manage this responsibly join in an industry effort to
commoditize bandwidth and eventual automate trading. 

The terms for purchase of fiber today tend to be negotiated from scratch
with each contract, and built around very long term duration - 10 to 30
years. Part of what is needed is a re-education of the industry to the
degree where it can grasp why purchase of bandwidth in terms of a few
hours duration to a few weeks duration will be better for the interests of
everyone than purchases for ten to twenty five years duration.  Sycamore
is getting a leg up on the rest of the industry not by focusing just on
optical transmission services but on building software that can be useful
in the provisioning of new bandwidth services. 

Ultimately, we may expect to see the vertical hierarchy of the big carrier
backbones devolve into a mesh. Currently these big networks don't just
connect to each other at a handful of places, they interconnect in all
kinds of interesting ways. But they connect only to each other and then to
their customers. This interconnection topology is going to start to evolve
in very interesting ways.  Customers of one vertical network, given the
opportunity do so, would like to be able to buy by bandwidth to connect
themselves with customers attached to a different vertical backbone.
Horizontal linkages that are then over printed onto the vertical ones.
Then you could move through the matrix of space either vertically or
horizontally. And you could do this in accordance with what your real time
switching and bandwidth equipment would allow. 

According to Hanks, the only reason that this hasn't happened to date is
two fold. First there isn't enough money in it in terms of applications.
Second that there is no way to manage the risk associated with doing it.
This horizontalization comes when A and B wind up being able to directly
connect to each other, on an "as needed" basis. Akamai and the other CDNs
- CDN = Content Distribution Network - are doing things to facilitate
this; Enron is also doing this.  Akamai's content distribution model sets
up horizontal routing for web sites in such a way where should traditional
routs become congested, Akamai's routing can switch from a vertical
organization to a horizontal paths across provider boundaries. Inktomi and
Digital Island after its recent merger with Sandpiper may also be regarded
Content Distribution Networks determined to build their own models of
horizontal connectivity across provider back bones. There are more of
these out there. "Coming Soon," as the saying goes. Hanks was at a venture
capital conference recently and found "CDN" to be one of the new hot

Sweden Goes Broadband pp. 9 -12

We interview Anne-Marie Eklund L÷winder, a senior project Leader of the
Swedish Government's Commission on Information Technology and
Communications (CITC). Ann Marie explains the rationale behind the
national fiber strategy presented to the Swedish parliament this week. 
The government is proposing a fiber build out that will connect together
all municipalities in all of Sweden.  The fiber is to be owned by the
municipalities and sold on equal access terms to ISPs which meet the
program's criteria.  A second and equally important part of the program is
designed to lead to a local build out that will result in an Ethernet jack
delivering TCP/IP at five megabits per second to every home and apartment
in Sweden. The interview also discusses Stockholm's experience with Stokab
which has fibered almost the entire metropolitan region over the past five

Napster's Impact, pp. 13 - 15

Napster is an application written by a 19 year old computer science
student last summer. Downloadable from the web, it lets users temporarily
turn their computers into servers for the purpose of swapping MP3 files. 
Grown hugely popular in the last several months, it accounts for a
significant percentage of Internet traffic.  According to university
network administrators, it is clogging campus connections to the Internet. 
We publish edited discussion on what can be done about the problem from
the CAIDA and NANOG mail lists.  Port blocking has been tried without
great success as students in many cases find other ports to use.  A new
program called Gnutella and far more powerful than Napster is under
development as well.  Some people are saying that Napster's impact on
Internet traffic may approach that of the web. 

Breaking the ICANN Code, pp. 16 - 23

Various court decisions are making ever more clear the advantage that
possession of the root gives to the US in maintaining its commanding lead
in global e-commerce. This is leading to resentment abroad.  Given the
course on which we are all headed, ICANN is likely to be at best a
temporary band aide on a festering sore until decisions of foreign courts
or governments fracture the US-controlled, authoritative root.  We discuss
both some of the ways in which this fracture might take place and what
impact it would likely have on the Internet's operation. 

While a fractured root would certainly not destroy e-commerce, the very
fact that it happened would be likely to pop the speculative bubble
supporting the stratospheric prices of Internet stocks.  It would
demonstrate that a globally-unified forward march of the global economy
running on internet "rails" is only a pipe dream. Many investors and VCs
would be forced to rethink the price value equations on which their
actions have been based.  Should contention over the root get serious
enough to throw prices of Internet stocks into a nose dive, the United
States would loose far more than any other nation in the world. This is
very likely what John Patrick and Vint Cerf and Esther Dyson had in mind
when they asked the venture capital community to contribute to ICANN last
summer cryptically warning that if ICANN failed e-commerce would also
fail. Certainly the ongoing uncertainty of how much of a global market for
business to business e-commerce would be easily reachable in the event of
trouble for the authoritative root would take the buzz off of most
e-commerce business plans. 

We arrived at the above conclusions after pondering Ed Gerck's essay
"Thinking" (April COOK Report, pp. 23-25). We find Gerck's article to be a
useful point of view for analyzing some unresolved issues relating to
ICANN and the Department of Commerce on the one hand and the DNS and
alleged need for a single authoritative root on the other.  Gerck sees DNS
as the major centralized component of an otherwise decentralized Internet.
In his essay "Thinking" he says that some of the choices made long ago in
the design of the DNS not only make it depend on a single root but also
"without the DNS there is no email service, search engines do not work,
and webpage links fail."  DNS is " the single handle of information
control in the Internet. And, in the reverse argument," it is "its single
point of failure." 

