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Assessing the Impact of the Mega-LECs

VIEWS: 303 PAGES: 116

									Assessing the Impact of the Mega-LECs
Value in the IXC Acquisitions Is Hard to Find
We Search Meanwhile for its Impact on Enterprise Networks
and for a Framework for Local Infrastructure Building
SBC and Verizon, the nation’s two larg-       the fact that SBC is paying only slightly
est local phone companies, are beginning      more for ATT’s never bankrupt global        Volume XIV, No.s 4,- 5 July-Aug 2005
the process of acquiring ATT and MCI          assets ($16 billion) than Comcast and        ISSN 1071 - 6327
- the two largest IXCs. Nextel, a wire-       Time Warner are paying for the assets of    des focuses on Sprint. However, what is
less carrier is acquiring Sprint, the third   bankrupt Adelphia Cable Company ($14        missing from the interviews and discus-
largest inter exchange carrier. Looking       billion). ATT was once was a 100 billion    sion is the conviction on the part of most
at these events, many see consolidation       dollar jewel of the American economy,       of our experts that the consolidation will
and evaluate them as good for equity          while Adelphia - bankrupt by fraud - has    have a positive long term impact on the
holders. Consolidation is good, these         a small footprint and only 4.5 million      industry.
analysts say, because they assume that        customers. These figures might well
economies of scale will bring stability       tell even the novice that there is little   Extensive Symposium Discussion both
to a telephone business that continues to     agreement on how to value “networks.”       reacts to the interviews and tries to find
be hollowed out by first generation VoIP      Where then does one turn to find mean-      some agreement on what a modernized
systems like Lingo and Vonage, and sec-       ing in the midst of chaos? The COOK         landscape may look like. There is much
ond-generation systems such as Skype.         Report sees no easy answer.                 interest in the moves to build municipal
I think the analysts are wrong. What has                                                  networks, but little agreement on the
actually occurred is that voice has be-       Examining Phase                             right way to proceed. What is elaborated
                                              Change
come a software application like email                                                    in the August portion of this two part is-
and we are on an inevitable trend where                                                   sue as the result of discussions between
the most cost-effective way of deliver-                                                   Bob Frankston, Fred Goldstein, David
                                              Consequently, this two-month issue
ing voice will be via IP networks that are                                                Reed, Bruce Williamson, Frank Coluc-
                                              examines what David Reed calls phase
no longer under telco monopoly control.                                                   cio and others, is the fact that the mu-
                                              changes going on in American telecom.
Stability will prove to be elusive.                                                       nicipal and community network build-
                                              The goal is to bring some greater under-
                                              standing into focus. The issue begins       ers have not adequately thought through
The consolidation process that is getting                                                 their strategy. This portion begins with
underway will be, at best, a temporary        with an essay that examines what I be-
                                              lieve is a conceptual stalemate in fram-    an “essay-interview” on page 39 where
fix for the telco’s problems. At worst, it                                                Frank Coluccio offers part one of a de-
may cause so much uncertainty for en-         ing an economic and policy basis neces-
                                              sary for moving forward.                    tailed tutorial on how to begin thinking
terprises that it begins to speed up the                                                  about and planning for community net-
process of enterprises building their own
                                              There follows an interview with Farooq
networks. Whatever happens it will be
                                              Hussain that offers a general analysis                  On the Inside
a lengthy and tumultuous process as
                                              of the LEC acquisition of the IXCs and
demonstrated by the three-month-long
                                              suggests an outcome that could leave
                                                                                                Mega-LECs vs Local
Qwest sideshow that raised the price
to Verizon of MCI by roughly 3 billion
                                              room for some competition rather than               Infrastructure
                                              the instantiation of a new monopoly.                    Contents     p. 2
dollars.
                                              Another interview with Tom Evslin ex-          Please READ Explanatory Note
That the value of the carrier’s assets is     amines the state of affairs with ATT and
                                                                                                        page 4
difficult to determine is evidenced by        yet another interview with Martin Ged-
Contents
Assessing the Impact of the Mega-Lecs
Value in the IXC Acquisitions Is Hard to Find
We Search Meanwhile for its Impact on Enterprise Networks
and for a Framework for Local Infrastructure Building                       p. 1
Interviews
Mergers Seen as Moment of Telecom Transformation
Farooq Hussain Asserts that Mergers Will Achieve
Operational Cost Savings
Adds that Even with last Mile Control, Metro Gigabit Ethernet
Opportunities Leave Room for Competition and Innovation                     p. 13

Mega-LEC Mergers Make No Sense Since They Fly in Face of
Broader Trend Toward Horizontal Layering
Tom Evslin Warns that IXC and LEC Vertical Operation
Shield Managemnet from Customer Contact                                     p. 22

How an Effort to Form a Wireless Open Application Platform at Sprint
Became a Walled Garden Focused on Billing for Every Bit                     p. 28

Symposium Discussion April, 2005
The Muni Network Wars -
Reports from the Trenches
Colorado, Texas, and Tenessee in April 2005                                 p. 34

Interview - Turned Essay
Forming A Framework for Municipal Networks
Beginning With Taxonomy And Architecture
Frank Coluccio Explains Why it is Time to Think
Logically and Thoroughly About Network Governance -
We Begin an Exploration of Investment in Telecom Infrastructure             p. 39

Part One of Two Parts
We Begin an Exploration of Investment in Telecom as Infrastructure          p. 39

Institutional Networks, Muninets, City Wide Wi-Fi Nets                      p. 40

The Problem of Intersecting With the Rest of the Telecommunications World   p. 41

Multiple Dwelling Unit Nets and Neighborhood Area Nets                      p. 42

Service Offerings Fall Victim to the Incumbent’s Asymmetric Network
“Cookie Cutter” Operations                                                  p. 43

The Problem with Copying the Incumbent’s Architecture                       p. 44


                                              2
                            The COOK Report on Internet July August 2005


A New Framework for First Mile Architecture                                p. 45

Understanding the Difference Between the Sea Change in Europe and
Asia and What is Happening in the US                                       p. 46

Defining the Problem by Looking at Service Choices                         p. 47

Balance Needed Between What Is Possible and What is Affordable             p. 47

It’s All Local                                                             p. 48

Muninet as LoopCo?                                                         p. 49

In Part Two We’ll Consider Three Options and Pick One                      p. 49


Symposium Discussion April 9 - May 9, 2005
Network Architectures and the Duopoly’s Plans for the Last Mile
A Discussion on Where the Technology and Economics are Headed

MCI-Verizon: A Happy Ending, But for Whom?                                 p. 50

LEC Survival Through the Enforcement of Last Mile Asymmetry?               p. 51

Build Adaptable Flexible Infrastructure                                    p. 52

But Where is the IXC Acquisition Value?                                    p. 53

The Real Issue is to Find the Funding Path from “Here” to “There”          p. 55

Issues Affecting Triple Play Services and the Market for Metro Fiber       p. 59

LECs Betting Their Future on Bundled Residential Services                  p. 61

Optical Capacity Analysis                                                  p. 62

Connectivity Frameworks                                                    p. 66

Broadband Technologies Impact Both Enterprise and Last Mile Networks       p. 69

Communications and Phase Change                                            p. 70

For End user Infrastructure -- What’s Meant By a Raw Pipe?                 p. 73

So What Kind of Access Does LoopCo Sell?                                   p. 74


                                                3
                    COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA



IPCo Versus LoopCo                                                                                                    p. 78

The Proper Place for IP and How to Create LoopCo                                                                      p. 81

Divestiture One                                                                                                       p. 82

Divestiture Two                                                                                                       p. 84

Symposium Discussion May 17 - 19, 2005
Video - Examining the Plans of the LECs versus the Entrepreneurs                                                      p. 88

The Terms of Debate Are Still Very Muddy                                                                              p. 88

“Bronx Beats Babbio to Broadband Video”                                                                               p. 90

Verizon Fiber As a Walled Garden                                                                                      p. 91


Interview and Discussion Highlights                                                                                   p. 94

Executive Summary                                                                                                     p.112

Side Bars
Where is Google Going?                                                                                                p. 57

Can One Apply Strategy to Telecom?                                                                                    p. 63

Broadband Properties Contents and Article Summary                                                                     p. 89

Some Good News From Nepal - Mahabir Pun's Network Wins World Bank Grant                                               p.115




An Important Note to Our Subscribers -
This is a two part July August issue. Please begin with the Executive Summary and Introduction on page 112. Then go
to page one and read straight through. This issue includes clickable urls and page links from your Acrobat Reader. The
September issue will continue our exploration of the economics technology and politics of local infrastructure. The first part
of the introduction on page 1 has been revised to bring it into conformity with what this issue actually does. The remainder of
the first 38 pages has been changed to provide a complete Table of Contents and Contributors list and the text has had the
benefit of some further editing and formatting.




                                                             4
                                The COOK Report on Internet July August 2005


Symposium & Interview Contributors to this Issue
   Affilation given for purposes of identification - views expressed are those of the contributors alone


 Jim Baller, Partner in Baller Herbst law firm & Expert on Municiple Networks

 Frank Coluccio, President DTI Consulting, NYC, high-capacity optical netw’k consultant

 Peter Ecclesine, Technology Analyst, Cisco

 Tom Evslin: Founder and former CEO of ITXC

 Jim Forster, Distinguished Engineer, Cisco

 Bob Frankston: developed Visicalc and Lotus and later home networking at Microsoft

 Martin Geddes, Consultant and author Telepocalypse Blog

 Fred Goldstein: Principal of Ionary Consulting, author of The Great Telecom Meltdown

 Tom Hertz, CTO, Opportunity Iowa

 Dave Hughes, Owner Old Colorado City Communications and wireless advocate

 Farooq Hussain, Principal Network Conceptions

 Francois Menard, Canadian policy expert and municipal fiber network architect

 Andrew Odlyzko, Director Digital Technology Center, University of Minnesota

 David Reed, Internet pioneer, spectrum policy expert, currently with Media Lab & HP

 Jere Retzer, Sr Mgr, Next Generation Networks, Oregon Health & Science University

 Bill St Arnaud,Director Ca*Net4 , Canarie, Canada

 Chris Savage, Telecom attorney and Partner at Cole, Raywid & Braverman in Wash. DC

 Ron Sege, CEO Tropos

 Richard Stastny, Austrian Telecom author VOIP and ENUM Blog

 Jeff Sterling, Interconnected Associates, Bellevue, Washington

 Matt Wenger, Product Manager North America, PacketFront

 Damien Wetzel, Network Consultant Paris, Formerly with Akamai and Internap

 Bruce Williamson, CEO Windward Associates - economist formerly with SBC

 Ron Yokubaitis, CEO Giganews




                                                      5
                       COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
works as a third path to the duopoly of the    Stupid, Perfect and                           of economic concepts founded on owner-
                                               Locally Financed and
mega-LECs and MSOs.                                                                          ship. For well over a century traditional
                                                                                             circuit switched telecommunications had
We find that the infrastructure builders       Controlled - In Search                        developed in a complex understanding of
may have failed to ascertain the appropri-     of a Third Leg for 21st                       what the monopolist owner of telecom-
ate business models but, even more to the
point, just what parts of the public net-
                                               Century Networks                              munications could and couldn’t do. A
                                                                                             rigid framework was established that, af-
work infrastructure they wish to replace.                                                    ter divestiture, was kept alive by an FCC
                                               TCP/IP riding on the Stupid, end-to-end,
The essay- interview with Frank Coluccio                                                     attempting to act as Solomon. While the
                                               Network has ripped apart our ability to
(p. 39) begins to lay out the complexity                                                     framework attempted to maintain the vi-
                                               understand how to take our new technol-
of the issues that face municipal network                                                    ability of the old ideas of ownership in
                                               ogies and apply them to creating a viable
planners. One of the critical issues that is                                                 the context of what the new technology
                                               economic future for telecommunications.
likely to be overlooked is that municipal                                                    enabled, most observers would agree that
                                               We have unlimited bits, storage and pro-
and community networks have to decide                                                        it is now dead in the water, attacked by
                                               cessing power. However, we lack any
not only technology questions but also                                                       everyone, and respected by none.
                                               conceptual framework to understand how
need to get community understanding
                                               to use that power in a way that attracts
and buy-in on the financing and business                                                     It is time to do a reset on the framework
                                               investment and builds stable telecom net-
model. They must also determine what                                                         of our thinking. Such a reset might en-
                                               work infrastructure.
services will be provided, as opposed to                                                     able participants in these on going battles
relying on the existing services of the de-                                                  that are tearing apart the structure of one
                                               Isenberg conceptualized the stupid net-
clining PSTN.                                                                                of our most vital industries to look at the
                                               work in the summer of 1997. His words
                                                                                             events dragging us down with an under-
                                               foretold to ATT it had no future busi-
Therefore, we conclude that while the ul-                                                    standing that would provide answers to
                                               ness case. He was correct. But it took
timate end state some number of years in                                                     what so far the Stupid Network and Para-
                                               another fives years of thinking for Goo-
the future should be telecom as a form of                                                    dox of the Perfect Network so far have
                                               gin, Isenberg, and Weinberger to general-
infrastructure utility, the road to the end                                                  not.
                                               ize the ideas of the Stupid Network into
state will be filled with difficulty, uncer-
                                               the Paradox of the Perfect Network. We
tainty, and further upheaval.                                                                I suggest that the ideas of the Peruvian
                                               learned that the Stupid Network was the
                                                                                             economist Hernando de Soto are worthy
                                               only economically cost-effective network
Up to this point it seems that we have                                                       of being applied to the current telecom
                                               but that paradoxically, because it was so
been stuck with an analysis of change in                                                     deadlock. De Soto has gained a note-
                                               cost-effective, no one could see how to
telecom starting with the Stupid network,                                                    worthy reputation and been embraced by
                                               monetize it and make money from it. It
and going onto to the Paradox of the Per-                                                    a spectrum of capitalist opinion makers
                                               was the perfect network, but because it
fect Network and then halting in frustrat-                                                   ranging from Bill Clinton, through the
                                               was so perfect, it repelled capital invest-
ed despair with a view of the future no                                                      Republicans as a whole and extending
                                               ment. One could invest and build but not
more insightful than the suggestion that                                                     even into the libertarian Cato Institute.
                                               only would one likely make no profit, one
the telcos should oblige us all by dying.                                                    He has done this by astutely observing
                                               likely would not even get all one’s capital
Something that they are not especially in-                                                   over the past 25 years the roadblocks
                                               back in the end.
clined to do.                                                                                to capital investment that exist in third
                                                                                             world countries.
                                               I am tempted to argue that the result has
I therefore offer the following “essay” as
                                               been catastrophic, especially in the con-
a suggested aid and framework for think-                                                     Here is how Art Kleiner, whom I first met
                                               text of laissez-faire capitalist ideology
ing about our current problems. The es-                                                      “on line” in 1980, describes de Soto in
                                               of the post 9/11 United States. We have
say also suggests that systematic focus on                                                   an article from the Summer 2004 issue of
                                               here a set of expectations for technology
user built and owned infrastructure is de-                                                   Strategy+Business magazine:
                                               investment and operation that clashes
sirable. The rest of this two-month issue
                                               with the reality of our best telecommu-
will explore how we might begin to get                                                       “Nasser City, a neighborhood on the
                                               nications technology. The result is stag-
from here in the dawning age of Mega-                                                        northeast side of Cairo, contains the big-
                                               nation and gridlock. It is a two-legged
LECs to the “there” of a very different                                                      gest housing project in Egypt. Its con-
                                               milking stool - a contraption that makes
kind of infrastructure.                                                                      crete block apartment buildings, each six
                                               getting milk out of the cow into a very
                                                                                             stories high, stretch for miles. When the
                                               difficult and stressful task. I propose to
                                                                                             Peruvian development economist Her-
                                               look for ways out of this malaise by ex-
                                                                                             nando de Soto presented a photograph of
                                               ploring some new ways of thinking about
                                                                                             this project to Egyptian Prime Minister
                                               economic value, law and technology.
                                                                                             Atef Ebeid and his cabinet at a meeting
                                                                                             in 1999, they recognized it immediately.
                                               Capitalism is most fundamentally a series
                                                                                             It has been a landmark in the country ever


                                                                  6
                                       The COOK Report on Internet July August 2005
since President Gamal Abdel Nasser’s           banker give them a mortgage?”                   An Important Question
socialist regime built it in 1960. Accord-
ing to two observers of the meeting, Mr.       The COOK Report would say to Her-               I suggest that we have an important ques-
de Soto asked, “Do you remember how            nando de Soto that, given the standard le-      tion to answer. Is our society as a whole
tall it was when it was built?”                gal economic value system of advanced           better off when there has been a funda-
                                               capitalism, he is quite correct. For vari-      mental change in the value of what tele-
“Yes,” said the minister of housing.           ous reasons, in the third world the system      communications networks enable and
“Two stories.” “Then who built the other       of aristocratic privilege that was over-        that change of value goes unrecognized?
four?” “                                       thrown by the idea that the government          Surely not. From de Soto’s point of view,
                                               is there to serve the needs of all its people   the society of his native Peru was in le-
Thinking about the other four stories re-      has not taken root. The question for us         gal and economic gridlock because the
minds one of the layered network inter-        should be what insights can be found in         system excluded those whose inclusion
loping into the telco vertical silos made      his views on legal and economic disen-          could strengthen it. In his world de Soto
possible by the additional independent         franchisement and applied to telecom for        saw how the centralized, official system
layers of the OSI stack. Of course prob-       formulating a path that moves us beyond         excluded the edge-based economy.
lems immediately occur. When sources           the Paradox of the Perfect Network? Part
of value can come from new directions,         of the problem may be found in what the         “For the last 30 years, “ writes Kleiner
the old models created to exploit a previ-     network enabled. The intelligent vertical       “Hernando de Soto has been presenting
ously static system must begin to change.      silo network enabled top down control           such stories to government leaders, first
Since the stewards of the old system           and distribution of content.                    in his native Peru, and then through-
control the legal foundation on which it                                                       out the developing world and in former
rests, it is not surprising to see them re-    Not surprisingly, in 1993, the network          Communist nations, to explain how their
sist change. The rise of the Internet in       owners planned to carry their content dis-      legal systems and bureaucracies prevent
the 1990s has seeded telecom with a huge       tribution world forward. Because there          poor but inherently capable people from
anomaly that will eventually change the        was more capacity, the easy answer was          helping themselves to overcome their
fundamental nature of the system . This        to fill it with more content. They would        poverty - and the chronic underdevelop-
change is proceeding apace throughout          use the Internet to deliver 500 channels        ment of their countries.”
the world. Unfortunately, in the US its        of cable TV. Before the disruption of the
pace is disturbingly slow.                     Web, in their minds, all roads led from         There are plenty of talented, aggressive,
                                               the well-controlled center to the couch         entrepreneurial, and technologically ca-
Meanwhile Kleiner continues: “As Mr.           potatoes at the edges. Until the network        pable people among the worlds’ poor.
de Soto knew well, developing nations          owners realized that users could attach         “You cannot walk through a Middle East-
are rife with these sorts of anomalies. He     their own website printing presses at the       ern market, hike up to a Latin American
and [his] researchers . . .had found doz-      edge, they regarded us as low hanging           village, or climb into a taxicab in Mos-
ens more during the years they had spent       fruit waiting to be plucked - monthly. If       cow without someone trying to make a
collecting data and studying the hidden        we could be treated as inert consumers          deal with you,” Mr. de Soto wrote in his
economic life of Egypt. Cairo was ap-          rather than producers, life would be much       best-selling book, The Mystery of Capi-
parently full of illegal apartments con-       more simple and the business model of           tal - Why Capitalism Triumphs in the
structed literally on the rooftops of pub-     telephony’s vertical silos could continue       West and Fails Everywhere Else (Basic
lic housing, where contractors had paid        relatively undisturbed.                         Books, 2000). Why, then, is it so difficult
off local officials (and the first- and sec-                                                   to succeed at transforming the economies
ond-story residents), built extra floors,      Yet the belief is that those of us on the       of these nations?
and sold the apartments them-selves.           edge are not just the low hanging fruit
The extra stories could be seen plainly        - inert and waiting to be plucked, but          What separates poor nations from
by anyone walking by, but they were in-        rather that, in the most active sense, we       wealthy ones is “the mystery of capital,”
visible to the government. There were no       are the source of the value and innova-         says Mr. de Soto. To solve that mystery,
official records of the structures or their    tion and deserve to call the shots rather       he argues, one must understand why it is
inhabitants, no titles of ownership, no tax    than be called upon. “We have the ideas,        so common for the poor in non-Western
records, and - most important for Egypt’s      the initiative, the innovation,” we would       countries to be locked inside large, in-
economic future -no way for apartment          say, “yet the system is designed to block       formal, extralegal economies where they
owners to use these assets as collateral       us and frustrate us at every stage.” How-       are unable to accumulate wealth.
or capital. “I’m sure the residents have       ever, the system is difficult to change be-
pieces of paper saying they own the            cause, set up for different times, its legal    To be sure, there are always some people
property,” says Mr. de Soto.                   foundation, blocks new sources of value         in even the poorest countries with reg-
                                               and continues to recognize the old ones.        istered assets, credit with global banks,
“But if the public records don’t recog-                                                        and formal protection of their property
nize that the property exists, how can a


