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[FYI] (Fwd) <nettime> May 2000 COOK Report on Internet Summary




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Date sent:      	Wed, 22 Mar 2000 23:42:45 -0500
From:           	Gordon Cook <cook@cookreport.com>
Subject:        	<nettime> May 2000 COOK Report on Internet Summary
To:             	nettime-l@bbs.thing.net

[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 buzzwords

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 years. 

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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