With something as powerful as the Internet, everyone wants more and more
to seize control, if only to keep others from controlling it.  It
certainly can be argued, as Gerck does, that the struggle for control of
DNS has become the focal point over the last four years of a diverse
coalition of actors (trade mark interests, IBM, ATT and others) that have
gathered together to form ICANN.  Now it is generally assumed under US law
that the organization which controls an entity bears legal responsibility
(liability) for the use of its power. Gerck suggests that under the
conditions of a single handle of control over the Internet, the
controlling organization's liability is potentially total. Thus given the
nature of ICANN's use of DNS as a means of grabbing control over the
Internet, the liability facing ICANN and anyone else who would emulate it
is essentially unlimited.  As a result, in structuring ICANN it has been
necessary to insulate all players from the consequences of their otherwise
unlimited liability. 

We have taken Gerck's essay and used it as a template on which we have
applied our own knowledge of ICANN.  This process has helped to bring a
number of issues into focus for the first time. In its eagerness for
control those who have promoted ICANN have taken all the critical
administrative infrastructure of the Internet DNS, IP numbers and
protocols and dumped them into the single ICANN basket. 

But having all our eggs in one basket and having in the DNS a single point
of failure creates the kind of prize that, as long as we still have
national economies competing against each other, the US government and its
major corporate allies will do what ever is necessary to protect from
foreign capture, or even from foreign influence. Since ICANN is the basket
holding all the eggs it, in the meantime, must be protected from its
unlimited liability by being made virtually unsuable. 

In order to make ICANN unsuable, its backers have had to create for it an
arbitrary structure that renders it immune from the inputs of those
communities that it is supposed to serve.  This arbitrary structure has in
turn prevented ICANN from inheriting the political legitimacy within the
Internet community that Jon Postel's exercise of these functions once
enjoyed.  ICANN follows a carefully scripted routine that supports its
role as guardian of all the Internet's administrative eggs that have been
in its single "basket."  This scripting greatly angers those who having
mistaken the ICANN process for being one of actual openness have invested
their time in hope of influencing the outcome.  However the play acting
also serves ICANN interests in that it can be spun by ICANN's public
relations firm in such a way that the casual press lacking the time and
ability to do its own research may be fooled.  Therefore ICANN has bought
the administration some short term time to regroup and maneuver. 

What we have done in this article is demonstrate (1) why ICANN can be
nothing more than a temporary fix (2) how ICANN is likely to fail (3)  why
the consequences of this failure will hurt the United States more than it
will hurt other nations, (4) why from ICANN's efforts designed at all
costs to shore up what is really an untenable effort to maintain long term
central control over Internet addressing there needs to be a switch to
efforts aimed at placing in the hands of each user the means by which he
or she shall be able to address and find Internet objects. 

ICANN was created as a diversion on the part of Ira Magaziner who
conveniently left the administration and returned to private consulting as
soon as it was established.  It is a smokescreen cleverly designed to give
the illusion to the rest of the world that the US is transferring control
of administrative functions over the net to a world body where the
Europeans and Asians would be led into thinking they could play a
significant role in policy making. 

And indeed just so long as they don't try to grab the root, American
policy is to play along with the Europeans and Asians and acting through
ICANN do such things as granting them direct control of their own country
codes, and the power to enable their corporations to have preferential
treatment over domain names on the excuse that such names can be treated
as trademarks.  Many other powerful groups have been given an opportunity
to play in the great ICANN charade. 

As long as ICANN is there, it gives the impression that others besides the
US government will be allowed a role in root server policy making and
control. In reality the continued heavy hand behavior of Roberts and Dyson
has made it possible to drag out the ICANN foundation process for another
year getting it conveniently past the upcoming touchy US Presidential
elections.  As a result the Clinton Administration has been able to extend
the dual relationship of the ICANN DoC cooperative agreement. 

The extension makes it possible to preserve ICANN as a maneuver designed
to deflect attention from the stark fact that without ICANN, the US
administration would seize the root servers by force rather than loose
control. This is the secret of why ICANN cannot be allowed to fail. 
ICANN's central purpose is to divert attention from the fact that the
Clinton administration has made a decision to treat the root servers as a
strategic telecommunications resource over which it is perhaps even
prepared to use the police power of the state to protect from falling into
the wrong hands. 

It would be encouraging to see some interest in Washington in the
incubation of the understanding necessary for the Internet and e-commerce
to cooperate in working its way out of the win-lose control situation in
which it finds itself.  The route of control has been tried.  As we have
shown in this discussion, not only has it not worked, it also looks to be
untenable on a long term global basis.  It is to be hoped that if our
policy makers understand that we are likely to loose more than anyone else
in a struggle to maintain our control, they may also come to understand
that they have the most to gain by removing all possible levers of control
from everyone's grasp.  If it becomes clear that no single entity can hope
to control the Internet, many strains in the present system could be
quickly dissipated.  We are a "can do" nation.  If the administration were
to understand that everyone would have more to gain from such an outcome,
we believe that there is adequate talent available to ensure success. 

**************************************************************** The COOK
Report on Internet Index to 8 years of the COOK Report 431 Greenway Ave,
Ewing, NJ 08618 USA http://cookreport.com (609) 882-2572 (phone & fax)
Battle for Cyberspace: How cook@cookreport.com Crucial Technical . . . -
392 pages just published. See http://cookreport.com/ipbattle.shtml

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