                                                                 7
                       COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
against seizure and disputes. “But they       formulate what this might look like.            stand the new realities just as de Soto
are only a tiny minority,” Mr. de Soto                                                        seeks to educate the legal and political
writes in The Mystery of Capital “The         How to Free Ten Trillion                        systems of many third world capitals
                                              in User Creativity?
great majority of people. .. cannot get the                                                   about the steps that they can take to en-
fruits of their labor represented by the                                                      able otherwise disposed citizens to ac-
formal property system,” Kleiner con-                                                         quire stakes in the current order.
                                              Kleiner drives home his points about de
cludes.
                                              Soto: “Lacking legitimacy, most citizens
                                              of developing nations are driven into the       User’s Labor Must
                                                                                              Convert into Ownership
Art’s description ought to get readers of
this list and readers of the COOK Report,     underground economy, where they can’t
in general, thinking. I can hear David        register their assets in any system that        and Control of their
                                                                                              Networks
Isenberg growling now that in the intelli-    banks recognize; where they must spend
                                              inordinate amounts of time bribing offi-
gent network no one can ever be reward-
                                              cials and protecting their property from
ed for creativity and technology inven-                                                       It is time to redefine the terms of debate.
                                              thieves; where they obtain credit at exor-
tion. The intelligent network demands                                                         It’s not network technology or topology.
                                              bitant rates, often from organized crime;
stagnation, stability, and lack of change                                                     We understand those. It’s the user’s la-
                                              and where their wealth has far less im-
to satisfy the business model needs of its                                                    bors that must be monetizable! Until a
                                              pact than it otherwise would. Indeed, Mr.
owner. What we have is the opposite of                                                        new set of, and locus for, understanding
                                              de Soto has estimated that what he calls
what the old network demands.                                                                 where value is to be found and how such
                                              dead capital assets that currently can’t
                                                                                              value can be established, there can be no
At least a part of our problem is that no     be used to spur investment or economic
                                                                                              progress. Property rights may not be quite
one is stepping back far enough to ask        growth and are controlled by the world’s
                                                                                              the term needed for fresh understanding.
what the role should be for telecommu-        poor - adds up to as much as $10 trillion.
                                                                                              But if not property rights, what is needed
                                              If it could be converted to ‘living capi-
nications networks in the 21st century.                                                       is something similar.
                                              tal’ by giving people legally enforceable
With the nature of the technology chang-
                                              rights to the property they already have
ing the cost and locus of production of                                                       One must ask: where does value reside in
                                              (and the knowledge to use those rights to
what traverses the network, network                                                           the stupid network?
                                              grow their assets), then the developing
ownership will never be the high-income
                                              world would finally gain the leverage to
growth productive sector that we naively                                                      End users create content (that is bit
                                              achieve a healthy free-market economy
extrapolated from what we thought we                                                          streams on their machines). But can they
                                              and vibrant middle class.”
observed during the roaring 90s.                                                              feel that creation of these bit streams
                                              I would ask list members to think about         gives them monetizable property rights
In terms of what the network could carry                                                      just by virtue of the fact that they own
                                              what we have been discussing for the past
then versus what it can carry now, net-                                                       all the bits? No. They need a network, an
                                              year. Because the developed westernized
work construction cost then was quite                                                         infrastructure on which to get the bits to
                                              and legalized network system of the pre-
expensive versus now. So cheap that car-                                                      market. Does he who uses the network
                                              Internet era belongs to the telcos, rather
riage of bits on a per session basis may                                                      have new property rights that used to
                                              than being the source of potential salva-
be thought of as the uses of transistors in                                                   belong only to the network owner? Or
                                              tion for the entrepreneurial spirits on this
an integrated circuit. They are so cheap                                                      perhaps I should just say at the very least
                                              list, it is a roadblock. The lords of the old
as to be unworthy of measurement in the                                                       do network users have a claim to the
                                              telco order use the rents generated from
overall situation. But the current proper-                                                    attention of those who write the legal
ty-based legal and regulatory framework       their end users to maintain their power
                                                                                              framework for some control over what
hasn’t changed. And most people don’t         by spreading fear uncertainty and doubt
                                                                                              kind of network is created. Yes. Because
even understand that it should change.        among law makers who are unable to un-
                                                                                              in it’s absence one need only look at the
                                              derstand what the problem is and wonder
                                                                                              titanic struggles underway to constrain
We have huge investments of capital in        why us nerds complain so fiercely.
                                                                                              what users can do with their bits. The
a dying industry. There are a few trillion                                                    ammunition being leveled against them
                                              The problem is that a property system
dollars in dead capital in the American                                                       being asymmetric channel designs and
                                              is needed. Instead, the current formal-
LECs and PTTs of the rest of the world.                                                       lopsided quality of service treatment be-
But we have only done the first two-          ized vertical network silo system in place
                                                                                              tween incumbent’s content and that of
thirds of the analysis need to finish the     today is the way to prevent the growth
                                                                                              others. All this can be done by the in-
task of overturning the past. We have the     of live usable capital in a telecom world
                                                                                              cumbent since it, and not the users, owns
stupid network. We have the paradox of        where value is not to be found in the
                                              cheap commodity transport of bits, but          the network.
the capital-repellant perfect network. We
need a final foundation for understanding     rather in what economic value can be de-
                                                                                              Yet the telecom of the perfect network
and agreeing on the place of end-to-end       rived by network users who can plug into
                                                                                              has no conceptual framework of owner-
user controlled photonic networks in our      the grid and start their own businesses.
                                                                                              ship and control to match what has been
economy. In this essay I want to begin to                                                     made possible by the technology revolu-
                                              We need to help the law makers under-
                                                               8
                                         The COOK Report on Internet July August 2005
tion of the past twenty years because the        year or two, but I have seen as yet no sys-     users ask for the opportunity to belong to
theorists of the stupid and perfect net-         tematic attempt to map out the variations       a world in which they can derive some
work have seen fit to ignore the concept.        and attempt a “cookbook” of what might          benefit from their own creativity and en-
They have left us a two legged stool that        be done and where.                              trepreneurial spirit.
is inherently unstable. What property
rights exist, and the legal fabric on which      Establish a New                                 We should think about networks in terms
                                                 Ownership Base
they rest, are still those of the intelligent,                                                   of who owns them, as we realize that the
circuit-switched networks of 50 to 20                                                            ownership of a network defines the terms
years ago. If you look at the way the In-                                                        and conditions of its use. Given the cur-
                                                 One path forward is to establish a new
ternet is run in the USA today, you find                                                         rent standoff in the US, the owners of the
                                                 ownership base. That base can be a net-
that the old telecom regime wants the us-                                                        old networks have few incentives to build
                                                 work fabric that is municipal or commu-
ers in their place and gets upset when it                                                        new ones. Change will likely not come
                                                 nity-owned and has the openness associ-
does not find them there.                                                                        here until the debate can be reset and re-
                                                 ated with public utilities. Just so long as     framed in terms that do for the hundreds
But how can the old intelligent network          you do not damage the network, you can          of millions of end users on cable co and
property rights be modernized?         The       plug into it and use it.                        telco networks what de Soto did for the
first step is to spread a more broad under-                                                      disenfranchised peasants of Lima.
                                                 How do you sell, or give, or make it pos-
standing of the economic changes in the
                                                 sible, for an end user to set up a stake in
cost of building networks. The second                                                            In this case however, it is not they who
                                                 the new network? The users now are do-
step, and one really that must take place                                                        will join the progressive fabric of the le-
in parallel, is to increase policy maker’s       ing what the extra-legal peasants of de         gal status quo. Instead it is a change in
and citizen’s understanding of the pur-          Soto’s third world do. They are spending        understanding of the old order that will
                                                 their time and energy building four new
poses to which these new networks will                                                           enable the authorities to grasp that, given
                                                 stories on top of the original two of the
be put.                                                                                          the strengths of the new technology, they
                                                 Cairo housing project. They are building        only way to enfranchise growth and prog-
It must be understood that because of            hidden networks (peer-to-peer and en-           ress for our entire society is to instantiate
the increasing criticality of broadband to       crypted) to enable them to escape detec-        policies that encourage networks but by,
the economic life of communities, it is          tion by the feudal overlords of the intelli-    or on behalf of, users for the develop-
not a naïve socialist plan to suggest that       gent networks. The economic resources           ment of their local communities.
communities be free to build their own           are poured into the issue of whether or
networks. Public interest and advocacy           not the old order can preserve its old sta-     The task will not be an easy one be-
groups must explain what is possible and         tus, old wealth, and old privileges.            cause the technologies are continuing to
even more important begin to show why                                                            change and the ways in which networks
                                                 It seems that it is really only when the
it makes good economic and legal sense                                                           can be built are very complex. What is
                                                 network is a utility - owned by its users
to think of telecom networks as utilities                                                        often not realized is that plans and fi-
which need to be enabled by the citizens         - that it can support the users’ stake in the
                                                                                                 nancing programs that make sense in
of their communities as public goods for         fabric. Absent this end the fabric is lousy
                                                                                                 one geographical area may well make no
                                                 and the users take refuge in peer-to-peer
the locations where they live.                                                                   sense in another. As Peter Ecclesine says
                                                 and other approaches resistant to formal-
                                                                                                 viable future network solutions will dif-
We must understand first why this should         ization of the centralized owners rights.       fer from locality to locality. At the local
be done. Next we must educate local              Having no stake in the network, the users       level the different mixes of population,
leaders in understanding the number of           must spend time and effort in hiding their      industry leadership and physical envi-
ways in which it can be done.                    activity.                                       ronment mitigate against one size fits all
                                                                                                 solutions.
                                                 If the users can’t do what the technology
Their priorities must become ones of de-
                                                 makes possible because they don’t own
scribing the ways in which networks can                                                          But at the very least, end-user-owned, or
                                                 it, they will use it by stealth and figure
be built and financed and to get people in                                                       at least end-user-governed networks, and
                                                 out how to do what they want anyway.
a community thinking about which direc-                                                          enterprise-owned networks must be no
                                                 Our system, given the new technology,
tions will be most suitable.                                                                     longer seen as risky gambles but rather
                                                 has flipped from the days of centralized        as strategically chosen paths to better
                                                 intelligent networks. The creativity at
Do they want the city or county to build                                                         futures. The third leg of the stool that
                                                 the edges cries out not for formalization
it? Do they want an association of prop-                                                         we must now design for telecoms future
                                                 by being included in the old legal order
erty owners to build it? What is the fi-                                                         must be one of educating our localities
                                                 of the intelligent network but rather it
nancial model to be followed? Is it to be                                                        why they must “get wise” and pull them-
                                                 cries out for the opportunity to become
amortized as part of a real estate venture?                                                      selves up by their own bootstraps.
                                                 something other than dead capital to be
There have to be numerous possibilities.
                                                 taxed and exploited by the absentee own-
Many of these are underway and have                                                              The story of the future must become one
                                                 ers of the old networks. Instead edge
been discussed in our pages in the past                                                          of local communities taking responsibil-
                                                                  9
                       COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
ity for their own prospects. We should         believe he has framed the rule of law and      an economist and statistician who has
expect to see more of the following con-       property ownership values in a way that        worked for SBC and now heads his own
clusion to one community’s efforts as re-      explains much of what has, and is, hap-        consulting firm. He lists three problems
ported by Jim Baller on his private list.      pening in the world today. How this ap-        – in bold faced italics on the next page
                                               plies to the telecom transformation is less    - that need to be addressed. Beginning
Black Hills (SD) energy utility to sell        clear, although there are lessons in his       with the September issue it is my cur-
successful telecom subsidiary: “We’re          writings that are universal in application.    rent intent to explore these issues in more
getting out because we’re primarily an                                                        depth with Bruce.
energy company and we accomplished             Your post does not, however, take your
what we set out to do, which was to            approach to the logical conclusion; sepa-      Williamson: Gordon, I truly welcome
bring state-of-the-art telecommunica-          ration of property (the physical infrastruc-   your dose of scientific skepticism, and
tions to the Black Hills. No one else at       ture) from the “network” itself. Explicitly    the questions you raise. It seems to arise
that time was willing to do this.” (Jim        recognizing silo’s of ownership without        from your sense that something is miss-
Baller notes: About a third of the com-        acknowledging that there is no self-inter-     ing in the dialogues in blogs and else-
munities that formed their own electric        est by the silo owners in changing this        where about utility ownership, the power
utilities sold them to the private sector in   structure implies there is no solution. We     of the pipe, the shibboleth of IP, the latent
the 1920’s-30s after achieving their goal      disagree.                                      power in municipal initiatives to chal-
of avoiding being left behind in obtaining                                                    lenge incumbent inertia.
the benefits of electrification.)              The physical structure is not cost free,
                                               although the incremental cost of using it      In my economics training and research
http://www.billingsgazette.com/index.          approaches zero over time. If you sepa-        I have some background in the econom-
php?id=1&display=rednews/2005/04/27            rate physical structure which has a fi-        ics and financial modeling - and history
/build/business/25-have-heard.inc              nite, and relatively fixed cost, from the      - of municipal, state, and federal electric
                                               network which has essentially zero cost        generation capacity. It’s a long history to
Tom Hertz who is CTO of Opportunity            per increment of use (or at least declin-      learn from. There are many traps (some
Iowa had this to say: Your essay is rel-       ing costs per increment over time), then       deliberately laid by investor owned
evant to what our original goals were in       all the wailing and gnashing of teeth over     electric utilities), some goof ups, some
Iowa. In fact it reads much like our “es-      the lack of profitability becomes moot.        self-destruction examples in munici-
sential infrastructure” approach to the                                                       pal finance (e.g., issuing debt based on
cities. That is, the physical structures       Public ownership does not use GAAP or          revenue from generation, but dumping
need to be commonly-owned in the same          require profits in the capitalistic sense.     revenues into municipal general funds,
manner as other essential infrastructure       And it shouldn’t. The “costs” incurred         forgets to do facilities maintenance, and
(roads, sewers, airports, and the like).       by society in public investments are re-       uses the new source of revenue to give
This is because the value to the economic      coverable mostly via intangibles such as       pay raises). Incidentally, municipalities,
(and other) well-being of the entire com-      economic development, quality of life,         if bond financing their networks, are re-
munity (country) is so fundamentally im-       improved educational opportunities, and        quired by the municipal bond covenants
portant. Despite the monopolists, alarm-       the like. Economists measure intangibles       to build reserves and maintain the finan-
ists and anarchists, we are convinced that     all the time, but as noted in a recent post    cial and operating integrity of their net-
common (public) ownership of essential         (Goldstein?), economics is a soft science,     works while repaying their debt.
telecommunications infrastructure does         and the answers depend on the assump-
not logically require any more control         tions, not on unchanging physical laws         Profit, called “earned surplus” in mu-
of use by its owners than do streets and       (ignoring nano-tech laws, where every-         nicipal finance, serves the same purpose
highways.                                      thing is weird).                               it does in an investor owned utility. Cer-
                                                                                              tainly it is owned by the residents of the
We have maintained this philosophy             We have preached, since the beginning,         municipality, but its existence on the
throughout the OpportunityIowa cam-            that structural separation of the network      books (and not sucked off into the city’s
paign; indeed, portions your post reads        from the underlying physical infrastruc-       general fund), and the maintenance of
like a transcript of the sermon we have        ture must be the goal. The path there          adequate reserves for debt servicing and
been giving (and continue to give when-        looks much like the bad parts of Middle        O&M, proves to investors in the bond
ever we find an audience). Reception has       Earth, but I am neither Frodo nor Gan-         market and other municipal entities that
varied, as is the case with most transfor-     dolf, Hertz concludes.                         the municipal venture is on sound foot-
mational ideas. But perusing the press in                                                     ing - and if needed, the city could finance
Iowa over the last few months leads us         An Economist Proposes                          additional ventures on more favorable fi-
                                               a Framework for Further
to believe that some (perhaps small, but                                                      nancing next time. I am very much in fa-
significant) part of the sermon has been                                                      vor of well planned municipal forays into
sticking.                                      Analysis                                       the broadband market. We aren’t going to
                                                                                              get to S. Korea’s situation with abundant
I have read de Soto (some time ago), and       Editor's Note: Bruce Williamson is             bandwidth by relying on the dinosaurs -

                                                                  10
                                     The COOK Report on Internet July August 2005
and the regulators and lobbyists that as-    end state, e.g., abundant bandwidth; ex-        to bathe, cool, and boil into steam? End
sist them - to provide it. Our market sys-   tensive, inexpensive transport, and the         users will find myriad of creative uses at
tem has had the wonderful precedent of       lush paradise of creative possibilities un-     the margins of the river- some end users
municipal ownership to stir our markets      leashed at the fringe of the network.           will become producers, creators of new
to change constructively. Let’s tap that                                                     value and transformers of the river’s util-
resource.                                    I’m all for it. I’m just trying to see how      ity into alternative, and valued forms and
                                             we shall get there, and what “there” will       possibilities.
There are clearly enormous benefits to       look like, if we subject our thinking to
adding competitors to the industry. I can    a little rigorous economic analysis of the      Right now, a few incumbent investor
think of examples from the 1905-1925         markets of producers and consumers, and         owned telecom and cable utilities own
period in the Northeast where the large      a time path (or transitional path) as tastes,   the senior water rights to our pristine
IOU’s (like Niagara Mohawk Power)            preferences, prices, costs, and technolo-       river, and we hold junior rights. We can’t
tried to lock up run-of-river rights to      gies evolve. It is not “simple” at all. But     readily alter the essence without conflict.
rivers that had sufficient head for hy-      we must be as simple as possible before         Ron Coase would have something to say
dro generation. NiMo lawyers roamed          the models become richer. Otherwise we          in that specific instance, but the analogy
the Adirondacks and the foothills trick-     will be bogged down in trivialized details      also gets a little strained, or drained. We
ing towns into selling power generation      without discovering the insights we seek        leave it there.
rights off of 19th century spillways -       - and very much need, to be predictive,
simply to lock out potential competition.    and instructive.                                I digressed. We have three problems
Some cities fought back (Auburn, NY)                                                         that must be tackled with a useful de-
and kept dams that had powered mills         Indeed, the paradox of the best network         gree of simplicity and clarity, in order
in the 1800’s, and in the 1980’s pressed     is not a paradox - it is a template for a       to see our way clear of the slippery eco-
ahead with municipal financing of new        perfectly competitive industry thriving at      nomic swamp:
generating capacity. The bottleneck in the   the margin of the network.
1980’s was the ability to put that power                                                     1. What is a useful analytic model of
out on a grid owned by the IOU’s (if         So how does an oligopolistic market             the industry today, that captures the
you remember the great “avoided cost”        structure, held in place by a web of reg-       sense of costs (partly tied to technol-
debates) in the NYSPSC. Well managed         ulation (which is not all bad, given the        ogy), number of competitors, extent of
competition from municipals has always       greed that runs through oligopolistic           markets, price, and returns to capital
kept the IOU’s more honest than they         corporations) - how does an oligopoly           (both large guys/girls and little guys/
would be without competition. That can       get eroded sufficiently by intelligence at      girls), etc.
happen with broadband markets as well        the edge to dissolve the vertically inte-
- and it can happen despite the Bush/Re-     grated sinews created over the previous         2. What is the model proposed for the
publican control at the Federal level.       century?                                        transition state? If it is an oligopoly
                                                                                             holding the reins, in what ways does
But let’s turn to the core of my comments    Is technology or markets the deus ex            the oligopoly foreseeably become al-
today. A source of my own scientific         machina - or both, and when and where,          tered by markets and technology? Is
skepticism is the predicament we find        why and how? How does the value of in-          there more than one way this can hap-
ourselves in. The Stupid Network con-        formation, and the ability to price infor-      pen? (I am certain there is).
cept is normative economics (i.e., what      mation along certain margins, play into
should be), not positive economics (what     the return to investors at the highly com-      3. What is the stable future market
is). During both the WTF and F2C con-        petitive fringe? (I am certain that will be     structure that results from our hy-
ferences I was sketching various analyti-    the key).                                       pothesized transitions? In which in-
cal models of the industry structures that                                                   stance do we end up with the Best
were being tossed about. Some audience       These are questions, the answers to             Network? In which instances could
members and speakers proposed (again,        which would satisfy my curiosity. It ain’t      we end up somewhere other than with
normative economics) what the market         just IP, for god’s sake (no pun), it’s what     the Best Network? And when would
should be, but the descriptions of how we    smart people do with it. IP is like the deep    this be? What were the transforming
would arrive there was anything but an       and clear river of H2O that flows through       aspects or roles played by technology,
economic model that could pass muster        our frontier settlement. The channel, the       prices, market conditions, regulation
or clarify the debate to a larger audience   bottom water, the surface water. If it is       and politics?
outside the room. We heard confiscatory      clear and drinkable, are all substitute
schemes, we heard “hang all the law-         and complementary uses also required to         When I say the Stupid Network is nor-
yers,” we heard from lawyers, libertar-      leave it pristine? What about reservoirs/       mative economics, that is not pejorative.
ians, inventors, historians, lobbyists and   temporary holding? What about treat-            A “fair and just social order, founded in
CEO’s. We heard just about everything        ment? Can we dam it and generate power          a fair and just economic system” is also
possible to hear when thinkers give free     also? Can we have fish ponds and agri-          normative economics, but it is something
reign to their thinking about a desirable    culture? Can we run it into our houses,         I believe in deeply. But because norma-
                                                              11
                     COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
tive economic propositions leave us with
a burden of subjectivity about good and    The economic debate can proceed along-      These were some ideas I had during the
bad outcomes, we circle too often. The     side - and benefit from the technology      Conferences last year and this year; re-
way forward to clarify the blogging is     debate. The technology debate must also     cent list-serve discourse brought me back
to establish an analytic economic frame-   be able to learn from the economic dis-     to my thoughts about market structure
work whose assumptions are explicit, not   cussion, because what we ultimately will    evolution and matters like municipal en-
implicit, and whose essential elements     live with is a technology embedded in       try, both notions serving well to fast for-
are all posed as eminently testable hy-    our economic existence, five, ten, twenty   ward from a largely technology-defined
potheses.                                  years hence.                                discourse about the future.




                                                             12
Mergers Seen as Moment of Telecom Transformation
Farooq Hussain Asserts that Mergers Will Achieve
Operational Cost Savings
Even With Last Mile Control, Metro Gigabit Ethernet
Opportunities Leave Room for Competition and Innovation
Highlights                                      ness model that is based on local access       local providers would sell long distance
                                                for the last mile with a very costly infra-    and the long distance providers would
Editor’s Note: Farooq Hussain held              structure that demands continual invest-       sell local. But for the latter to happen,
significant positions at Sprint and MCI         ment and upgrading. They have had huge         the long distance providers would have
during the 1990s. His most recent role is       cost cycles that simply don’t relate to        to have access to the local incumbent’s
as the president of Network Conceptions,        the pace of communications innovation          infrastructure. There was no other way
a Washington DC based telecom consult-          elsewhere.                                     to reach the residential or small business
ing firm. I interviewed Farooq on April                                                        customer since the cost of building out
1, 2005. Farooq’s last major interview in       The services they provide are ones that        such infrastructure was considered to be
these pages appeared in the June - August       have often been supplanted in the mar-         both too high and unnecessary. The no-
2004 issue.                                     ketplace by other services that the ILECs      tion was that the incumbent local service
                                                have entered into. For example, their          provider could operate both a wholesale
Hussain: I think we are at a moment of          source of wireline voice revenues is,          business model for the sale of access
transformation in the telecom industry          for the most part, being cannibalized by       as well as deliver service to residential
- a global watershed that is as exciting        their own wireless operations. The ILECs       and business users. In return for open-
as the NSFnet transition was a decade           have to be asking themselves what they         ing access to their network, ILECs were
ago. However, the circumstances are             have to offer their customers that no one      to be able to compete for long distance
very different. It’s certainly not a gold       else does. Ultimately, they have only          services.
rush atmosphere as before. The euphoria         one thing in their favor. They offer their
is not there, but I think nonetheless that      customers a network connection. How-           But with the Inter-eXchange Carriers
we are at a moment of substantial change        ever, this connection is a point of access     (IXCs), the ILECs are now acquiring a
that represents the beginnings of a trans-      from which their customer goes off and         line of business where people are ask-
formation of the telcom industry. Of            does a bunch of interesting things - ap-       ing: ‘Why when you spent the last three
course, there is still a lot of wreckage left   plications such as voice and video/audio       years fighting them and taking over their
from the dot com bubble and the telecom         that are not necessarily directly related      customers, both in the CLEC and IXC
“nuclear winter” and the final outcome          to revenue generation for the provider         space, are you suddenly buying them?
of that is not yet clearly definable. What      of the network service. Considering that       What you are buying is not any longer a
is different about this transformation is       the network is really the only asset they      sustainable business but rather one that is
that it is something we want representing       have, it is likely reasonable for them to      eroding rapidly.’
change in the form of replacement and           want to protect this asset in the most ag-
renewal rather than a recovery of the cur-      gressive manner possible. Whether it is        The erosion of the long distance business
rent business models.                           regarded as fair or unfair, the rationaliza-   is due to wireless and to IP broadband
                                                tion they are making is easy enough to         while broadband voice can be provided
What is of interest to me is not the speci-     perceive.                                      by the carrier itself. One cannot help but
ficity of the consolidation - namely why                                                       wonder under these conditions what the
is Company A buying Company B but               If this is the case, you must ask what         unstated rationale is for the ILEC acqui-
rather what is happing in general that is       is taking place that forces them to pick       sitions of the IXCs?
causing the consolidation to occur? I be-       up a line of business that is comparable
lieve that the consolidation is occurring       in respect to their local voice business       If you look at specific companies and
because the industry is being replaced.         - namely the long distance business. This      circumstances, you can always come up
When consolidation takes place in other         is an area that is competitive in a way        with something that would contradict
industries, there are usually well-defin-       that their local access services are not.      a more general theory. I would suggest
able changes in supply and demand that          But it is also subject to the same price       however that there is also value in look-
the consolidation brings into equilib-          erosion that they see in their last-mile       ing for the more generalizable trends. I
rium.                                           business.                                      would therefore conclude that the general
                                                                                               value for the ILEC that does exist at the
In the case of an ILEC, you have a busi-        Now going back to the 1996 Telecom             end of these acquisitions is that the larger
                                                Act in the US, we had this idea that the       size of the combined base of the two
                                                            13
                      COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
companies (the ILEC + IXC) is enough          and they know how to operate at levels       tion of the competitive base. Over time,
to trigger a substantial restructuring of     of scale that are very large, what you       on the IP side, I think alternatives such
the combined entity for the better. While     create is an environment below that level    as wireless will emerge. But rather than
all this can also be viewed as leading to     of scale that is very open to competition    pin everything on wireless let’s just say
the lay off of thousands of people and        - because the consolidated ILEC-IXCs         other broadband providers because there
the cut back of capital expenditures by       would be very large they are not prob-       are other competitive DSL providers,
some huge amounts, one can equally say        ably able to enter that smaller market       although, as a percentage of the total
that this is an over-simplification and       space competitively relative to other        space, they don’t reach very much today.
that there are tremendous opportunities       service providers such as re-positioned      Consequently, the consumer is really not
of scale that will enable savings and effi-   CLECs, and Integrated Access service         ideally positioned as a target market for
ciencies that might allow the emergence       providers delivering metro and local         the competitive space.
of a new generation of “super carrier.”       area broadband.
                                                                                           But those same consumers are ideally
I think that the idea of these economies      Consequently as a result of this consoli-    positioned for applications that they
of scale is a very strong motivator and       dation that creates duopoly, there should    want to have access to that come down
that it is more significant than any as-      also be a result that creates a group of     that pipe. This could be anything from
sessment of the intrinsic value of the        very large companies at the top and a tre-   pay-per-view movies to all sorts of other
target company itself.                        mendous amount of space in the middle        content and applications apart from just
                                              and a large market environment below         voice.
COOK Report: And if the technology            that is open for competitive service pro-
transformation is ongoing, they have got      viders that are able to be more innova-      COOK Report: But what exactly are you
to engage in cost savings wherever they       tive and nimble in responding to new         saying about access to the pipe?
can possibly grasp them?                      market needs in services and technology
                                              - which is roughly where the consolida-      Hussain: That what we are heading
Hussain: Right. They know how to op-          tion seems to be going at the moment.        towards with the consolidation of the
erate as a large entity and they are now                                                   ILECs and IXCs will be difficult to de-
going to be an even larger one. In this       I believe that this competitive space        fine precisely ahead of time.
sense becoming larger should play to          underneath the small group of very large
their strength. I am making some huge         companies while needing a watchdog           Think about the earlier CLEC model
generalizations for the sake of having a      is actually competitively open territory.    where CLECs were given the right to
discussion and seeing where it leads us. I    One where a lot of innovation can poten-     set themselves up in competition and
am saying that the ILECs have a motiva-       tially happen. This innovation is likely     terminate their traffic by handing it over
tion that can be articulated in detail but    to be very healthy and generate a lot        to IXCs. They had network maps claim-
that I believe the detail is not revealing.   of competitive pressure (bottom up) on       ing a national infrastructure but basically
A higher level view where they see their      the large entities to innovate themselves    they had their switches set up to hand-off
survival as an absolute need to feed on       because it is a market where both players    all traffic in metro areas to IXCs. But the
someone else.                                 have the same target customers but dif-      CLECs also said they had to have access
                                              ferent means to reach them.                  to the RBOC infrastructure because they
Given the issue of scale required, I                                                       were not going to lay their own. Now of
would suggest that it makes no sense to       As a competitive service provider, over      course, we see how broken this model
acquire 30 or 40 smaller networks. You        the two or three years that it takes the     was and know that it is gone forever.
have to swallow something really large.       consolidation to settle down, there is the
Once you look at it from this point of        issue of whether I am going to be able       There is something out there in terms of
view you really don’t need to emphasize       to have my service go down the DSL           access to applications that is not service
the importance of the IXC in terms of its     line of any provider? Since this is being    provider related. Why would you say to
enterprise market so much. When you           legally contested at present, you can see    a company such as Disney for example,
don’t need to emphasize it so much, it        why the ILECs are going to try and stop      that you can’t have access to send your
makes it more reasonable that the ac-         that. They need the ability to access the    content to people who want to watch
quisition is taking place. For some other     end user and the more control they have      your movies over my DSL connection? I
reason, perhaps to protect themselves         over the access the better for them.         am only going to let them watch Warner
from undue scrutiny as to the health                                                       Brothers because Warner Brothers are
of their own business performance, a          The ILEC will always seek to protect         paying me more or have exclusive rights
simple rationale as expressed by the “we      the exclusivity of its network for the       to my network for some other reason.
want their enterprise business” rationale     delivery of its own services. But there
seems to be useful.                           is a need to keep open some access to        That doesn’t make too much sense to
                                              competitive networks and this is where       me and that is where the issue about
If you say that the acquisitions are taking   rules are important and will necessitate     who has access is going to have to be
place because the ILECs need to survive       in my view, the presence of some protec-     addressed because at the end of the day,
                                                                 14
                                      The COOK Report on Internet July August 2005
the importance of the network infra-          ernment entity.                                space is, I believe, as applicable to the
structure piece in the middle (the Tier                                                      smaller player as it is to the larger player.
1 IP backbone) has hugely changed and         Let’s say the government entity has 30         This consolidation has triggered the cre-
has become far less important than the        or 40 locations in the state and five or six   ation of two, three, or possibly four, very
local infrastructure. This national level     key ones in the metro area. They are able      large players at the top of the US space
infrastructure that would be between the      now to interconnect directly. Their core       and because these players are only able
hosting center for the content and the last   traffic is now in a private infrastructure.    to operate very efficiently at very large
mile that used to be the Internet Service     Instead of having that as frame relay it       levels of scale. I believe that they will be
Provider, ISP. The ISP used to say that       is now a Gigabit Ethernet service. As an       able to efficiently handle very large cus-
it was a fully routed network that could      entity they serve their end users who are      tomers. But, in so doing, they leave open
take one’s traffic and deliver it anywhere    scattered all over the population of the       a very substantial space for competitive
on the planet.                                metro area. They offer “e-government”          players underneath. What is even more
                                              services on line.                              positive is that, because the nature of
I am saying that the transformation we                                                       this transformation the Internet has been
are seeing is one motivated by quite nat-     Now you can characterize the way gov-          flipped on its side and the importance of
ural structural movements in the industry     ernment, institutions and small and mid-       IP backbones has been lessened in favor
responding to deteriorating business and      size and large enterprises and residential     of the last-mile. at the nearest point of
economic circumstances brought about          consumer services content like movies          broadband interconnection. In my view
not only by technological innovation          can naturally fall into this model. To give    that’s the infrastructure player that takes
but by changing business models for the       one example you might say - OK I am            over the mantle of the so-called Tier 1s.
way people can access services formerly       in Los Angeles I have the world’s larg-
controlled under the exclusive domain         est collection of cartoons or something,       I am saying that, if you need to reach
of the telecom carrier. It has triggered      that people want to watch and will pay         an edge-based host, that edge host has
a situation which is, for those occupied      me say 25 cents a download for this. Do        multiple choices to deliver the service. I
with IP services, a flip.                     I need to have a single ISP to deliver         also am going to call it service because I
                                              this content? No. Because when you do          want to stay away from the details of ap-
Welcome to the “Flip”                         this, given all the issues that exist in the   plications right now. Let’s say someone
                                              public infrastructure, you don’t want          has a service that he wants to deliver in
It used to be that all traffic really had     to depend on the public Internet for the       Atlanta. However, he has three different
to pass from the originator up this hi-       service delivery. No one wants to try and      types of services. He delivers Type “A”
erarchy to the Tier 1backbone and then        re-engineer the public infrastructure to       to one service provider that has last mile
down again to some other location on          the extent needed to support this kind of      broadband distribution. He delivers Ser-
the edge of the network. These circum-        service.                                       vice “B” to a different service provider
stances have now flipped to make the                                                         because that provider has a different
originator of the content that matters to a   What you can do now rather than a set          geography, different reach, and different
broadband-connected user to be deliver-       up a VPN is buy a service. Perhaps as a        service quality. But at the end of the day
able by the owner of that content from a      point-to-point Ethernet because you have       the people reached by “B” are the ones
point as near as possible to that end user    figured out that there is a huge portion of    that want to buy it as opposed to the ones
as is feasible for them to get to.            people in the Sao Palo Brazil area that        on “A”.
                                              wants to watch your cartoons. Let’s say
COOK Report: So you are saying that           you conclude that 2/3rds of your likely        COOK Report: You are matching dif-
it is edge-based hosting centers that will    market happens to be in that one place.        ferent services to different providers’
serve as a means of access for content        You will take then a point-to-point high       appropriate delivery paths?
over the ILEC controlled last mile in this    speed link. You want a very high level of
newly turned upside down world?               service to that one place. There may be        Hussain: Yes. But there could be mul-
                                              20 additional markets to which you wish        tiple differences. It will be keyed to price
Hussain: Yes, I am saying that this edge-     to deliver. Thus you can selectively route     and to performance and to who is on the
based hosting applies to all business         your traffic in that way.                      end of the service. The only thing really
use. It’s not just large enterprises. Let’s                                                  different from this being just an ISP is
just say any entity - taking it away from     COOK Report: But how are they going            that it is not any longer access to an IP
the analogy of content providers so you       to get to the 20 additional markets? Rea-      backbone network - rather it is just ac-
can see how broadly I think this might        sonable question?                              cess to your broadband users. In the old
apply.                                                                                       days when the IP backbone network was
                                              Hussain: Yes, but I don’t like getting         the most important thing you might say
Let’s look at this from the point of view     caught in a single analogy because I           something like: “I want my service pro-
of the metro area and take two examples       believe that what we are observing is          vider to have only one hop to Moscow.”
- one an enterprise and the other a gov-      something that is very, very generic. The      But this is no longer important as your
                                              ability to compete and deliver in this         list discussions have shown in spades
                                                                15
                       COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
during the past year. The fact is that over    line to three different providers?           is how does the traffic get from the edge
time people have multi-homed, routed                                                        host to the end network? That is the piece
around and plugged into the global ma-         Hussain: Exactly. The need for a Tier 1      that I would like to describe in more de-
trix at many places. It is not this, in and    backbone has disappeared because he is       tail. From my point of view my answer
of itself, that has diminished the impor-      just buying access to TCP/IP as a carrier    to this question is that small, medium
tance of Tier 1 backbones. The cause           and he does not push much traffic out        and large enterprises, local government
is the changes that have taken place in        there. The observation that people are       entities and content providers are able to
the industry that has created very large       able and motivated to do this is some-       determine and gain access to transport
players driven by a need for scale and         thing that we are all seeing.                quite competitively between wherever
efficiency.                                                                                 they are located and the point of access
                                               But look at what else is going on here.      to the last mile no matter whether they
I think that what is happening is that         SBC and Verizon are buying with ATT          are regional or metro.
the importance of services such as high        and MCI respectively, two of the largest
speed Ethernet for example, as the next        chunks of IP backbone infrastructure in      If they are metro, they will choose from
service that large backbone carriers pro-      the world. 90% of global routing is going    among the competitive metro or fiber
vide has significantly escalated. It has       through that infrastructure that they will   networks. Now bear in mind that I am
gone from something that they just did         have acquired. But what is the signifi-      looking at macro patterns. I am general-
to something that is absolutely central to     cance of this? Not very much actually        izing and you can get a myriad of spe-
what they need to be focused on.               because the IP Tier 1 backbones aren’t       cific situations that might not fit the gen-
                                               worth worrying about as much anymore.        eralization. Between the very large-scale
COOK Report: Are you saying that if                                                         players and those that can operate effec-
one wants to provide services, all one         It’s not that we don’t need a global pub-    tively at this metro, local, and regional
needs to do is to connect a few servers to     lic Internet. But as has been pointed out    tier there is clear, open competitive space
high speed Ethernet at various exchange        by some very informed people on your         because the very large players don’t want
points?                                        discussion list, some of these backbones     to be bothered with business that doesn’t
                                               are significantly burdened with worthless    have sufficient scale for them.
Hussain: No, I am just telling you about       traffic volumes comprised of spam, porn
something that I am observing. Let’s           etc. Some estimates are in the 20- 30 per    COOK Report: So you are saying that
say you are an insurance company in            cent range. Staggering really.               the efficiency of scale for the large scale
Virginia and you have three offices in                                                      ILEC or cable operator is in enabling
the state, and two more in the District        Some people would have reasonably            the large scale infrastructure that enables
of Columbia. And lets say that your IT         viewed the IP backbones of ATT and           users numbering in the tens and eventu-
director does really not need to be told       MCI as being major assets. But the fac-      ally hundred of millions to plug into the
that he should be buying metro Ethernet.       tors I’m alluding to suggest that these      broadband grid? Providing the generic
He has probably been connecting your           particular assets are now very much less     grid is the large-scale business model
offices that way for three, four, or even      important than they have been in the         with the economy of scale? Yes?
five years. Doing that is not novel. What      quite recent past. For example, what a
was annoying to him was having to buy          year ago might have been perceived as        Hussain: Yes, and what I am also saying
Internet access. What annoyed him was          the core of the Internet is no longer of     is that since some of those markets are
having to be multi-homed to two differ-        significant interest to the ILECs in the     like the NFL top 20 cities, I think that
ent Tier 1 service providers.                  ongoing consolidation.                       only a few entities would ever imagine
                                                                                            now saying that they would consider roll-
The reason that it has now changed is          The whole nature of the Internet service     ing out a competitive dark fiber network
that his market is not scattered across        environment is in the throes of a major      in those areas. But we know that people
the world or even across the US. His           transformation where the Tier 1’s have       are doing so nonetheless. But in other
market is concentrated right there in the      lost their former relevance and the issue    areas, it may get easier because there is
DC area. He has determined that the cus-       of local access to the end user has come     much less scale for the national players
tomers he needs to reach are to be found       up to the same level of importance that      to leverage.
on the networks of maybe two or three          the Tier 1’s formerly had at the time of
different broadband service operators.         the NSFnet transition.                       COOK Report: Remember the inter-
And to connect, all he needs to do is to                                                    view with Scott McCollough where he
go to the PoP of his broadband service         How to Get from Edge                         was talking the delivery of broadband
provider. He doesn’t need to go to some
                                               Host to Destination
                                                                                            in smaller Texas cities and saying that
fancy exchange point. For that matter he                                                    he could do it there on the basis of roll
can just run an Ethernet private line to his   Network                                      your own generic ISDN? It sounds to me
broadband provider.                                                                         like this fits booth in terms of price and
                                               Now there is a very significant remaining    access.
COOK Report: And he could run such a           piece that you have been asking and that
                                                                  16
                                        The COOK Report on Internet July August 2005
Hussain: Price will always be relevant,         eign networks was when large foreign         who is going to carry it and deliver it
but the problem with bringing up spe-           carriers were forced to pay a heavy          as an IP backbone. Company X has
cific detail like the example you men-          charge to connect to the US networks at      International Service Provider X that
tion from Scott McCollough is that each         the Tier 1level because the big American     operates a global IP backbone. Broad-
instance will have very specific circum-        players would not agree to interconnect      band Services X has to pay international
stances that may appear to diverge or           with them as a peer. But what has now        service provider X money for carrying
not. But let’s not even go there. What I        happened is that US providers that, as       its IP traffic. Now you need to ask where
am describing for you is a general case         of four or five years ago, held a very       the money originates? It originated in
that is in support of the consolidation’s       substantial amount of submarine and ter-     X because it was paid to Broadband
not being the end of the world.                 restrial infrastructure have given up that   Services X. It originates in one division
                                                infrastructure through bankruptcy re-or-     of the company and is paid to another
What I am saying is that with the circum-       ganization. This infrastructure has been     division for delivering the traffic. That
stances surrounding the consolidation           acquired by a new generation of carriers     international services division x has to
today, there are many things that you can       that have emerged mainly out of the Asia     deliver a portion of the traffic to some-
talk about as being areas of concern, sen-      Pacific region and are still probing into    one else because it is not a fully routed
sitivity and so on. All I am trying to do       this space. They are set now to be the big   IP network in this case. So they charge or
here is to make a generalized point for a       global carriers with low cost of operation   are being charged by this other network
discussion that there is nothing anymore        relative to the costs of operation of the    (US Tier 1). They reflect that charge in
that should warrant any concern that the        US IP backbones.                             what they charge Broadband services X.
consolidation of UUNET into Verizon                                                          Broadband services X then complains
and the AT&T backbone into SBC that             Of course it is important to have a global   that they are being charged too much
creates any market place dominance by           network of 20 or 30 global IP backbones      for IP services and decide they want to
itself. If there is a concern, it is that the   all interconnected to the US infrastruc-     go buy from a more competitive service
last-mile broadband infrastructure that I       ture - all exchanging traffic. But the       provider. This is a general example that
believe is now much more important that         revenue streams for the public Inter-        is commonplace in the industry.
access to the Tier 1 backbone are both          net infrastructure are primarily those of
likely to be under the control of, at most,     inter-carrier traffic exchange. In other     Why? because traffic that is flowing
three or four very large players in a few       words they are transit fees.                 from the source of revenue for IP is
years time, and SBC and Verizon in the                                                       disconnected from the cost of the IP
nearer 18 -24 month timeframe.                  If you are a CFO at a carrier you will see   backbone. It used to be that people
                                                the money coming in for the backbone         generating revenue for the IP backbone
COOK Report: What I think I hear you            to pay for it and grow it. This money        were huge service providers and large
saying now is that, what is important is        is coming from the CapEx of the engi-        Internet enterprise customers and so on
an Internet of micro-markets rather than        neering budget. Hardly any of it can be      who were all interconnected to the Tier 1
everyone trying to deliver the whole            underwritten or explained as having been     backbones. It has become a commodity
world?                                          driven by sources of customer revenue        business. There is really no margin in
                                                for IP access. So CapEx is being spent       moving these packets around between
Hussain: Let me respond slightly differ-        to build an IP infrastructure because the    one big Tier 1 and another carrier. Even
ently. My message is that over the course       company also must justify itself as an IP    if you charge them for terminating their
of the past five years in particular, the       carrier and if it doesn’t have the new IP    traffic just to you and you are not acting
global IP backbone business has become          network, it can’t be credible in the mar-    as transit but rather are doing so-called
commoditized and the circumstances              ketplace. Yet the new IP network brings      paid peering. So what happens with the
where downstream service providers had          in little revenue - at least not enough      paid peering case when you take some-
to have a commercial relationship to            to justify the CapEx on it’s own merit.      one’s traffic that is terminating only on
their upstream has dissipated. They have        What they are spending is not fiscally       your routes? The charge that you are able
found all sorts of work-arounds that have       justified in terms of the revenue they get   to exact for this has gotten whittled down
been so well described in the COOK Re-          from general sources of public Internet      to a point of insignificance.
port over the years.                            access. What they see as sources of rev-
                                                enue from this is that revenue that comes    We know that this situation has been
The other thing that has taken place is         from another carrier for terminating the     existing for some time and because in-
that if an upstream Tier 1 ISP wants to         traffic that the carrier sends.              ternational IP traffic as exchanged be-
charge too much, your traffic can still                                                      tween the top Tier 1s in the United
get to where it needs to go by many other       Let’s say you have traffic flowing into      States - (Sprint, ATT, Qwest, MCI) is
strategies that you can apply. And more-        your backbone and you have a domes-          primarily a commodity business. Also
over that you can do this with very little      tic unit called Broadband Services that      the consolidation has, in my view, now
loss of network performance.                    domestic unit is generating tons of cash     accentuated the shift in importance from
                                                and masses and masses of traffic. All that   the Tier 1 to the Local Broadband Ac-
What also used to be a problem for for-         traffic has to go to someone somewhere       cess and the consolidation of both Local
                                                                17
                      COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
and Tier 1 backbone in a few very large      is nevertheless still a very very healthy       are uniquely well-positioned is that in
carriers poses interesting questions for     competitive space.                              the metro areas on the local and regional
the future.                                                                                  side they are really able to drive Ethernet
                                             COOK Report: But who are all of the             services. The more that they can offer en-
But before this, the trends have been        others?                                         terprise and even mid to small customers
driving people not to go through the                                                         Ethernet private lines, Ethernet point-to-
Backbones where you cant get any qual-       Hussain: It is the mid tier. Level 3.           point connections, the better off they are.
ity of service. You can no longer assume     Global Crossing, Williams, etc. It isn’t        I would say not just metro but also rather
that the particular service that you are     going to easy for them and there may be         Ethernet Man and WAN services.
providing to a specific part of your         some more consolidation to take place at
market is really necessary to support        this level also.                                COOK Report: Note that Joe Mambretti
the service. Therefore it is not really a                                                    is working with Nortel and SBC in a Gig
motivation for anyone to any longer pay      COOK Report: And now that NTT has               E MAN in Chicago as was referenced
that much attention to engineering these     demonstrated a thousand wavelengths             in the March April 2005 COOK Report.
networks or to acquire control of them.      over a single strand of fiber it makes the      This certainly underlies the point that
                                             positions of all these fiber rich compa-        you are making.
When you do things like acquire MCI          nies worse. You can argue that the big
and ATT’s international infrastructure,      three or four above them have all the           Hussain: Absolutely. It makes perfect
you have an obligation to maintain that      fiber they will ever need.                      sense for them to be doing that.
infrastructure but you face a problem in
doing so because it is not making any        Hussain: Well there is a market space           So there are situations then where these
money for you. So you say my goodness.       there. Whether there are too many play-         combined networks can do significant
This is a bit odd. You are not making        ers in it is a big open question?               things. I don’t think this is possible with-
money off local wireline. You are not                                                        out any kind of framework. In this case,
making money off of traditional long dis-    To begin a high-level summary:                  there are plenty of reasons for the large
tance. Voice over IP is a big headache in                                                    players to consider operating effective
terms of how it will generate revenue and    This consolidation is not all good, nor all     wholesale businesses. There is no reason
what existing sources of revenue it will     bad. There are a lot of things to worry         why if the new mega players roll out very
cannibalize from our existing customer       about, but in general the factors that          substantial metro Ethernet infrastructure
base. Especially if we let competitors       are motivating the consolidation at the         why they would try to prevent them from
offer their services at a lower price than   higher levels are not as generally articu-      having a wholesale model. In fact, I think
us on our broadband connection and by        lated. I think they are driven more by a        the reverse is true: that they are actually
the way while we are getting eaten alive     need for these entities to leverage their       trying to promote a wholesale model.
in all these areas we have to continually    size. They will gain efficiencies by these
expand and maintain our component of         acquisitions. If you think about it in this     Now, having said this, there are going to
the global public Internet infrastructure.   way, it becomes easier for me to see that       be metro areas where they are not pres-
And all of this has to come out of our       having all the long distance business be-       ent. And in those areas there can be no
engineering CapEx because there are no       long in a couple of places. Even though         rationale for an operator of that size be-
real revenue drivers that are feeding that   it is all losing money. It is an easier thing   cause of the scale that they need to build
either. As said previously, it’s a com-      to manage at a very large scale than it is      and operate where there is dark fiber that
modity business where revenues come          to leave separated and withering away in        other people can pick up and put to use in
primarily only from inter-carrier traffic    many different companies.                       competition with them. What I am trying
exchange and only in those cases where                                                       to say is that it is a pleasant surprise for
we are able to exact paid peering.           To say that the acquisition is very heavily     me to see that there are so many poten-
                                             motivated by a desire to gain enterprise        tially good outcomes that can result from
COOK Report: So the question as David        data customers and IP infrastructure as         this transformation. I think that there
Isenberg asked a year ago is not: Where      a means to supporting the next genera-          is even potential stability in the market
is the fiber? It is: Where is the revenue?   tion of services and so on is hopelessly        place deriving from very large market
                                             overstated and doesn’t make that much           operators that can leverage their scale.
Hussain: As always. Follow the money.        sense. I believe that one of the reasons it
Right?                                       doesn’t make sense is that backbones are        What I am also saying is that there needs
                                             not important. When I say they are not          to be some careful considered and bal-
So there are several trends here to ob-      important they are certainly not a good         anced discussion about the framework
serve. One the consolidation that could      driver of revenue. They merely are one          for operation. There need to be some
trigger an upper level market of three       means of support for revenue created            rules within a generous regulatory envi-
or four very large players and a fairly      elsewhere.                                      ronment favoring competition.
substantial space in between before you
start coming to all of the others. But it    One of the reasons I believe the ILECs          COOK Report: It seems that the IP
                                                                 18
                                      The COOK Report on Internet July August 2005
guys are determined to hold on to the         serious commercial traffic depends will
independence of the underlying network        have to figure out an inter-carrier charg-   Might the home based future look like
from any central control and that they        ing regime.                                  access to a broadband IP infrastructure
are willing to do so in isolation from the                                                 for price “x” and then pick an internet
consequent economic outcomes. They            The issue then is what is the best way to    service provider for web, email and so on
will hold fast to the “perfect network” re-   allow the development of new services        for price “Y”?
gardless of the economic consequences.        without having to define applications by
And when rather than “fail fast” as the       some technical or regulatory cubby hole.     Farooq has laid out some very interest-
Isenberg Party asked the FCC to allow in      Under such a regime people would have        ing premises and this does seem like one
the autumn of 2002, the telcos combine        to categorize new services based on what     possible direction but there sure seem to
instead of fail, they become somehow          is beneficial to them commercially rather    be a lot of blanks waiting to be filled in.
surprised.                                    than on what the services really are. So
                                              instead of going down that road, why not     Fred Goldstein: I’m going to make a
Hussain: Exactly. What is now needed is       simply say we will toughen up and make       few initial comments on what I’ve seen,
a careful thinking through of the environ-    sure anti-trust rules work?                  particularly Farooq’s rather lengthy in-
ment here which goes from policy all the                                                   terview, and on the two big mergers in
way down through regulation, and all the      COOK Report: So where is the focus?          general. Not surprisingly, I’m rather less
other bits and pieces. This is why I would    That everyone should have some reason-       sanguine about them than Farooq is. I
say to you that it is odd that the Internet   ably well-defined and cost-substantiated     don’t see them as being beneficial to
has things like ICANN and standards,          access to some high speed Ethernet in-       anyone, really. They’re not surprising,
but that from the point of view of com-       frastructure?                                though, because both AT&T and MCI
mercial business models they say: “Oh                                                      are shells of their former selves, and they
no! We don’t allow any regulation here.”      Hussain: You got it.                         were ripe for swallowing. So it’s the trag-
It’s a little lopsided point-of-view in my                                                 edy of the inevitable, when the carrion is
opinion. I think that as long as we want to   Some Follow Up                               devoured by the predator while it’s still
                                              Discussion
be able to deliver a Voice over IP service                                                 warm, but clearly dead meat.
to a broadband user we have to be a little
less rigid in our approach. One may ask:                                                   What value is AT&T to SBC? Farooq
What the value is of a lateral approach as    COOK Report to Symposium List on             suggests that bigness makes the deal
opposed to a vertical approach to regula-     Sunday April 17: At some point in our        work. I don’t see it -- HP certainly
tion in the context of the model I have       conversation two weeks ago it seemed         didn’t prosper by eating Compaq, which
described?                                    that Farooq was saying that the LECs         was far healthier than AT&T. SBC pre-
                                              likely would own last mile high speed        sumably sees value in AT&T’s existing
I certainly think we need something and       Ethernet to people’s home and SOHO           enterprise and government contracts,
I really think that simplifying things is     locations. But if I recall adequately that   though if I were still a telecom manager
more important than making them more          there was a large area of middle sized       I’d be sure to be checking my “change
complicated. I think it is untrue to say      businesses that he didn’t think the LECs     of ownership” clauses, and looking for
that the Internet is not government-regu-     could serve with any economy of scale        alternatives. AT&T’s network itself is
lated already.                                and thus he thought they would find it       rather quirky; it doesn’t have huge
                                              necessary and convenient from an anti-       bandwidth, but it does go to a lot of
COOK Report: Well, if you are going           trust point of view to allow independent
                                                                                           places that no other IXC reaches. It is
to have a wholesale market for Ethernet       Ethernet based interconnect to their net-
                                                                                           essentially a monopoly wholesaler of
and if discussion is needed to establish      works on an opportunistic basis?
                                                                                           PSTN connectivity to rural America.
a framework for this Ethernet market to                                                    That monopoly is no doubt attractive
play itself out in, who sets the rules? If    Am I warm? How does one move to-
                                                                                           to SBC. AT&T’s top and bottom lines,
there is to be a wholesale market, then       ward some definition of what defined
                                                                                           though, are shrinking, so it’s hard to
how does access to that market play out?      and cost substantiated would be? How
                                                                                           justify the acquisition on shareholder
Who defines it and sets the terms and         does one find out whether the LECs will
                                                                                           value grounds.
conditions?                                   have a monopoly on high speed Ethernet
                                              to homes? Or are we assuming that the
                                                                                           More realistically, the primary motiva-
Hussain: That is why I said the simpler       last copper mile will be a LEC monopoly      tion for the deal is CEO ego, what I
you can keep it the better. We have the       over DSL delivered public Internet ser-      sometimes call “P.D.’s”. Ed wants to
public Internet infrastructure over which     vices? I agree that no one seems to be       be the biggest rooster on the farm, and
we cannot deliver anything valuable so        able to figure out how to make money         Ivan’s the slightly bigger cock right
we’ll just leave it like that. We will        from the public internet but people will     now. (Of course they have different hen-
always need to buy connection to that         want access to IP broadband, for all the     houses and no spurs.) And that explains
infrastructure and that’s fine. Those who     neat edge based things like Skype that       VZ’s willingness to enter into a bidding
have the large infrastructure on which        they can do.                                 war (which is usually a bad idea) for

                                                              19
                       COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
MCI. Everything I said about SBC and          tioned for enterprise markets. So granny
AT&T is also true about MCI, save the         will have “a choice”, giving the FCC and       The natural monopoly is real. Almost
rural network. Ivan’s less swaggering         PUCs cover, but there won’t be many            every country outside of the USA now
than Ed, but he’s still just the leader of    choices. A few independent CLECs will          understands this. One doesn’t have to
Ray Smith’s old junta (the “SLORC”).          soldier on, but only in narrow markets.        ban access competition for it to not exist
MCI’s bigger asset is UUNET, the top                                                         in most places, save the cable/ILEC duo-
IBSP. VZ’s attitude towards the Inter-        I do see some enterprise-market op-            poly. It’s just not profitable to pull paral-
net has always been negative. ILECs           portunities for Sprint, Global Crossing,       lel fibers all over the place. Wireless can-
and their toadies in Washington (Pow-         Level3, Broadwing, and maybe some              not compete in fixed markets. Structural
ell being their recently-deposed leader)      other IXCs, if they’re not picked up by        separation (outside plant vs. service-co)
don’t even talk about “Internet”, they        RBOCs and can survive long enough to           is the right answer; regulated common
talk about “broadband”, which implies         pick up discontented MCI and AT&T en-          carriage and unbundling is the best thing
a walled-garden approach to content.          terprise customers. Maybe even Qwest.          short of that. Deregulate a monopoly and
Watch that shift; once there is no com-       Yes, it’s a commodity, and prices are low,     you get abuse. Deregulate a duopoly and
petition from real ISPs, then they hope       but with MCI and AT&T knocked out, I           you get a slight cap on the level of abuse,
to milk “broadband” like a WAP on             expect LD prices to rise somewhat. Of          but it’s still not a real free market.
steroids. I think it’s futile, but it could   course some of these companies have
be painful.                                   serious operational issues of their own to     Coluccio: Fred, you’ve covered many
                                              overcome; Broadwing’s stunts, for one,         of the issues implied in my account, and
Both of these RBOCs have inherited the        are becoming the stuff of legend.              done so more eloquently.
malignant parts of the old AT&T cul-
ture: the rigid military-like hierarchy,      Now to comment on a few of Farooq’s            Goldstein: Thank you.
the poor internal communications, the         notes? I simply don’t buy into the Eth-
inability to deal with “customers” in-        ernet cargo cult. Yes, it’s part of the holy   Coluccio: For clarity, since the term isn’t
stead of “ratepayers”, the lawyer-driven      trinity of the IETF/Cisco fundamentalists      used as much as it once was, by the di-
marketing. They can’t survive in a com-       (Ethernet, IP, SIP), but I am an apostate      vesting of CAPs, you are referring to the
petitive world. And they may know it,         there too. Ethernet is a LOCAL area net-       Competitive Access Providers that were
because they’re working awfully hard          work. It doesn’t scale and wasn’t meant        acquired by the IXCs prior to this round
to get rid of most real competition. SBC      to. What’s sold as Ethernet now is simply      of mergers, e.g., TCG, MFS, Brooke and
and Verizon compete in wireless, but          a frame-relaying network using Ethernet        the lot, correct? Such was a major con-
other than that, seem to have a strict        frame formats. Okay, I suppose, but            tention of mine when Farooq polled me
non-compete pact. Indeed if the deals         that’s a flat address space, no substitute     about the mergers back in February, and
go through, I expect AT&T to withdraw         for a hierarchical space (e.g., IP). Add-      I’ve reiterated it here, since. So I agree.
from active marketing in most VZ turf         ing VPNs and QoS is making it even
and MCI to withdraw from SBC turf.            more like real Frame Relay, albeit faster.     Goldstein: Yes. I use the term now
They will “compete” on Wall Street, the       Come to think of it, MPLS is also a way        generically to refer to any non-ILEC
way France Telecom and Deutsche Tele-         of implementing frame relay without            that owns business-grade (vs. just cable)
com “competed” when they had closed           admitting it. I wasn’t a huge fan of FR        local distribution facilities. Note that an
monopolies in their respective countries.     when we were working on the standard           MSO can become a CAP if it wants to,
They will compete for profit margins,         in the late ‘80s, but I guess I appreciate     but they often don’t facilities in business
bragging rights, and stock value. But         it more now!                                   areas. Virtually all CAPs are CLECs;
they won’t fight each other hard for cus-                                                    only a small percentage of CLECs are
tomers; it would hurt their margins.          Also, the heart of the problem is getting      CAPs.
                                              the glass (or even dry copper) to the sub-
The other main motivation for the merg-       scriber in a usable form. Hardly anybody       Coluccio:The implications of not divest-
ers is to shut down most CLEC competi-        is pulling competitive fiber in the ground     ing those properties are hard to imagine
tion. Remember that when the Telecom          now. The money dried up in the melt-           at this point, if you consider the need for
Act passed, it was assumed that the big       down. A few people in a few places, yes,       route diversity and redundancy, not to
CLECs would be the IXCs. And until            but you can’t count on it. ILEC FTTH,          mention pricing leverage for commercial
recently, the bulk of lawyering to defend     under the current rules, is worse than         entities, even if only in a limited number
the CLEC industries has been paid for by      useless. So we have a real crisis for many     of, albeit largest, locales.
AT&T and MCI. The remaining CLECs             users. The main non-ILEC fiber owners
are hard-pressed to fight the RBOC            were MCI and AT&T. So what do you              Goldstein: Agreed! The FCC is open to
legal teams. The new model is for the         do when VZ the ILEC takes over MCI?            Comments on the mergers, and I should
cable MSOs to be the main CLECs.              One can only hope that they’re forced to       hope that a LOT of comments require
They will take a lot of residential market    divest the CAP assets as a merger condi-       that the in-region CAP facilities be spun
share, which isn’t very profitable for the    tion! Even that only helps the customers       off. I don’t mind if VZ and SBC keep
RBOCs anyway, but aren’t too well posi-       who can get fiber.                             some strands for their own use, but they
                                                                  20
                                        The COOK Report on Internet July August 2005
should not be allowed to control the            fiber loops, too, so CLECs cannot take         disagreement with Isenberg. I see IP net-
MCI Metro, Brooks, MFS, TCG, and                the spare ILEC fiber in the ground and         works as far, far more “intelligent” (CPU-
other CAP facilities that got rolled up by      allow their customers to light it. Only        intensive) than telco SONET, ISDN, or
MCIW and AT&T.                                  CAP fiber can be treated as you wish, and      other bearer-channel networks. Sure,
                                                nobody’s pulling very much of that! (I do      “Intelligent Networks” throws 1985’s
Coluccio: If history is any lesson, one         have clients pulling fiber, but it’s hardly    computer power at the connection-setup
has to conclude that if the Fortune 100s        widespread.)                                   function, but once the connection’s up,
are doing something cutting edge in the                                                        it’s a bit pipe. IP is burning coal for every
transport space today, and it works to          That’s my main problem with Farooq’s           packet, chugging down the track.
their satisfaction, then it’s not long before   model too. He’s too sanguine about fi-
the F500s and the F1000s, etc., all the         ber’s being available to most customers.       Andrew Odlyzko: Apropos The Rogers
way down to the SoHo user follow suit.          I don’t see it happening under the cur-        Report with the pieces by Farooq Hus-
This has been the trend ever since the          rent regulatory regime. The megamergers        sain, and Gordon’s interview of Farooq,
first customer-owned modems and T1              make it even harder.                           I found a lot I agreed with there, in
multiplexers were used by enterprises,                                                         particular where he said that “backbones
and it follows to this day where lamb-          Coluccio: From the application perspec-        are not important.” It might be useful
das and traffic management algorithms           tive, ironically, leadership and stimula-      to emphasize that point. The entire US
constitute the new model of the day.            tion for new “service” products have           telecom industry takes in over $300
Consider that today’s FTTH deployments          proved to be working in the other direc-       Billion in service revenues each year. A
are using WDM all the way to the home,          tion, with end users driving new services      couple of years ago I made an extremely
even if it is only a three-wavelength           from their own edge platforms, where           conservative estimate that an IP back-
scheme at this time.                            transport providers have little if any busi-   bone that could carry all the traffic in the
                                                ness meddling. And increasingly, it is the     US would not cost more than $3 Billion
Goldstein: Not necessarily, if essential        services I’ve just mentioned that are no       per year to run, and figured that a small
facilities do not become available. Termi-      longer dependent on the merging entities       fraction of that figure would suffice, pos-
nal equipment and computing equipment           that we’ve been discussing, as services        sibly as little as $300 Million per year.
have continually come down in price,            become the province of the end users’          Well, a couple of weeks ago I talked
opening up their availability to smaller        own choices and designs.                       about this with Joe Mambretti, and he
and smaller users. But raw transmission                                                        thought that even $300 Million per year
pipe costs do not come down much -- it          Goldstein: Sure. I don’t see “teleser-         is an overestimate. So here we have a
costs a lot to lay fiber into the ground        vices” in the network ever accounting          key element of the industry, but one that
or even hang it on a crowded pole. In a         for much, but the RBOCs haven’t fig-           could be provided for with 0.1% of total
utility model, the increasing bandwidth         ured that out yet. The RBOCs were, for         revenues. No wonder it is not important.
capacity (caused by cheaper electronics)        the first few years of their existence,        (And so the “NC Network Conceptions
would lower the per-bit cost of a shared        strictly forbidden from doing anything         LLC: Executive Intelligence Briefing:
fiber. But in a monopoly model, the pipe        that smacked of teleservices. This may         The ILEC-IXC Telecom Mergers” is
owner takes advantage of its natural            have created a forbidden-fruit craving.        very questionable with its emphasis on
monopoly to create scarcity on that last        Services of value above the bit-transport      backbone congestion and peering. You
mile. VZ isn’t going to allow you to play       layers will be created outside of the net-     don’t pay $10 Billion for an IXC to fix
lambda on your FiOS. They do not tariff         works, by customers.                           a problem that can be taken care of for
dark fiber. The FCC has just discontin-                                                        $10 Million.)
ued the availability of unbundled dark          BTW this is where I have my biggest




                                                                 21
Mega-LEC Mergers Make No Sense Since They Fly in
Face of Broader Trend Toward Horizontal Layering
Tom Evslin Warns that IXC and LEC Vertical Operation Shield
Management from Customer Contact Highlights
Editor’s Introduction: Tom Evslin is          little surface area. And surface is where     integrated companies.
a self described “serial startup guy” and     you touch the customers. Instead of
CEO (retired). His last company, ITXC,        spending your time thinking about what        The trend toward the horizontal has been
went public in 1999 and became the larg-      people really pay money for, you argue        happening in telecommunications. There
est provider of international wholesale       about transfer pricing which is a to-         certainly are no longer all the great ver-
VoIP in the world. His blog is at blog.       tally unproductive activity. Your capital     tically integrated companies that were
tomEvslin.com and his historical murder       budget is set not by market forces but        once there. But counter to this is the star-
mystery set in the Internet bubble will be    by what politically powerful adjacent         fish like mentality of the Bells that, hav-
published later this year. I interviewed      layers need.                                  ing been the arms cast off from Mother
Tom on April 11, 2005                                                                       Bell, think they have to re-grow the rest
                                              Similarly your access to supply is re-        of the starfish.
COOK Report: How do you evaluate the          stricted.
impending LEC acquisitions of ATT and                                                       COOK Report: I want to mention what
MCI?                                          When I started AT&T WorldNet, we              Farooq Hussain has just said in an inter-
                                              began with a bunch of AT&T PoPs that          view with me in what I sometimes feel is
Evslin: From a business structure point       came from EasyLink. It was nice having        an after the fact rationalization of the cur-
of view I don’t think that these combina-     them there to start with. But meanwhile,      rent situation. He has said - at one level at
tions make any sense. The overall trend       out in the real world, we had PoPs being      least - that the only asset the LECs have
in telecommunications is towards hori-        set up by UUNET which was function-           that, under current market conditions, is
zontal layering and not towards vertical      ing as a horizontal company special-          really worth anything, is their ownership
integration. If we look at the de-lamina-     izing in setting up PoPs. Working with        of the last mile. That, with the excep-
tion of the computer industry, we see         UUNET, AOL got out of having to run           tion of folk who are large enough to get
that this has fostered a faster pace of in-   its own PoPs and just sold services.          metro Ethernet, for the time being the
novation and has been in general a more       Soon UUNET has more PoPs than                 way things are shaking out, there seems
effective business model. If you look at      AT&T because it had all these differ-         now to be effectively a monopoly in the
AT&T, a company that was the paragon          ent companies selling at the retail level.    last mile. Assuming that there is a near
of vertical integration, over the past 20     And a new retailer comes along, like          monopoly out there, he looks to gigabit
years you will see that it has been shed-     an Earthlink, and on day one they can         Ethernet as a source for innovation ands
ding layers although it is still vertically   offer more PoPs and have a lower price        wholesale competition for business that
integrated.                                   per minute for the use of their PoPs          lacks the economy of scale that the LECs
                                              than AT&T because they have been able         must have. Am I making any sense in
I think there is a good reason for this       to inherit the scale of the layer below       enunciating this contrary position?
shedding because I don’t think vertical       them. A colossus like AT&T which is
integration works except in the case          trapped in vertical integration is also       Evslin: Well, despite the doom and
where a monopoly has been granted. I          deprived of being able to reach the ef-       gloom that I am hearing about all this, I
can tell you that, having lived inside the    fective economies of scale to be found        really think that we are at the end rather
vertically integrated AT&T, the problem       in any one layer.                             than the beginning of the monopoly.
is that in most of the layers, you never                                                    First of all, customers in the US now
see the real customers. The reason for        Therefore, as a specialist in no single       have two choices. They can get either
this is that your customers are not the       layer, AT&T does not have the best            cable modem or DSL services. Each of
real end-users but rather the people in       network, nor the best retail services,        those providers has some unique assets
the adjacent layers.                          nor the best this or that - it always finds   and neither of them can afford to act in a
                                              itself operating under the constraints of     totally arbitrary fashion, especially when
Why the Horizontal                            all those adjacent layers. In contrast the    there is asymmetry in the duopoly. The
Model Wins
                                              companies that are not vertically inte-       cable companies have a content asset the
                                              grated have the advantage of being able       carriers don’t have and the carriers have
                                              to optimize what they do for the layer        a phone business asset that the cable
It is a surface to volume problem re-         that they are specializing in. These com-     companies don’t have. Each of them is
ally. The vertically integrated company       panies win layer-by-layer and, as they do     going to use their enormous lobbying
has way too much volume and way too           so, they literally slice up the vertically    clout to make sure that the other cannot

                                                             22
                                        The COOK Report on Internet July August 2005
close off the space where they have their       claim that they are going to provide           ally in the last mile and not on the back-
unique strengths.                               the Quality of Service of their network.       bone. But the last mile belongs to the
                                                “And that is why you are going to be so        customer in a practical sense. If you had
So neither of them can afford a com-            happy to buy voice over IP from us,”           to, you could go into your home router
pletely closed model because then they          they tell you.                                 and prioritize the packets any way you
could not afford to expand into the other                                                      want to. You can control the area where
guy’s space. They believe their future          So then you have to ask them: “Does this       QoS may matter. If the provider has a
lies in trying to expand into that other        great QoS on YOUR network mean that            bad backbone, it is effectively cutting its
space. Suppose I say that Verizon will be       if you call somebody not on your net-          own throat with all services.
my broadband provider and Verizon says          work, you will get lousy service?” “Well,
that I can get only its video content. In       no.” - they will reply. Well, if they can      As long as you do have AT LEAST one
such a case I simply won’t use them. If         call off-network, how can you control          other choice, no provider can afford to
I choose Comcast and Comcast says that          Quality of Service?                            offer deliberately bad service.
choice must also include Comcast phone
service, I will also refuse.                    “Are you saying your subscribers cannot        While both the cable co and the telco
                                                receive high quality calls from people         own the last mile access, it is going to be
Neither one of them can afford to be as         on other networks?” “Well of course            very difficult for them to get away with
exclusionary as they might like to be.          we are not saying this!” “Well why are         using that ownership to disadvantage
                                                you making these claims about control          the applications that travel on it because
Now, lurking not very far away, is a            of quality?” But, when not challenged.         people will decide not to do business
third wireless option for lots and lots of      they go on and on with all this nonsense       with them if they do. They will become
people. It is sneaking up on us and it is,      that they are going to control quality on      bad providers.
in some respects, an option of last resort.     their network. But only a fraction of all
Where I am, here in rural Vermont, it           interesting calls other than local calls are   Remember when AOL and MSN were
would cost $10,000 to extend cable and          going to be on one provider’s net.             proprietary services and wanted to dras-
we are beyond DSL but there is still                                                           tically favor their content at the expense
wireless access. It is not perfect, but it is   COOK Report; Cringely pointed out that         of the rest of the Internet didn’t have
usable and it is coming down in cost to         the cable cos could favor their VoIP by        anything like the content then that it does
50 or 60 dollars a month. It is a realistic     giving their packets high priority and         now. People said that this wouldn’t work.
alternative either to poor service by the       letting everyone else take what was left       They considered it a lousy service. In the
traditional providers or no service.            over.                                          end, their only model was as an access
                                                                                               service provider.
Soon we may not even have a duo-                Evslin. That is true. I wrote a response
poly and in cities there is this interesting    in my blog on March 21. http://blog.tom-       If you want to win the broadband con-
spread of municipal wi-fi and other wire-       Evslin.com/voip/ Broadband Providers           nection to the home - up to and including
less alternatives. Therefore I don’t think      WON’T Win the VoIP Wars by Playing             the IP layer - I think they have to play it
anyone can afford to act like a monopoly        Dirty.                                         straight. If they play it straight, then the
and that certainly is a good thing. That                                                       industry survives as horizontal. If they
being the case, there is no reason why          As I wrote: It’s not that the broadband        don’t play it straight, then they are not
a horizontal model is not more efficient        providers wouldn’t like to do exactly          good providers.
than a vertical model. This is true even        what Cringely fears. He is probably right
though I would agree that in the case of        that some of them are planning it. Fortu-      Now in your headline that “the telephone
a monopoly, the best way (or at least one       nately for us VoIP users, it isn’t going to    is becoming software” you are illustrat-
way) to extract value from a monopoly is        work. Let me explain. The explanation          ing an important point. We were having
to control all the adjacent layers.             that I gave in the blog is essentially what    some degradation in our VoIP service. It
                                                I just pointed out. Namely that most           had to do with some experimental stuff
But I don’t have that bleak a view. I think     VoIP calls will have to cross networks         that we were doing with our local WISP
we have alternatives and I think that the       and if you favor calls on your network         and stuff that was not the WISP’s fault.
number of alternatives are growing and          and discriminate against calls on others       After some frustration I went out to the
that the competitive dynamic between            networks you will be selling something         local Circuit City and brought home a
cable and ILEC is such that neither one         other than universal phone service. If         new LinkSys adaptor for my Vonage
can afford to be exclusionary.                  you can’t offer full access like the PSTN      service. What I found was not only did
                                                why would or should people become              it work, which I expected, but that it also
The QoS Fallacy                                 your customer?                                 solved all the quality problems that I had
                                                                                               been experiencing. In the software of this
The most ridiculous nonsense comes              Cringely doesn’t understand that VoIP          later adaptor there was much better jitter
from these guys themselves when they            does not generate huge streams of bits.        buffer management. It turned out that
                                                The QoS problems that we have are usu-         there was a software solution to what
                                                                 23
                       COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
was initially a network problem. What          ficult process for all concerned?             in the political wars and suddenly you
this tells me as well is that, even in the                                                   are dealing with this guy from SBC who
case where the telco or cable co may be        Evslin: I think the integration of the        doesn’t know anything. That would at
standing in the way of quality for VoIP        people will always be hard. I am not sure     least make you reconsider where you are
service, there are likely to be alternative    what the technology integration will be.      going to buy your communications from.
software solutions.                            With SBC they have a local area network       Nominally you were considering that all
                                               over a very small part of the world. The      the time because of price, but this gives
I didn’t have to replace the software.         AT&T network is much larger.                  you additional reasons.
Instead I just bought a new piece of com-
moditized hardware with new software           They are already connected to each other.     With something mission critical, if you
inside and found out that it works better.     It is not that you are going to have a        have a stable relationship, you are going
I take this as proof of your assertion that    single world-wide network that includes       to be reluctant to disturb it. If all of a
the phone is becoming software because         both long distance and local connections,     sudden you go from someone who knows
my problem had a software solution to          because the only local loops you own          you well to someone who does not and
it.                                            cover a relatively small geography. I         is not able to respond quickly and deci-
                                               am not sure what they gain by merging.        sively to your problems, you are going to
The Impact on                                  They may have believed that putting           find yourself looking for a new supplier.
Enterprise Managers
                                               together layers was a very good thing to      Even if your salesman survives he may
                                               do. But when one layer has a very small       have a new boss so the next time you tell
                                               geography and another layer a very large      him I really need extra help in prompt
COOK Report: OK. Fair enough. But
                                               geography it is hard to see what is ac-       provisioning of these new circuits, he
could I switch directions a bit and ask        complished.                                   doesn’t follow though because his new
you what do the phone companies think
                                                                                             boss can’t or simply doesn’t get him the
they are doing with these acquisitions as      COOK Report: People were guessing             needed support.
far as large enterprises go. It’s going to     that the LECs were doing it to gain the
get very difficult for the large enterprise    IXC’s enterprise customers but there is       Certainly, when things like this happen,
net managers is it not? If you look at         an irony afloat here for this will increase   all your customer relationships are at
Verizon and SBC as data management             the uncertainty that the largest enter-       risk. And I am not trying to be critical
companies, one has to wonder about the         prise customers have to deal with. Their      of these two specific companies. If you
probable horrors of what the enterprises       network upgrade plans may go out the          have any two companies in the world, the
will endure?                                   window because of concerns over things        same stresses and faults can appear when
                                               like who owns the fiber? Where do my          you integrate them. Those corporate ac-
Evslin: I see what you are wondering
                                               strands really go? What will be taken         counts are valuable assets and they are
about and I don’t have any good answers.
                                               offline when the process completes? And       certainly putting them at risk during the
I don’t think what they are doing is ratio-
                                               so on. One irony here is that if the enter-   transition. I think they are at risk more
nal other than trying to flexibly put them-    prise is large enough to consider rolling     from the integration of the people than
selves back together into the old vertical     its own infrastructure, this added uncer-     from the integration of the networks
solutions they used to have. There is a        tainty may be enough to get it to take the    themselves.
possible irony here. For example let’s         plunge.
take AT&T and SBC. It may be that they                                                       COOK Report: A systems integrator
each understand how badly their own            Evslin: It certainly is a possibility that    might come to that IT manager and
assets are wasting and they may not as         many larger companies deal with a net-        promise him that he could solve the
readily realize that the assets of the other   work manager whom they may pay to             uncertainties. But it is hard to see why
guy are in just as bad shape.                  roll a network for them. I don’t think        the IT manager would have unbounded
                                               that many non-carrier companies want          faith in the integrator to get him over the
The local access lines for the LECs are        to physically own fiber. But they are cer-    bumps. It gets very hard to see where the
still a huge asset for them but they are       tainly going to look at the feasibility of    benefits for the LEC will come from.
not going to be the kind of asset that         virtual networks of some kind. I think it
they once were. The number of lines are        is more a question of human integration.      Farooq in my conversation with him has
still dropping. They won the battle to not                                                   constructed a world where economy-
have to cut prices on those lines but they     Let’s say you are the IT manager who          of-scale savings will allow the ILEC to
lost the war because, before long, those       has been dealing for quite a while with       sell gigabit Ethernet in the WAN and the
lines’ only remaining value is going to be     the same AT&T salesman. You know              MAN but the Fortune 200 are not likely
as pipes for DSL.                              him and trust him. When you have had          to be terribly impressed by that. They
                                               service glitches, he has been able to help    have a lot of other issues. Right?
COOK Report: Well, as these companies          you out. A year down the pike in the
try to integrate their staffs and physical     newly merged organization you may find        Evslin: Yes. I hate to argue with Farooq
plant and services, it is going to be a dif-   that your trusted AT&T salesman has lost      because he is under more constraints than
                                                                  24
                                      The COOK Report on Internet July August 2005
we are. But basically I don’t find that to    houses passed by the cable network.           TCG and MFS metro (and even long
be an overwhelming argument from an           But I wouldn’t want to pretend that I         haul) fiber properties, present over-
enterprise point of view.                     understand cable nearly as well as I do       laps with the RBOCs in the larger,
                                              telephony.                                    hence more important from their per-
COOK Report: Certainly the markets                                                          spectives, markets that they serve.
that Farooq identifies are there but these    Editor’s Comment: It is interesting how
enterprise markets are also likely as large   hard it is to find good solid pluses on       What does this do to 1) the avail-
and are unlikely to be impressed by the       which to base an analysis of these ac-        ability of a competitive marketplace,
availability of wholesale gig Ethernet.       quisitions. Some speculation seems to         and 2) customers’ need for alternative
                                              suggest that the LECs may have wanted         loop/metro provision in order to meet
Evslin: Quite true.                           MCI and ATT for the size of their gov-        diversity and redundancy criteria? If
                                              ernment contracts. Yet, unless you grant      they have to divest or otherwise spin
COOK Report: I am wondering what re-          them close to monopoly status, it is hard     some of these networks out of their
action you may have to Frank Coluccio’s       to see the value that is there. Wall Street   fabric, do they retain the customers
comments on Adelphia’s bankrupt cable         seems to imagine that there is value and      who are attached to those networks?
assets reaching 4.5 million customers         that bigger is better, but as we well know,   Consider, many of the BWNG, Wiltel,
bringing in a couple billion dollars more     the value that is there is flowing out to-    L(3) and the myriad of reseller long
than AT&Ts global assets?                     ward the edge and is really replaceable as    hauls depend on those two metro car-
                                              broadband becomes a platform on which         riers, just as much as AT&T and MCI
In Search of a Rationale                      edge-based services ride. The mergers         do.
for the Mergers
                                              would appear to be fraught with peril
                                              because of the time, effort and expense       Digging deeper into the mesh of po-
                                              involved in putting giant companies to-       litical and relationship-based arrange-
Evslin: It is amazing, but I don’t know       gether dependent on technology that is        ments around the globe, including the
if I understand the cable model well          absolutely commoditized and has been          peering and transit relationships on
enough to comment intelligently. In gen-      deprived of all its value-added capacity.     the Internet that exist, not to mention
eral these businesses, both ILECs and                                                       the in-country backhauls from cable
cable companies have been valued on           One must wonder given the potential dis-      landing stations, can be a daunting
their numbers of subscribers. The logic       appearance of trusted relationships with      experience.
has been a pretty good logic. Namely          IXC staffs, the acquisitions won’t begin
that, for what they did, they both en-        to cause more and more enterprises to         Ditto for the submarine- (especially)
joyed local monopolies. Churn was not                                                       and some of the satellite- consortium
                                              take matters into their own hands and
a big problem and you knew how to do                                                        agreements. I’m suggesting that the
                                              move towards either rolling their own or
a discounted cash flow of the value of a                                                    latter will present a potential barrier
                                              building a trusted relationship with net-
subscriber.                                   work consultants - something that will        due to vetoes by the Europeans. At
                                              be seen as increasingly rare for the sev-     best, it’s going to be a very long time
As cable co and telco go head-to-head, I      eral years that the acquisitions are likely   before those organizations are reorga-
don’t think it reasonable to assume that      to require before something resembling        nized to reflect the new ownerships.
the value of a subscriber is going to be in   stability can shake out of them.
the future what it was in the past. But the                                                 Getting back to one of my original
counter argument is now we sell people        If the acquisitions became a tipping          points, though, it’s conceivable to me
more stuff so the value of a subscriber       point to propel more and more en-             to have a number of scenarios where
should be going up. As an individual I        terprises into building their own net-        enterprise strategies that went into
spend more on electronic communica-           works, it seems that the whole ratio-         mixing and matching long hauls with
tion and content than I ever did before so    nale of the buy-outs would evaporate.         metros in order to meet diversity and
there may be some truth to that assertion.                                                  redundancy criteria, (in addition to
However I would also maintain that, as        Here is how Frank Coluccio summed             satisfying pricing objectives), could be
a customer, I am much more expensive          up some of his thoughts on Febru-             voided. This relegates the customer to
than I ever was before. You have to win       ary 17: The mergers? Très complex.            staying with what they have, despite
my business and then, if you don’t have       Roughly a half to two-thirds of all           losing the type of leverage they had
a monopoly, you have to keep me. I can        enterprise long haul (and many metro)         before.
get content from satellite if I really get    carrier service acquisition strategies
angry.                                        go out the window, for starters. In           And others, who may just now be
                                              short, it’s difficult to play one against     waking up to smell the roses for the
Consequently, I think that the historic       the other when they are now, in some          first time after getting smacked upside
valuation models that we have used            instances, one and the same. Is it a          the head, may do as you suggested.
need to be discounted now. This is true       slam dunk with Justice? Don’t know.           They may elect to be more proactive
both for access lines and probably for        Each of the IXCs, by virtue of their          in achieving their own destinies and

                                                               25
                      COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
decide to assume more radical ap-            for now, where video is concerned. It        appliances transforming telephones into
proaches. Including asset-based net-         would follow, then, that they are open-      computers, I have to conclude that the
working where they roll their own or         ing themselves up, either knowingly or       same dynamic is eating its way into the
partner with new players to achieve          not, to increased competition, not only      enterprise, as well, which it clearly has
current- and next- generation conver-        from their competitors in the MSO and        been and will continue to do. The scene
gence objectives.                            municipal camps, but from the very end       is not as bleak in the enterprise during
                                             users they plan to serve, as well, since     the intermediate term, imo, because
Symposium Discussion                         end users can now go to the content          there are a great many extant conditions
                                             source directly via the Web.                 that will not change overnight, and be-
Coluccio: I just spent some time re-read-                                                 cause of the greater variances that exist
ing Tom’s comments on horizontalism          While the MSOs can compete with them         from one industry sector to the next,
against the backdrop of the proposed         at Layers 1 and sometimes 2 (physi-          each demanding of a differently tuned
mega-mergers. I enjoyed the read very        cal media HFC vs. FTTP), the greater         set of vertical services. Combined, these
much, and it prompted me to begin            battles will be fought and won or lost at    two factors still support a window of op-
thinking in a musing sort of way, so bear    the higher layers in the stack, where the    portunity for the telcos who have in part
with me while I go stream of conscious-      actual services that users want and need     managed these applications, up until
ness for a few moments, please. When I       will be provisioned and supported.           now, but with those same applications
refer to telco below, I’m referring to the                                                now being transformed into Web-based
mega-merger RBOC.                            One service sector that we’ve not spoken     services, the telcos by and large either
                                             much about prior to now, which has           don’t have the webbing nor the philo-
I’ve come to realize that, after several     also been good to the RBOCs, has been        sophical resolve, yet, to take that busi-
years on this list dancing around the        the wireless sector. I failed to mention     ness on, much less promote its arrival.
subject of revenue generation vs. the        this in an earlier message, when I stated
constant dollarwise devaluation of net-      that last mile bundled services (triple      So naturally, the upper layer services
work services, I’ve never fully obtained     plays) were their last vestiges of hope      once again will be sourced to those who
a sense of how service providers at all      for making a decent profit. Just how         can handle them, leaving that much
layers of the stack would generate rev-      profitable are these cellular and PCS        less revenue producing potential for the
enues going into an all Internet future.     wireless services to the RBOCs, really?      telcos in the enterprise sector, too. What
Yeah, there are the obvious default          Now, and into the future? Have the           we’re going to see happening here over
paths that are being taken, but not ex-      wireless pricing and feature wars ended      time (or continue to happen, if you’ve
planations of how those bucks would be       yet? And how will VZ and Cingular at-        been observing up until now), in my
made after the ravaging effects of con-      tempt to leverage their 3G offerings in      opinion, will be a form of default layer-
vergence have been fully felt, as we rap-    the future as a substitute for their land-   ing taking place, where even in the ab-
idly approach this all-Internet future.      line (FTTP/DSL) alternatives?                sence of regulatory actions or mandates,
                                                                                          enterprises, like users in the consumer
And that is exactly where we’re headed,      I’m already reading about users who’ve       and SMB spaces, will elect to roll their
sans many of the incremental features        been highly satisfied with their 2 to 3      own applications (such as many of them
that were invoked in core network intel-     Mb/s download speeds using Verizon’s         already have), relegating the traditional
ligence boxes, which, arguably merited       EV-DO, to the point where a couple           landline carriers to transport services,
corresponding incremental subscription       of them are thinking of disconnecting        only. And in order to make up for the
charges to the customer for every dip        their landline access. Is this an impor-     lost application revenues the landline
into the IN database. And if we, on this     tant question to be asking when discuss-     carriers will be pressured into raising
list, with the backgrounds that we pos-      ing these mega-mergers? If so, how?          their pricing of transport services as a
ses - and relatively immune from the                                                      matter of survival.
consequences of our own academic as-         No mention of 21st Century wireless
sumptions and hypotheses - can’t begin       would be complete without also stating       Ecclesine: Hi Frank, Another thing hap-
to enumerate how SPs would generate          that it, too, is undergoing convergence      pening is the onset of multi-homed client
revenues going into the future, then it’s    at the IP layer and now beginning to         devices - always best connected, and
hard for me to imagine what the head-        support many of the same multimedia          again, the IT devices supply the value.
lights must be like that the traditional     features that HFC and FTTP/DSL do,
carriers must be staring at, today.          as well. Which, I think, brings this last    Coluccio: Peter, are you referring to
                                             message full circle, leaving out only        multi-media (fiber, copper, wireless)
The RBOCs have already sent out clear        enterprise considerations, which I’ll say    residential and SMB gateways, or some-
signals that the platforms that they con-    one or two words about..                     thing else?
sider to be their most promising money
makers in the future will be based           If applications are moving closer to the     Ecclesine: I am referring to Treo 650
on IP constructs, primarily based on         consumer’s edge, with software now           kind of IT-issued smart handsets that
Microsoft’s Media software and IPTV          being mounted as clients on end users’       have three or more radios - BT/WiFI/2G/
                                                               26
                                     The COOK Report on Internet July August 2005
3G, and some user policies about tak-        future stream of income it generates, not      Video, then they can always select a best-
ing and transferring traffic across them.    how much it cost!)                             of-breed satellite TV alternative, instead,
Multi-homed terminals.                                                                      for their viewing purposes. Before long,
                                             Coluccio: Well put. I personally know a        what you have is an a la carte model
David Reed: Frank - in the big pic-          few individuals about whom you speak.          of service subscription returning to full
ture, those companies that provide us        One in particular went into fiber building     bloom.
the “service” of connectivity are in a       thinking that he was doing a service for
scary position. The cost of provision has    all of mankind. It wasn’t until a larger       Getting off this topic for a moment,
dropped, and the exclusivity of provision    entity absorbed his former company in a        although it might be used as a tie-in at
has dropped, so indeed, they should ex-      stock and cash based acquisition that he       some point, I just posted a short piece
pect returns close to the cost of capital.   became rich in the manner you suggest.         having to do with Hong Kong Broadband
                                                                                            Networks (HKBN) installing symmetric
Since any competitor has access to capi-     And yes, I’ve heard those same axioms          Gb/s lines (as well as 100/10) into resi-
tal at the same cost, the margins will be    before, and thanks for filling in the holes.   dential customer locations:
thin.                                        I hope I didn’t come across like I was
                                             airing a sense of remorse for the incum-       http://makeashorterlink.com/
However, as long as needs exist, there       bents, though ;)                               ?R2EA15FEA
will be a business to provision service.
Needs create business returns to those       What I wrote was for the purpose of            Andrew Odlyzko: Concerning the value
who satisfy them.                            eliciting comment, throwing some ques-         of AT&T and MCI to their acquirers: It’s
                                             tions in on topics that I’d like to further    all in their enterprise customers. What
Should we feel bad for those compa-          explore, as well. For instance, I’d like       I think would have made sense was to
nies who assumed that they could earn        to further examine what is taking place        combine AT&T, MCI, and Sprint to cre-
extraordinary margins, well above the        in the telcos wireless offerings and how       ate a service providers for large business-
cost of capital, merely by grabbing hold     those plans intersect with their other         es, one that could offer an alternative to
of bottlenecks and playing dirty tricks      platform offerings. The same telcos that       the ILECs, and which would have elimi-
on their competitors by buying off Con-      are creating triple and quadruple plays        nated the cutthroat competition among
gress?                                       using their landline fiber facilities as       these IXCs that has weakened them to
                                             a base are now putting in competitive          the point of non-viability.
Do those companies deserve anything          wireless services at this time. By this I
because they’ve demonstrated that “sunk      mean that the RBOC’s wireless service          Apropos the ILEC acquisitions of AT&T
cost” is not capital value?                  (EV-D), e.g.) will compete with its FTTP       and MCI, Tom Evslin said that “the
                                             offering. Thus, they continue to leave         overall trend in telecommunications is
I don’t feel bad, because for 25 years       themselves open to further cannibaliza-        towards horizontal layering and not to-
I’ve been pointing out that bits are bits,   tion of one platform by another, and this      wards vertical integration.” Yes, that is
and there are no special niches that can’t   is being caused by their own doing. It         true, but with a few caveats. The com-
be arbitraged by technical invention.        would seem to me that this might be one        puter industry, which Tom cites, has
You can’t say that you never heard that.     reason why a mega carrier might want to        shifted towards a horizontal model. But
Gartner and its ilk have been quite reas-    spin out its wireless carrier, but then what   that does not mean that most users go to
suring to such companies, telling them       would be left to fund the remaining fiber      Seagate for the hard disk, AMD for the
that they are brilliant to buy into the      buildouts? Assuming they do not spin off       CPU, etc. Instead they buy from Dell
latest tulip-bulb get-rich-quick telecom     their wireless components.                     or another integrator that works across
bubble - just buy lots of fiber and put                                                     all the layers. And IBM and Accenture
it into the ground, and you’ll have a re-    If a telco-provided 3G offering is now         do a booming business in running other
source that no one can beat... yeah sure,    sufficient to satisfy a user’s Internet ac-    people’s computer operations.
until someone makes fiber bits/sec for       cess requirements through the hookup of
half the price.                              a local USB attachment (never mind 4G,         Something like that appears to be evolv-
                                             whatever that is, or some other promised       ing in telecom as well.
The first to go were the people who          WBA alternative coming from a stan-
thought they could depreciate silicon        dards body) and it covers voice services,
as a 30 year linear asset. The pseudo-       as well, then this will in many cases
profits they took out of the business and    obviate the need for a landline broad-
invested elsewhere could not compensate      band access connection from the MSO
for the invisible decline in capital value   or Telco. And if the subscriber elects to
(capital is only worth the NPV of the        discontinue their HFC- or FTTP-based




                                                              27
How an Effort to Form a Wireless Open
Application Platform at Sprint Became a Walled
Garden Focused on Billing for Every Bit
Highlights                                     platform. The idea behind it was to have
                                               enough humility to acknowledge that           The way the game works is that you
                                               no one likely had a clue what the suc-        think of a project and you think of a large
Editor’s Introduction: Martin Geddes
                                               cessful applications would be. But the        dollar number to fund it with. You then
writes the telecom strategy weblog Tele-
                                               hope was also to have enough paranoia         stick it into a review pipeline. It goes
pocalypse, cited by Business Week and
                                               to recognize that the Paradox of the Best     before a review committee. If you have
Forbes. Before becoming an independent
                                               Network was going to come to wireless.        more political weight than the other peo-
consultant he was a technology specialist
                                                                                             ple in the room, your project doesn’t get
and product strategy manager at Sprint
                                               The open platform effort was sponsored        questioned quite so much and whittled
in Overland Park, Kansas. He is named
                                               by the chief marketing officer to whom        down as much. Eventually you will see
on 17 patents filed by Sprint. Martin
                                               the VP and general manager running the        it funded.
previously built large transactional sys-
                                               Sprint PCS.com business unit reported.
tems at Oracle Corporation. He holds a
                                               Sprint having gotten the full dot com         Unfortunately, if there were ever a plan
bachelor’s degree in Mathematics and
                                               fever had created a separate business unit    within Sprint that was based on any in-
Computation from Oxford University. I
                                               that was responsible for running all the      sights into the Stupid Network, I never
interviewed Martin on April 11, 2005
                                               web sites and wireless web, and had its       saw it. I was in the Product Planning
                                               own accounting department and Human           and Strategy Group where, by all ac-
COOK Report: How do assess the pro-
                                               Resources function. It was really quite       counts, it should have appeared.
posed mergers in general, and in par-
                                               autonomous. But after about a year the
ticular what is your assessment of where
                                               business unit was dissolved and most of       COOK Report: And yet paradoxically,
Sprint is headed?
                                               the people involved with the project left     perhaps some people had some clue
                                               the company.                                  because you did have the PCS group
Geddes: It is already over six months
                                                                                             centered around a wireless open appli-
since I left Sprint. But having said that,
                                               It was partly our own fault in that we        cation platform?
it is my feeling that Sprint is a company
                                               simply could not put a business case
that has lost its purpose in life. There was
                                               together. You are entering an uncertain       Geddes: There were some people who
some joking that Sprint’s new core com-
                                               world that no one has been to before.         wanted to go in that direction but their
petency had become to shrink its way to
                                               You may have a tendency to assume you         desire to do so was frightening to guys
excellence.
                                               will be in the application layer by default   in the network division because there
                                               because you are wireless and you con-         you had people who thought their whole
COOK Report: Meaning to downsize
                                               trol everything. You will be tempted to       job in life was to vertically integrate
and lay off?
                                               become a packet Nazi and put a price on       their layers with those above and below
                                               everything. It is not going to happen.        and to create endless SIP proxies and
Geddes: Yes. People were turning up and
                                                                                             plans for IMS services,
clocking in but they weren’t producing
                                               You have to create value. The way you
very much. I was working on a project
                                               create value is with an application plat-     COOK Report: So their point of view
dealing with digital identity. No one
                                               form that enables people to do numerous       was to be able to slice here and dice
there felt that it had any real corporate
                                               applications at much lower cost than they     there, and charge a few cent for these
sponsorship. Its purpose to us seemed to
                                               otherwise could.                              packets over here and a few more for
be a place to park people and keep them
                                                                                             those over there?
busy.
                                               COOK Report: Do you have some sense
                                               of why you couldn’t find the business         Geddes: Yes. Part of our naïveté was
Goal Was an Open                               case that you set out to look for?            the technical approach, that was not
Application Platform                                                                         to build a network that was as stupid
                                               Geddes: The reason was partly naïveté.        as it could have been. Why? Because
The purpose for which I went to Sprint         No one was quite sure what the thinking       we had to deal with the tyranny of the
in 2001 was to work on a project in the        of the parent company was. Of course,         installed base. We ended up proposing
Sprint PCS.com business unit. The goal         in retrospect, the idea that operable busi-   a smart edge network - very similar
was to make Sprint PCS into the first          ness cases were to be found inside a telco    to the OPES standard (Open Plug-
wireless carrier with an open application      was a fantasy.                                gable Edge Services). It was focused

                                                             28
                                      The COOK Report on Internet July August 2005
on some smart edge proxies that would         of this proposed merger has no plan that      different country with the wrong map.
deal with identity and billing and some       deals effectively with the realities of the   Sprint was trying to get off the Conver-
other issues. For example, you could          “stupid network.” Now maybe with the          gys platform and in-source its billing, be-
pop up authorization screens to release       Nextel side of things, things are differ-     cause it had come to the conclusion that
customer data or to bill the customer         ent. Clearly the Nextel folks have played     it had to build an enormously complex
some extra money. It did not require          a relatively weak hand extremely well.        set of rules where it had to have the abil-
the application provider to install lots of   They picked one thing and did it ex-          ity to fine grain charges for every packet
Sprint-specific logic in its application.     tremely well. Whereas Sprint has made         in the universe.
All the provider would have to do was         a ton of mistakes and has tried to be all
to say which URLs they wanted to bill         things to all people. But let me add that     COOK Report: Was Sprint the only telco
for, or which URLs they wanted to have        Sprint is full of honest and upright and      to do this?
customer profile information added in         hardworking Midwestern folks. There
the HTTP request headers.                     certainly is an order of magnitude less       Geddes: I don’t recall any that wasted a
                                              skullduggery going on inside of Sprint        half billion dollars on trying to in-source
COOK Report: So the idea was to make          than there is in the average telco.           a billing system.
it possible for application service provid-
ers to integrate their software not only at   But the problem was, with Sprint PCS,         Sprint had chosen Convergys as its out-
Sprint but also with many other carriers      that it was over focused on content. The      sourced billing provider. People inside
or other users?                               launch was centered around relatively         Sprint were not stupid. They had a whole
                                              minor media content trinkets and hope-        thing for dealing with MVNOs (Mobile
Geddes: Yes. We had a lot of discussions      lessly underplayed the photo-sharing,         Virtual Network Operators). Most of the
with Sun and IBM about the desire we          instant messaging, and all the other pos-     time, with respect to dealing with the
had at Sprint PCS to become an applica-       sibilities. The photo-sharing was there       old world, they had a sane and rational
tion platform. Although in the long run       only because they knew they couldn’t          plan but no plan for dealing with the
what this represented was only a local-       source phones that didn’t have cameras        new world of the Paradox of the Best
ized desire within a small part of Sprint     in them. But for the first year or so of      Network. You could say that not only
and something that did not have enough        the PCS Vision instant messaging didn’t       did they not manage to decide how they
acumen and fiscal backing to survive.         make the cut. Whereas Verizon focused         would create value but that they also
The immune system of the telco effec-         on “can you hear me now?” In other            didn’t manage to figure out how to cover
tively neutralized what we were trying        words can you get the signal cover-           costs.
to accomplish.                                ing both places and people? Sprint ad-
                                              vertised some frills. Verizon hammered        Sprint entered into multiple MVNO
Walled Gardens                                home reachability and reliability. As a       agreements that enabled third party com-
Over-Focused on
                                              result, Verizon gave Sprint a good whip-      panies to have wholesale access to their
                                              ping.                                         network and who then retail that access
Content                                                                                     to their customer base. For example,
                                              COOK Report: But what exactly did             consider Virgin Mobile USA. You buy
The situation was impacted by what we         Verizon do that made them successful?         CDMA handsets from them and get a
have later identified as the classic Para-    Did they figure out what was needed and       prepaid service. In theory at least they
dox of the Best Network - namely that no      apply the necessary resources until they      are marketing into some niche that Sprint
one could make money from it. From the        got the job done?                             finds it hard to reach. In practice what it
classic telecom perspective, the rule has                                                   means is you have just outsourced your
always been, if you can get a signal to       Geddes: I think you can argue that there      customer relationship, which is a danger-
a perspective customer and no one else        may have not even been a substantial          ous thing to do.
can, then you win. For example, with EV-      reality behind it. That the man running
DO, while there are issues about latency      around and saying “can you hear me            For those in search of the creation of
and the scalability of the reverse link,      now?” was just a marketing façade.            value, one of the “fire exits” of the Para-
the opinion appears to be that that it will   However, there were issues with cov-          dox of the Best Network is identity. If
consistently, economically outperform         erage and network deployment inside           you know a person and you know what
businesses that offer hotspots because        Sprint. From a position of being one of       you know about the person - if you have
EV-DO reaches more places. The same           the leaders in cellular, Sprint slipped       a wire into their house and bill them
ideas motivate the belief that broadband      downward in network quality and its           every month, or if you have issued them
access over power line is worth strug-        customers did not like the result.            a phone number or an email address that
gling for since the idea that you could                                                     they use regularly - you can participate
have an access point in every power           Sprint’s several hundred million dollars      in the brokering of transactions that they
socket in an entire city is tremendously      written off on putting in a new billing       must do every month or more and on
appealing. In my opinion, the Sprint side     system was a symptom of being in a            which that identity depends. It can even


                                                               29
                       COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
be meta-information about the identity.        large ILEC foot-print. Sprint Local cov-      is what you are looking for does not
For example, does this person really live      ers only about 5% of the US. Sprint is        exist. What you wind up with is a lot of
where he says he does?                         also trying to spin off what local business   niches that you must fill and a huge $900
                                               is still there. Obviously its long distance   million dollar campus in the middle of
Now, on the Nextel side of things, let me      division isn’t worth much either. You         Kansas that your business can no longer
say that I think Nextel has better manage-     have Sprint international with submarine      support.
ment. With Sprint’s expansion into wire-       cable but there is no real shortage of
less a lot of people lacking in talent got     undersea right-of-way. In general such        COOK Report: So where’s it all head-
sucked up into higher levels as the tide       cables aren’t perceived as good invest-       ed? Do you think it will devolve eventu-
flowed in. If they had to fight their way      ments now.                                    ally down to infrastructure like pipelines
up to where they found themselves from                                                       and sewers? The mystery is how one gets
where they started, I don’t think they         On land at least Sprint got its start         there? Are we looking at multiple bank-
would have made it.                            from Southern Pacific rights of way.          ruptcies with local governments running
                                               Wiltel came from gas pipeline rights of       the fabric that is left?
COOK Report: What happened to the              way. MCI realized the airwaves could be
spectrum that Sprint purchased for its         rights of way. But if you regard telephony    Geddes: I don’t completely agree with
MMDS service?                                  in general as dull, boring and thoroughly     everything that Bob Frankston is saying
                                               commoditized, you have to ask: Where is       in the list discussion. There, he is sug-
Geddes: I believe they had to write it         the value in Sprint? I don’t see any inno-    gesting that it is all going to be a utility.
down from $1.3 billion to $300 million         vation coming from them. Where for ex-        I think that the locus of innovation needs
about a year ago.                              ample would be their equivalent of a 60       to shift from trying to meter the value of
                                               gigahertz radio solution that you could       packets in search of the “golden” packet,
With No Strategic                              stick on the upper floors of skyscrapers      to innovative means of financing infra-
Market Focus Sprint
                                               to by-pass ILECs? It doesn’t exist.           structure and networks.

Reorganizes To Be                              COOK Report: It sounds as though you          Michel Roberts has written a book called
Customer Centric                               are saying that there is no real focus to     “Strategy Pure and Simple II.” He has
                                               what Sprint has evolved into. Wireless        written a series of books on business
COOK Report: How would you describe            here, some local over there, seasoned         strategy that overlap a bit but have a
Spint’s international infrastructure and its   with some fiber and undersea cables and       series of very good business model ar-
enterprise customers? Are they strong?         enterprise customers?                         chetypes. You can have product arche-
                                                                                             types for example and be uniquely good
Geddes: Yes - a reasonable number. I           Geddes: Yes. No real viable focus. Sprint     at making product features. Or at sales,
think a lot of value-added aspects has         reorganized to be “customer centric.”         or at financing. The telecom archetype
been sucked out of them by IBM’s Al-           This was executed when Gary Foresee           centers, to a considerable degree, around
liance agreement. This was, I think, a         came in replacing Esrey as President          distribution. What you are always aim-
rather one-sided agreement where Sprint        in early 2004. The local parts of Sprint      ing for is a network with more nodes of
agrees to buy a certain amount of IBM          got divided up. The consumer part was         access that reach more other nodes of
IT services and IBM agrees to try to           left alone and the business parts were        access. That will win the game.
promote Sprint maybe, a little bit, per-       rolled back into Sprint Business It be-
haps on alternative Tuesdays in June.          came a very vertical organization with a      Consolidation
                                                                                             Uncertainty and Sprint
<laughs>                                       horizontal network and IT group spread
                                               across the otherwise vertical silos.
COOK Report: But IBM had a huge                                                              as an Enterprise
global network services division that it       In the world of the stupid network, you       Network Utility Fabric
dismantled?                                    have horizontally layered business units.
                                               Rights of way. Connectivity and then the
                                                                                             Manager
Geddes: Yes. They will work with any-          application platform, including billing
                                                                                             Yet the interconnection afforded by the
one including AT&T and SBC. I think            systems. And finally the customers and
                                                                                             Internet will take away that kind of ad-
IBM got WebSphere software and a boat-         customer relationship. If you are not
                                                                                             vantage, therefore your business model
load of servers inserted into Sprint’s IT      organized around these things, it is very
                                                                                             strategy has to shift. If you are looking
department and that Sprint didn’t get a lot    hard to deal with the Paradox of the Best
                                                                                             at building local infrastructure, you will
in return. The program started about two       Network. It you are “customer-centric”
                                                                                             have to look at whether to concentrate
years ago and it is still on-going.            with a deeply vertical organization, you
                                                                                             on other areas such as mode of financ-
                                               are going to be spending all your time
                                                                                             ing. But there is more than one way of
Sprint finds itself caught in this awkward     looking for the “golden” application
                                                                                             building innovative financing models. So
middle space where it doesn’t have a           that replaces PSTN voice. The problem

                                                                  30
                                        The COOK Report on Internet July August 2005
there will likely be more than one way                                                         get either low latency or relative symme-
of building a municipal network. Do you         Geddes: Yes, and if you were Sprint and        try with either EVDO or CDMA.
do just a wholesale agreement like UTO-         can actually manage a network at less
PIA? Or do you go like Lafayette and            cost (which they are fairly good at) and       Flarion did drop by the Sprint campus
play at the retail level as well?               do it with more scale and get customers        during my time there to demo a push-to-
                                                the pipes they need and help them man-         talk application on a standard pocket PC
There can be still more forms of inven-         age the result rather than go running off      windows device. They put a Flarion card
tion. When you deploy fiber to an indi-         trying to squeeze something out of every       in the bottom and had a “cow” (cell tower
vidual neighborhood, you would expect           packet - then they might actually have a       on wheels) outside the building. They de-
to see property values rise. I have anec-       future.                                        moed a push-to-talk application that they
dotal feedback from operators in the UK                                                        had put together in two days. Spring had
that this is indeed the case. They say the      COOK Report: It sounds like you are            labored for about two years trying to put
real estate agents all come to their Christ-    saying that while there are a few billion      together push-to-talk tweaking SIP and
mas parties because they are very happy.        dollars worth of Sprint assets left that       everything else on its network to try to
Consequently, you might agree on some           are still worth something, they ought to       bring down latency to only 2 or 3 times
“x” percentage value that the fiber adds        be preserving these assets by applying         what Nextel had experienced with iDEN.
and conclude with the developer that if         these ideas to the building of some basic      How much creativity is there and who
he gives a proportionate lien on the value      infrastructure for what’s coming down          will exert it remains to be seen.
of the property such that he is repaid          the pike - so to speak. But looking at it
when it is sold, he will install it for free.   as you describe seems to be so contrary        COOK Report: To conclude then: I am
You then go on to securitize the lien and       to the telco’s fundamental DNA as to be        still looking after talking to Farrooq Hus-
build the network. In that case you don’t       impossible?                                    sain, Tom Evslin and yourself for what
have to be in the operational business of                                                      Verizon and SBC think they are going to
trying to squeeze every last packet out.        Geddes: I think that they are making a         get out of these mergers. It is very hard
                                                big mistake in selling off Sprint Local        to see. What do you think?
Along the same lines you might wonder           because in conditions like this you want
why the 98 percent of the largest com-          to be able to keep a cash cow in the barn.     Geddes: I am impressed by what An-
panies are paying the other two percent         If you do understand the Paradox of the        drew Odlyzko and Benjamin Tilly had
such massive amounts for connectivity?          Best Network, you will understand that         to say in the recent paper about what
They may want to ask why they don’t             you cannot focus on price discrimination.      happens when you join two networks
just set up a mutual general connectiv-         In my view, if you are going to rebuild        of unequal size together. They conclude
ity-company to provide a basic utility          your infrastructure on a commodity, and        that the smaller network gains dispro-
fabric.                                         layered, basis, you don’t want to have to      portionally much. It tells you that there
                                                go to the capital markets to raise funds.      is a defensive reaction to the Paradox
COOK Report: Given the uncertainty              But rather you are much better off if you      of the Best Network where the belief is
that is coming courtesy of the amalgama-        can finance it for yourself. Since Sprint      that the only way out to grow large in
tions going on, large American enterpris-       Local is a cash cow, I think they are mak-     search of some economy of scale. You
es have to start asking whether they can        ing a mistake to cast it off as I believe it   also try to grow your market power and
justify sitting back and taking chances?        was publicly announced as part of the          increase your interconnect capability. No
The motivation for them to do their own         Nextel deal, they intended to do so.           small entity can compete because such
build has to increase as a result of the                                                       an entity cannot afford your interconnect
consolidation.                                  COOK Report: From what I am hear-              fee. You rebuild to the extent possible the
                                                ing, the Nextel people appear to be in         pre-1984 monopoly. Commercially the
Geddes: Yes. Think of the Paradox of            charge.                                        more things change the more they remain
the Best Network as a dark room with                                                           the same.
a number of gently glowing green exit           Geddes: I think that is indeed the case.
lights around the edges. The way you            Now if you are inside the Sprint Wire-         Discussion - Some
                                                                                               Comments on Nextel
deal with it is not to grope around the         less Network division and your power
room exploring the darkness but rather to       comes from building smart networks you
head for the exits straight away. You have      may feel threatened by the Nextel folks
                                                                                               Bruce Williamson: Thank you Gordon -
to find new ways of doing things.               and their different approach to wireless.
                                                                                               it’s a conversation I wanted to have with
                                                I think that Sprint is still very much
                                                                                               Martin at the F2C conference on his view
COOK Report: And the very security and          wedded to the CDMA approach and not
                                                                                               from the outside.
future stability of some of these compa-        ready to change. The Sprint people still
nies may depend on the ability of these         see EVDO as a means of maintaining
managers to get off their duffs and head                                                       Nextel is no smarter than Sprint with
                                                their ability to charge a premium for
for the exits. Right?                                                                          regard to the Stupid Network. As a com-
                                                voice. But I don’t think you are going to
                                                                                               pany, the closest analogy to an operating

                                                                 31
                         COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
style is MCI in the early days of lawyers, ‘national’ coverage of the top 5 mobile over using others’ facilities.
rooftop antenna, and money. Hidden companies). Access to handsets that are
from view of those who have focused not Motorola’s (i.e, allowing lower cost These steps might make incremental
their careers on PSTN and auctioned cel- Asian handsets, widening Nextel’s mar- sense but, ultimately, what is Sprint’s
lular spectrum in the 860MHz frequen- gin on handset sales), and using network defensible position as the wireless arena
cies and up, Nextel has elbowed its way technologies that are supported by mul- succumbs to forces of fungible packets.
into “commercial cellular” operability in tiple large players rather than relying on What happens when wireless connectiv-
many tiny slices of the spectrum below a single network technology provider ity becomes assumed and, in the interim
860 - often wedged between public (Motorola). That’s for starts.                         one can use Skype over the data path
safety/emergency service/TV spectrum -                                                   with minor latency?
without having gone through the process In short, odds are that Nextel will change
of A & B mobile operator licenses of the little, doing nothing that would favor or I’ve been painting a stark picture in
1990’s.                                      advance the Stupid Network. Look for which it becomes impossible to recover
                                             same old vertical integration of transport the value of the network from the cus-
This growth could not have been accom- thru application. Nextel will have chal- tomers who create their own value and
plished without years of careful lawyerly lenges that will keep it looking the other that there isn’t a business model for sell-
steering thru murky FCC spectrum waters way, looking like a traditional wireless ing packets - one must resort to indirect
to grab underutilized/unutilized slices of network. It may lose longtime technol- funding like a utility model.
spectrum below 860, never quite being a ogy partner Motorola, a company that
commercial cellular operator, but looking invested a lot to build Nextel into what So I’ll ask my usual question - what am I
more like one from the standpoint of the it is on the technology side. That’s both missing? Is this what you mean by “los-
end user all the time. That was Nextel’s good and bad. Nextel’s key customer ing its purpose” or is it simply that they
plan. They didn’t make many friends in segment is Government/public service, lack a coherent vision - what can that
the process, because “underutilized/un- but that is Motorola’s key customer seg- vision be?
utilized” is open to debate. Once tiny ment also, through LMR/PMR technol-
spectrum slices were acquired and used, ogy dominance.                                   Bruce Williamson: Bringing the billing
Nextel next went after a plan to con-                                                    in-house makes sense only if what you
solidate its separated spectrum slices into And thanks, Martin Geddes, for the learn by owning the process again out-
adjacent bands thru swaps. But that has Sprint comments - good insights!                 weighs the cost of hiring programmers
gone about as far as they can take it with                                               that you laid off five years ago. SBC out-
the FCC and other users of the (roughly) Frankston: Telcos are in the billing/ sourced billing back in the mid-1990’s to
700-860 MHz spectrum.                        service business. Sprint was similar - Amdocs, an Israeli company that SBC
                                             an attempt to sell services rather than owns a chunk of. I think you’ll find Am-
Nextel’s move to go after a commercial raw connectivity. Bringing the billing in docs involved in every SBC venture now.
cellular player was a necessary next step. house makes sense because that’s the real But SBC’s lost its Business Research
Sprint PCS gives them the vehicle to play competence of a Telco.                         group that use to analyze customer be-
alongside Verizon/Cingular, and be like                                                  havior. Amdocs doesn’t do it, so the
them, in technology and concept.             It’s interesting to see the mentions of EV- insights to be gleaned from new services
                                             DO and SIP. EV-DO is beholden to the is go undiscovered. Do you know what
The PTT (push to talk) technology is a CDMA2000 architecture and it seems Amdocs focuses on delivering? Analyz-
capability that came along with the Mo- difficult to improve it on any reasonable ing billing data to determine the next best
torola iDEN technology built to migrate schedule. I wonder what Nextel uses in- marketing action, known as NBA. That
Land Mobile Radio (LMR)/Special Mo- ternally. SIP is also telling because I’ve means if your contract is due to expire on
bile Radio (SMR) communications for been arguing that it is faux telephony so wireless, I call you to recommend certain
government, public safety, emergency should be familiar to Telcos. I see it as things...knowing what you have, and
services over to digital capabilities in- a symptom of a conflict between being what others like you have. To SBC, if
cluding encryption and data services. For IP/Standards-based while trying to be a that’s all they care about, they don’t need
Nextel and Sprint to blend easily is not service platform that doesn’t expose this to own their ATT legacy (CRIS) billing
likely - sure to be left on the cutting room architecture.                               system again.
floor will be an odd assortment of Sprint
people/business units and possibly Mo- The PLC is also interesting - why doesn’t What’s lost in outsourced billing is the
torola technology (in Nextel’s network Sprint just use VoIP over others’ con- in-house knowledge from ownership of,
plus all the current Nextel handsets).       nectivity to create local relationships in and ability to random sample from, live
                                             like ATT’s CallVantage and Verizon’s customer usage information. Like call
What does Nextel gain? Access to above- VoiceWing? It’s one thing to bring bill- detail in the old days (love those 18
860 spectrum they could never gain oth- ing in-house when it is strategic (in the track reels), careful study (math/stats/
erwise. Access to an LD network. Cover- traditional model) but another to build a economics) gave us ratable elements
age (Nextel has perhaps the most limited private network that gives no advantage of frequency, duration, distance, time

                                                               32
                                      The COOK Report on Internet July August 2005

of day. Research papers based on that         formation is positive - else they wouldn’t   comments on bringing the billing in-
ability to sample, measure and estimate       communicate/transact so predictably.         house. My real point was that billing is
traffic probabilities propelled Faulhaber,                                                 the real strategic skill of the carriers and
Wittig and others to greatness.       If I    Second - to answer the question about        the rest is just an excuse to create fodder
were a packet nazi (nice term, Martin)        Nextel’s internal technology - that’s        for the billing engine. Once there is no
I’d be sampling and identifying behav-        iDEN - check out Motorola’s web site.        intrinsic meaning in the bits themselves
ioral patterns in new services that could     Trying to make it pass data at ‘broad-       and no way to bill for the value then
sustain a tariff, but to be sustainable, it   band” rates has been a challenge, al-        the whole system one has to rethink its
has to have a foundation in predictable       though my impression is that it is the       purpose, if there is any. Even worse if
human behavior. I’d probably focus on         workhorse behind 75-80% of the many          the system is not sustainable as a closed
reciprocity gains - From/to - which trig-     public safety/government/public utility/     system and must bring society into the
gers reverse flow of information. Why?        military trunking radio systems around       loop (no pun) which bring us to a utility
Because packet nazi’s and data miners         the world today.                             model.
can usually spot communities of interest,
where the marginal value of shared in-        Frankston: I was a bit cynical in my




                                                              33
The Muni Network Wars -
Reports from the Trenches
Colorado, Texas, and Tennessee in April 2005 Highlights
Editor’s Introduction: Throughout               telecom giants.” . . .                        now 13th down the list - and dropping
the United States the Telco Cable Co                                                          - behind other countries from Japan and
Oligopoly is on the warpath against             http://www.theledger.com/apps/pbcs.dll/       Korea to Europe in their provision of
the economic future of countless local          article?AID=/2005                             broadband. Several speakers said this
communities. In state-after-state the           0505/NEWS/505050345/1036                      would prohibit cities from even entering
Oligopoly's lobbyists run screaming to                                                        into JOINT public/private ventures. The
the legislature demanding that state gov-       What follows are some highlights from         City of Aurora testified against it. As did
ernment protect the interests of share-         the “muni-wars” for the month of April        EchoStar the Colorado based satellite
holders buy preventing municipalities           2005 as compiled from our network eco-        service trying to enter into the broadband
from establishing community owned and           nomics Symposium mail list.                   market. Two savvy speakers pointed out
operated broadband networks – falsely                                                         cities do NOT have to go to a vote to
claiming that these efforts are wasting         Dave Hughes on April 6: The Tuesday           building golf courses, or pools or other
tax payer money to do something that the        Hearing before the Local Government           facilities cities build with tax money -
Oligopoly wants to do if only the price is      Committee of the Colorado House on            that if the voters don’t like what the city
right and it is granted enough time.            Senate Bill 152, went pretty much as I        fathers approve, they will turn them out
                                                expected. By the end of the 4 hour hear-      next election. And every one against the
The Baller Mail List                            ing no less than 16 people testified. The     bill said it was ANTI-competitive, would
                                                hearing room was full, which somewhat         impede the spread of the Internet across
Jim Baller has lately been making a na-         surprised me - it held at least 70 besides    the state, and leave whole towns out in
tional reputation for himself as the attor-     the 7 Democrats and 6 Republicans on          the cold. Two recommended the bill be
ney that many community efforts hire to         the Committee. (All attended.)                tabled - indefinitely! I just flat said they
fight for their interests and against those                                                   should kill it entirely.
of the Oligopoly. He puts out a small           Nine, including me, spoke out strongly
mail list made up of URLs and a sen-            against the entire bill - which prohibits     About four speakers, from the Colorado
tence or two copied from the information        any municipality from providing ‘ad-          Municipal League, the State Utilities
to which the URL points. The subject            vanced telecommunications services’ in        organization and a large School Dis-
matter of the list maybe be defined as the      particular ‘high speed internet’ unless       trict that was already entering into joint
broadband productivity infrastructure           a whole series of hoops are jumped            venture with the city of Pueblo - which
wars in the US, Europe and Asia. Cov-           through - from requiring an election, first   would be ‘grandfathered in’ said they
erage broadly reflects technology law           refusal rights by vendors, and a whole        could support the bill ‘with amendments’
and policy. He will subscribe readers to        series of hearings before it can do it,       (which largely didn’t make what they are
his list (the best resource of this type that   where the city is specifically prohibited     doing now illegal.)
I have seen) who email him with their           from lobbying for the measure (while
requests at jim@baller.com. The follow-         the vendors, including Qwest of course        I’ll give you TWO guesses who the
ing editorial and URL is from his list of       are free to spend any money they want         staunch advocates for the bill were, who
May5. In this case the Lakeland Florida         to defeat the city measure). And with         stage managed it so they could be the last
Ledger really “gets it.”                        magnificent ambiguity the bill prohib-        speakers before the vote? You guessed it,
                                                its the cities from offering its citizens     Comcast and Qwest!
Lakeland, FL Ledger editorial: “The             broadband if any ‘private services’ is
question is, why is legislation necessary       offered in the city - never defining what     And it was utterly clear when the House
at all? Why is it deemed proper for mu-         that means.                                   ‘sponsor of the bill’ a Mrs. Jahn from
nicipal owned utilities to sell electricity                                                   other committees of the House - who
but not telecom services? ... In truth,         Those arguing against the bill, including     explained the bill, defended the bill, told
publicly owned enterprises are not trying       the Mayor of Glenwood Springs, owner          everyone how hard they had been work-
to squeeze out private competitors, it’s        of lodges in Red Stone Colorado which         ing right up to last night ‘amending’ the
the other way around. The Legislature is        doesn’t even get cell phone coverage,         bill to ‘satisfy’ everyone’s ‘concerns,
being asked to solve a problem that does        a lengthy and detailed recounting by          called up the Qwest spokesman that the
not exist. ... It would be wrong for the        Tropos of cities outside Colorado which       Qwest fix had been in from the begin-
Legislature to handicap those communi-          have set up such networks (never men-         ning. That Qwest literally wrote the Bill
ties in order to serve the ambitions of the     tioning Philadelphia), a speaker who          from the git go. Transparent - they didn’t
                                                hammered home the fact that the US is         even try to hide it. In the Colorado Senate

                                                                 34
                                     The COOK Report on Internet July August 2005
and the House. And that their deep pock-     voted it in now she would insure that the    have mistaken my huge optimism about
et lobbyists had button hooked EVERY         amendments were OK!                          where we are heading overall with my
Committee member well in advance. As                                                      more cautious optimism about our chanc-
they had the Technology Committee of         (So, after four hours they voted on a Bill   es of doing well in most of the battles
the Senate and ALL 35 State Senators.        that not even the Committee members          that we are currently fighting across the
And of course gave the same gobblygook       ever saw complete)                           US. The main point that I was trying to
about ‘competition’ and how, if cities                                                    get across at F2C is that, since Penn-
want broadband, all they have to do is       Finally, after one set of amendments         sylvania, our support has grown rapidly
ask for it (to which Rep Mike Mansfield      were voted on and approved, Mansfield,       across a wide cross-section of American
retorted that he, once on the city council   having heard me complain that the Defi-      life, and it is likely to continue to grow
of Manitou Springs - three miles and         nition for ‘High Speed’ was a lousy 144      stronger every day. That said, I applaud
contiguous to Colorado Springs, asked        kbps, which miraculously was the very        Dave Hughes for calling out the rancid
starting in 1996 ‘when’ Qwest was going      threshold Qwest wanted for ISDN etc,         legislative tactics of the incumbents, with
to get Broadband to Manitou and it took      he made the amendment motion which           the help of at least some state legislators.
them eight years to even bring DSL in        passed to kick it up to 256 kbps, saying     Dave’s report should also remind every-
last year.)                                  that’s closer to what the FCC says is        one that our fight has many rounds to go
                                             the lowest speed that can be called ‘Ad-     and that we need all the help that we can
My litany included asking why, since         vanced Services; Internet.                   get. There’s also a good deal more to the
there had been nothing stopping Qwest                                                     Colorado story than I can discuss before
for the past 10 years from bringing          But by then it was clear, with only two      the legislative session has closed.
broadband to rural Colorado towns - and      Committee members really asking the
they had failed utterly to do it, instead    big WHY are we doing this to the 186         Here’s the excerpt from my presentation
just cherry-picking the fat urban centers,   cities/towns in Colorado, the majority -     at F2C to which Gordon is referring.
why the hell were they objecting now to      including all 6 Republicans, were going      The full text is available at: http://www.
‘unserved’ cities from doing it? Nobody      to vote for it to be passed onto the whole   baller.com/pdfs/baller_f2c_keynote_3-
had an answer.                               house. So it was approved. And the           30-05.pdf. Also, samples of the state-
                                             Qwest Anti-Municipal Bullshit Band-          ments that I mention are available on our
By the end of the hearing, Mansfield, my     wagon through all 14 of their Western        website, at http://www.baller.com/barri-
House Representative began to see what       States rolls on.                             ers.html.
and who was the hell behind the bill. And
when he asked WHY is this Bill even          The Bill will now go to the Full House,      “The day that the governor [of Penn-
necessary, he never got an answer. An-       and even though Mansfield wants me to        sylvania] signed the law, I turned to my
other Committee member asked the same        send him more ammunition, it is clear        partners and predicted that the passage
question - what is this bill supposed to     all the cities and towns in another State    of this infernal statute could turn out to
fix that’s broken? No answer other than      is going to be Internet-screwed by the       be the tipping point for municipal broad-
political bafflegab.                         Telco.                                       band, as the sinking of the Lusitania was
                                                                                          the tipping point for America’s entry into
It became obvious near the end of the        COOK Report on April 7: I found this         World War One. If I’d thought of it at the
Hearing that the fix was already in by       note from Dave really depressing when        time, I might also have quoted Cymbe-
Qwest, it was their bill all along. (But     I read it yesterday morning. The fact        line, Act IV, Scene 3: “Be cheerful; wipe
the Committee members didn’t seem to         that the legislators had apparently no       thine eyes. Some falls are means the hap-
mind. So much for good government)           understanding of what they were doing        pier to arise.”
In fact, although Ms Jahn is an elected      and had to be prompted by their Qwest
House member from other committees,          handlers was profoundly discouraging.        “Sure enough, almost immediately after
and sponsor of the Bill in the House she                                                  the Pennsylvania law passed, a strong
had the Qwest representative sit RIGHT       Jim Baller at F2C gave a hugely optimis-     sense of revulsion began to spread across
next to her at the two microphone table      tic speech saying that Philadelphia would    America, like a wave circulating around
before the committee, and when she           be the turning point in a rush to muni       a stadium. Before long, the cry of “No
couldn’t explain ‘amendments’ (we never      - wireless. The contrast between Jim’s       more Pennsylvanias” was echoing from
got to see - only the committee members      optimism and this comment by Dave            every corner of the country.
had them as handouts) she turned to the      Hughes was quite stark. Philly was at
Qwest guy to explain them!) And when         F2C and said they hoped to release their     “Numerous national associations that
she was asked what did the ‘secret’          business plan on Tuesday. Looks like it      had previously been mildly supportive
amendments nobody had seen yet - they        did not happen? [Editor: It did happen a     of municipal broadband now saw the
weren’t ready - say, she admitted as the     few days later.]                             need to push it up on their list of pri-
House SPONSOR of the Bill, she really                                                     orities. The broad coalition of public
didn’t know. but she promised that if they   Jim Baller: Gordon, I think you may          interest groups that had risen up to force


                                                             35
                       COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
Congress to overrule the FCC’s media          changed now. While half the reason for      providing a high-speed Internet service
ownership rules now joined us in the          the bad Colorado legislation is Qwest/      to their citizens, and managing it like
battle for municipal broadband, believ-       Cableco Conspiracy, the other half is the   a public utility or any other essential
ing that it had become as important for       great American - and Colorado - political   public service. They are being barred
freedom of choice and localism as the         tradition of Utter Incompetence.            from offering it either by themselves or
battle over media ownership had been.                                                     in joint venture with others, regardless of
Similarly, new grass roots organizations      The long time and very senior Edito-        whether it can pay for itself.
have cropped up in several states to resist   rial page Editor Vince Carrol of the
incumbent efforts to obtain new barriers      Rocky Mountain News (the other major        Why would any Colorado town or city
to entry.                                     Colorado newspaper) after I sent him the    want to do that? It’s because they more
                                              same screed started quarrelling with me     clearly understand than any of our dense
“Most important, at least from stand-         by email and then this morning asked me     urban legislators that the future Colo-
point of state politics, a number of pri-     to write a 700 word piece for the news.     rado economy among their constituents
vate-sector companies, including giants       (I think I shook him up by reminding        - manufacturing, marketing, farming and
such as Intel, and several important busi-    him that he asked me, 14 years ago,         ranching, as well as medicine, educa-
ness groups, including the Fiber to the       for a 1,000 word Opinion Piece for the      tion, and even distance learning from
Home Council, the American Electron-          RMN titled “Mired in the Past: Colorado     farms ranches and cabins - is ever more
ics Association, the High Tech Broad-         has a way to the future; does it have the   dependent on the Internet. Those 125 or
band Coalition, TechNet, and others,          Will?” saying essentially the same points   more rural Colorado towns are sick and
finally said “enough is enough” and           about state-wide digital telecommunica-     tired of waiting for the worst regional
publicly announced their support for          tions before he had ever heard of the       telephone company in America - Qwest
municipal broadband and local choice.         ‘Internet.’ The splashy piece I wrote was   - to deliver broadband services to them
These companies and groups realized           illustrated with a Dinosaur that was all    and thence to their citizens.
that municipalities are a huge strategic      but titled ‘US West’
asset for America in the global economy,                                                  Qwest and its little brother, Comcast
that municipalities have a critical role to   So its a waste of my time to think I can    Cable, want only to cherry pick the
play in helping our country to recover its    get the Colorado General Assy...er In-      fat-cat suburbs, big businesses, down-
competitive edge, and that state barriers     competents’ to change their mind.           town Denver, and other big metropolitan
to public involvement are not only bad                                                    areas. And block everybody else from
for the communities involved, but they        April 16, 2005, today’s Rocky Mountain      competing.
also bad the private sector and bad for       News. After violent arguments with the
the Nation as a whole.                        editor Vince Carrol, a knee jerk ‘conser-   Lawmakers themselves didn’t come up
                                              vative’                                     with the weird Machiavellian scheme
“As a result, when incumbents proposed                                                    contained in SB 152. Qwest did. The
barriers to municipal entry in eleven         http://www.rockymountainnews.com/           bill should be titled The Qwest Monop-
states this year - Colorado, Florida, Il-     drmn/opinion/article/0,1299,DRMN_           oly Protection Act. It is so intentionally
linois, Indiana, Iowa, Ohio, Oregon, Ne-      38_3704368,00.html                          convoluted and “requirements”- laden,
braska, Tennessee, Texas, and Virginia                                                    with techno- gobbledygook and down-
- we were able to mount far more inten-       Legislators answer Qwest’s call to          right contradictory and vague measures,
sive and effective campaigns in opposi-       keep cities out of the ‘Net business        that even the Associated Press got the
tion than even we could have imagined                                                     story backward, reporting the bill would
before Pennsylvania. In these states, I am    By Dave Hughes                              stimulate Internet communications in
growing cautiously optimistic about our                                                   small towns. Actually, the bill effectively
chances of success. A new barrier was         Half the bad laws enacted by the Colo-      prohibits local governments, including
just introduced in West Virginia, and I       rado General Assembly come from back-       entire counties, from serving their own
am concerned about whether there will         room political conspiracies. The other      citizens in the absence of the willingness
be enough time to derail it in the short      half are the results of utter legislative   or ability of the private sector to do so.
time left in this legislative session.”       incompetence.                               It’s an anti-competition bill masquerad-
                                                                                          ing as a pro-private-sector competition
COOK Report: Dave Hughes and I talked         A very bad law stemming from both           bill - a big legislative lie.
yesterday at length. Dave has not given       causes is about to be enacted.
up and I would suggest that the two of                                                    Qwest quietly lobbied SB 152 into ex-
you might want to work with each other        It is Senate Bill 152, which was approved   istence via the Colorado johnny-come-
a bit in coordinating some strategy?          by the state Senate on Friday and now       lately Denver-centered Democratic Sen.
                                              has to be reconciled with the House-ap-     Jennifer Veiga. She got Rep. Cheri Jahn
Hughes: Oh, I suppose you could say           proved version before being sent to Gov.    to sponsor it in the House. Neither of
I haven’t ‘given up’ but I know it is         Bill Owens. The bill would gratuitously     these legislators has a clue about the
a Quixotic endeavor to get anything           prohibit all Colorado municipalities from   future importance of information tech-
                                                                36
                                       The COOK Report on Internet July August 2005
nologies or the Internet or its economic       ties in the public interest.                  there is insufficient rage.
implications for Colorado. I’d like to
see either of them get connected, or set       Municipalities offering Internet as a ser-    I do find it fascinating to compare the
up a law practice in Redstone, where           vice is fundamentally no different from       Colorado and Texas comments. Dave
a desperate programmer had to sell his         governments building the “information         Hughes wants them to give up control
house and move to Glenwood Springs to          delivery” infrastructure of the last cen-     of the transport while Ron Yokubaitis is
get access. Yet Glenwood’s City Council        tury - roads and highways and paying for      concerned about their owning the appli-
itself, years ago, voted for and deployed      them by tax money. Or from providing          cation layer.
its own Internet in frustration at the un-     public utilities - power, water, gas, sewer
willingness of Qwest to do so. By this         - and charging for them by monthly bill-      They want to be in both because they
law, it couldn’t do it again.                  ing. Why are not these illegal?               are uncertain either is viable by itself
                                                                                             and they can make a good case that they
Veiga and Jahn’s political philosophy?         Our lawmakers can’t put 2 and 2 to-           can’t compete in a fair marketplace. This
Much the same as Marie Antoinette’s:           gether. But I’ll bet they sure can count      is why I keep pushing the utility model
“Let em eat dial-up cake.”                     Qwest’s political contributions aimed at      -- to accept their argument that they can’t
                                               keeping its dying corpus alive. Is that       compete with municipal connectivity and
What motivated Qwest to do this? It            what is meant by the “culture of life”?       respond by asking why they want to be in
came from their collusion with all the                                                       such an unprofitable business anyway?
other regional telephone companies, who        SB 152 should be killed. It accomplishes
panicked recently after one large city         nothing, and retards everything in Colo-      On April 22 Coluccio: Prompted by a
- Philadelphia - tired of waiting for          rado’s information future.                    poster on my forum, with respect to the
Verizon to get the Internet to them by                                                       following story ... “State [of Tennessee]
trickle-down economics and started set-        Yokubaitis: Texas Legislature has a           Begins Broadband Push” http://makeas-
ting up its own municipal Internet. Now,       “telecom bill” before it (HB 789) that        horterlink.com/?A11B151FA ... I ask:
at least 50 other cities across the country,   “had” the same provision outlawing
including several in Colorado, think this      munis or their partners. For now the pro-     How much hope do you hold out for the
is a very good idea. So do I. And those        vision is out in the current version. The     State of Tennessee’s broadband network
telephone companies have rushed to 12          “FREE” Hotspot folks together with the        agenda when, in describing what they
other state legislatures to stop cities from   rural Munis. (Texas has a bunch of rural)     mean by “broadband,” they manage to
serving their citizens. Colorado is their      cut the provision out of the current ver-     list every legacy form of transmission
latest sucker.                                 sion. Which does not mean the provision       medium that is still in use while omitting
                                               won’t come back out of a dark smoke           any mention of fiber?
Qwest doesn’t care a whit whether the          filled room.
Internet is available across the state. It                                                   I’m not sure about Tennessee, in par-
certainly doesn’t invest in the Internet as    I am working to get language in the           ticular, but a number of its neighboring
a service to the public - but just for the     bill that protects consumer, including        states, as did numerous others around
sake of its bottom line.                       business, access to whatever application      the nation, installed similar-sounding
                                               service he chooses. (I would be happy to      networks ten to fifteen years ago or
In fact, Qwest knows it is incapable of        email a copy of HB789 with our amend-         more almost immediately following the
making a profit delivering the Internet        ments to anyone on the list). We are just     standardization of SONET and ATM.
across rural Colorado for the foreseeable      trying to protect against “inadvertent”       Many of them were called Institutional
future, while small municipalities can         vertical extension of the broadband duo-      Networks, or I-Nets for short, and they
do it, and very cheaply, especially using      poly up the protocol stack. “ Would you       generally catered to major educational
high-speed telephone company bypass            prefer a little more choice in restaurants    institutions, state-run hospitals, highway
wireless - the same technology I paid          than McDonald’s and Jack-in-the-Box?          departments and other agencies, and the
for out of my own pocket and deployed                                                        like, usually using telco type protocols
among the unconnected Nepalese on              Excluding Muni wireless partnerships in       and infrastructure standards.
Mount Everest at 15,000 feet. Sherpa           effect extends the duopoly horizontally
teachers and kids are now better con-          across the physical layer.                    If the state’s intentions are to bring
nected from Namche, Nepal, than busi-                                                        government owned facilities into the
nessmen in Creede.                             Frankston: This is flat-world stuff -- it     competitive market place to go head to
                                               places those communities at a major dis-      head with the ILEC(s) and IXCs across a
But this is the central political point the    advantage in the world marketplace. It’s      broader territory than home towns would
dense legislators refuse to admit: Qwest       akin to the railroad barons starving the      normally involve, then I believe it would
wants to stop anyone else - especially         community into submission but worse           constitute the opening of a new chap-
desperate cities whose citizens are with-      because the carriers don’t care enough        ter in the ongoing controversy over the
out the benefits of the information age        but see any improvement in service as         philosophical divisions between public
- from doing it themselves as public utili-    simply a policy wedge. It works because       vs. private sector funding for telecoms.

                                                                37
                      COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
One could argue that self-determination     have I heard this before?                   are facing hurdles doing the very same
at the lowest levels of local government                                                thing, when faced with legislation being
may be fine, but when it reaches beyond     Might this mark the beginning of a re-      passed at their own state levels?
the local municipality, then it is some-    surgence in statewide network build out
thing else, again. Through extension this   initiatives at a time when lesser munici-
would result in a federally funded na-      palities in other states (or maybe even
tional network at one point. Hm.. Where     within those same states - who knows?)




                                                              38
  Forming A Framework for Municipal Networks
         Beginning With Taxonomy And Architecture
   Frank Coluccio Explains Why it is Time to Think Logically
         and Thoroughly About Network Governance
Highlights                                    an unbalanced telecom stool. A basic tele-     of the incumbent providers that previ-
                                              com plant has many of the characteristics      ously, or currently, serve them. These are
                                              of a natural monopoly where the costs of       the very same networks that many mu-
Part One -                                    servicing the customer over a reasonable       nicipalities strive to compete with or wish
We Begin an Exploration                       infrastructure go to zero over time. It        to replace. The propensity that this has to
of Investment in Telecom                      may be that the priorities of the telcos and
                                              cable companies in their quest to outdo
                                                                                             flummox the faculties of one’s brain is
                                                                                             not readily apparent because it has been
as Infrastructure                             each other have resulted in their forget-      the predisposition of municipalities to
                                              ting to ask what their customers want and      look to the telephone companies and to
The following essay - discussion with         need. In response to this apparent conflict    the cable operators for guidance and as
Frank Coluccio grew out of several inter-     of interest, and as some would argue the       examples to emulate all along.
views conducted with him beginning in         abrogation of responsibilities to many of
April. It is intended as an introduction to   the customers that Telcos and Cable Op-        Going forward, I’ll demonstrate why the
the fundamental re-visioning of telecom-      erators should be serving but are not, the     foregoing statements are true, and in the
munications that is called for in my essay    municipalities that serve their residents      process describe how and why the ser-
that begins this July August issue (pages     with roads water sewer and electricity         vices that incumbents’ networks deliver
6- 11).                                       are increasingly adding telecom assets         today are inherently limited by not only
                                              to their infrastructure arsenals in order to   their terms of use policies, but more im-
In the glory days of the nascent consumer     bridge the gap. Indeed this increasingly       portantly, by the intrinsic channel shap-
Internet almost ten years ago David Isen-     necessary municipal network framework          ing and capacity handling limitations that
berg outlined the premise of the Stupid       becomes the third and missing leg for the      are physically-irreducible consequences
Network based on the IP protocol. Ac-         resolution of the disruption caused by the     of their basic designs, as well. Copying
cording to Isenberg and many others, the      Stupid Network.                                the incumbents’ networks and technol-
phone companies were supposed to roll                                                        ogy choices, therefore, does not seem to
over and die. They did not. There was in-     COOK Report: Let’s assume then that            me to be a sound strategy, regardless of
stead a general industry collapse. People     we understand the premise of the Stupid        what business model a municipality may
scratched their heads wondering what          Network and the additional premise of          choose to use This would hold true even
happened and in 2002 Googin, Isenberg         the Paradox of the Perfect Network as I        if in the extreme case everyone agreed
and Weinberger outlined the Paradox of        outlined them in my “three-legged stool”       that all future networks would be publicly
the Perfect Network, which pointed out        essay at the beginning of this issue. That     funded.
that a roadblock to the full development      being the case, perhaps it is this kind of
of the stupid network was that it was         network analysis discussion that has to        My goal here is to objectively show why
capital repellant. No one could make          take place before you can move on to           and to state what I see as some of the is-
money from it therefore no one would          meaningful local action in building that       sues being faced by municipal IT depart-
invest in it. Consequently it is those        third leg? Let’s ask therefore: how should     ments and managers today, along with
two legs of the current telecom “stool”       local governments approach the building        the principal architectural options that
which have delivered us to the present        of a municipal network?                        they should be considering when plan-
state in which we find ourselves today,                                                      ning their networks. My intention is not
where citizens and businesses in many         Coluccio: Having had the advantage of          to add fuel to an already-polarized issue
locations find themselves missing out         anticipating some of your questions for        that very often reaches fever pitch levels
on opportunities due to a lack of suitable    a couple of weeks now, I’ve worked out         during debate. Although, I fully realize
network infrastructure, while the nation      a developmental approach that I’d like         that some of the facts that I present here
as a whole is losing ground rapidly to the    to pursue in presenting the subject. But       might very well have that effect.
rest of the world.                            before we get started I want to air a few
                                              comments and general observations I’ve         Let’s begin by investing some time in
What I propose in my introduction above       made in the area of municipal networks         classifying and defining the various types
and what Frank lays out in detail in the      over the past ten to fifteen years.            of municipal networks that exist, while
following pages in the first of a two part                                                   using the existing oligopoly as a back-
series on this subject is the need to build   The most important initial point to make       drop for comparison, and then explain the
a third way, a framework for a new type       is that most of today’s municipal network      attributes and interactions of each as we
of network environment, or a third leg for    architectures tend to emulate the networks     move along. In this fashion we will have
                                                        39
                         COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
laid the groundwork for further discus- refrain from addressing broadband over
sion on alternative network architectures, powerline or powerline communications I-Nets and Muninets
and in a later segment, examine and (BPL, or PLC) last mile technologies for
propose some underlying business model municipalities, and I do this for two rea- Most municipal networks fall under two
considerations for each.                    sons. First and foremost, for brevity, since general headings: Institutional Networks
                                            the technology is still in an early nascent (I-Nets) and Muninets, which are terms
Institutional Networks,                     state and would require an extraordinary I’ve taken some license to use here solely
Muninets, City Wide
                                            amount of discussion for the amount of for the sake of establishing convention.
                                            return that it would yield. And secondly,
Wi-Fi Nets                                  to avoid speculating about the efficacy of The Institutional Network, or I-Net,
                                            a technology that is still in a very early should probably best be thought of as the
From the outset I should note that many stage of refinement, with much, in my municipality’s “intranet”. I-Nets were
of the aspects we discuss here concerning opinion, that it still has to prove before initially used to replace common carrier
municipal networks will also apply, with- it can be discussed in the same general lines in order to achieve financial cost
in varying degrees of legal and regula- way that we can discuss other technolo-
                                                                                         savings, among other reasons. The pri-
tory distinctions, to other types of public gies that have demonstrated the ability mary intent behind an I-Net is to serve
and public-private entities. Those entities to perform in disparate and often times as a utility for the government’s internal
include but are not limited to municipal hostile environments with some level of data and voice communications needs.
utility companies, public power authori- reproducible certainty.                         It would be a fallacy to consider I-Nets
ties, public utility districts, rural coop-
                                                                                         as strictly standalone, homogeneous net-
eratives operating under RUS guidelines, My avoidance of power line solutions works built by municipalities, since in
and any others with ties to the public in this writing shouldn’t be construed the larger sense, as viewed by a munici-
sector.                                     by your readers as a judgment of its palities internal IT operations, the I-Net
                                            past performance, per se, or a prediction includes municipality-built facilities as
I should also mention that I am neither about the technology’s future role in the well as those that are leased from com-
a lawyer nor an economist, rather I am a first mile, because it has shown some mon carriers and other sources, as well.
“networkologist” and a network architect successes in North America already. Al- For the purpose of this discussion, how-
Therefore, your mileage may vary with though, it has not fared in North America ever, because I think you want to limit
respect to the preciseness of some the as well as it has in other regions around focus to only that part that is built by the
definitions that I use. In the interest of the world where electric utilities are more municipality itself, I’ll stick with that line
addressing networking issues in a sub- conducive to its use. With its near-term of thought for both the I-Net and its larger
stantive and focused manner, I’ll forego viability still unclear, therefore, I shall
                                                                                         sibling, the Muninet, which I’ll get to in a
citing case law, recent court decisions, forego investing further attention to it at
                                                                                         few moments.
rulemakings and regulations, along with this time.
the bean-counting exercises that attempt                                                 The main purpose of an I-Net, as it
to divine the cost per megabit of capacity It is probably also a good idea at this time was initially conceived, was and still
in this scenario versus that. I shall also to state that the information presented is to tie together most, if not all, of a
refrain from any lengthy discussions over below is not intended as a be-all-and-end- municipality’s internal office buildings
the dynamics of natural monopolies.         all “solution” for municipalities to follow. and their respective business units, and
                                            Rather, it is a view of existing conditions these include city hall, court buildings,
The foregoing considerations all have in what has been regarded heretofore as school districts -- and in some cases the
been highly “cartel-ized”, in my opinion, the network’s “last mile,” with the intent schools themselves, libraries, hospitals,
and are based primarily on the parameters that readers begin thinking instead in public works departments and utilities,
that have been defined and articulated by terms of the “first mile.” In the end it is uniformed- and first-responder services,
incumbents, which is in large part respon- left to the municipality to decide which of and so on. Most modern-day I-Nets still
sible for getting us to the point we are at these approaches it will choose. In some
                                                                                         have their roots in the designs of the Mid-
today. And while I’ll unavoidably brush instances they may elect to enter the com-
                                                                                         Nineties through the turn of the century
up against each of the professional zones petitive fray as a third leg using some or
                                                                                         which were installed using time division
I cited as we proceed, my approach will all of the precepts outlined herein. Or the
                                                                                         multiplexed (TDM) technologies fash-
be to focus on answering your questions municipality may elect from one of many ioned around incumbent providers’ T1,
with a higher-level view of trends that I other options it has before it, includ- T3 and SONET-ATM networks, using
see taking place in the market place and ing partnering arrangements with entities the physical outside plant cables they
some of the options that make networking with whom they would otherwise com- either built themselves or rented from
sense to me. And on that last point, again, pete. It’s the municipality’s prerogative to the incumbent telco and cable operator.
one’s mileage may vary.                     decide which option best suits its needs, Today many I-Nets include Multi-Gigabit
                                            once it has done a complete assessment of rated F-O rings in support of IP, as well as
Lastly, before jumping into the taxonomy its constituents’ needs and considered all
                                                                                         a variety of remaining legacy TDM and
of municipal networks, note that I will of the alternatives.
                                                                                         SONET components, and they still sup-
                                                                40
                                       The COOK Report on Internet July August 2005
port legacy protocols such as IPX, SNA,       While a Muninet may share a territory         phases it expands to include nearby com-
and storage related applications and their    with an ILEC and/or an MSO, it doesn’t        mons areas, merchant locations -- for the
associated protocols, such as Fibre Chan-     always support certain legacy services        purpose of creating hot spots and Internet
nel, ESCON and FICON.                         or some of the very high-bandwidth re-        cafes, and then, conceivably, wireless
                                              quirements for commercial applications        meshed footprints across entire territo-
Older I-Nets utilized both wireline and       to the same extent as the ILEC, and as        ries, thus fulfilling the needs of both the
wireless technologies. They consisted of      some of the larger MSOs increasingly          general population, businesses and gov-
copper and fiber lines provided by the        do. However, Muninets, when they are          ernment offices, as well.
incumbents, although increasingly with        of sufficient size and dominance, also
time the municipalities began building        tend to handle those functions, too. Today    The Problem of
                                                                                            Intersecting With
their own facilities. The earlier wireless    (May 26), in fact, I came across an article
variants of I-Nets consisted primarily        in Lightwave Magazine describing how a
of point-to-point microwave radio sys-        PUD in Washington State is supporting         the Rest of the
tems that were basically extensions of        industrial grade bandwidth requirements       Telecommunications
T1 and 4-T1 (T2 equivalent) networks
to municipal office buildings and school
                                              over its FTTX network. See: “Washing-
                                              ton Public Utility District Taps World
                                                                                            World
district offices. Today, while an I-Net       Wide Packets for Inter-Island FTTx
                                                                                            Staying with the terms and definitions
is still apt to continue carrying earlier     network”       http://lw.pennnet.com/Ar-
                                                                                            I’ve suggested to this point, there are
line protocols and formats, it is just as     ticles/Article_Display.cfm?ARTICLE_
                                                                                            important distinctions between what I’ve
likely to also include point-to-point wire-   ID=228561&p=13&pc=ENL
                                                                                            called an I-Net and a Muninet that must
less links capable of OC-3 (155 Mbps)
                                                                                            be observed and respected. I-Nets serve
and GbE speeds over microwave and             Muninets usually conform to the architec-
                                                                                            the municipality in a manner similar to
LASER-based line-of-sight free-space          tures that have been acknowledged by the
                                                                                            a corporation’s intranet, gated off by
optical (FSO) technologies, as well as        FCC as being suitable for multi-modal
                                                                                            routers, firewalls, and other IP services
license-free 802.11 wireless LANs with        competition. These “modes” or modali-
                                                                                            Therefore, I-Nets should be designed
802.16 WiMAX. Increasingly several            ties may include: Wireline Telco (cop-
                                                                                            and built with all of the isolating char-
forms of meshed wireless topologies are       per-fiber/DSL/FTTX); Wireline Cable
                                                                                            acteristics and security safeguards af-
also appearing and ready to be added to       (HFC); Wireless ISP (WISP); Wireless
                                                                                            forded to any other enterprise intranet.
the mix, as well.                             Cellular; Satellite; very likely BPL at
                                                                                            A Muninet, on the other hand, has the
                                              some point; and Proprietary or Private
                                                                                            potential of reaching out and touching,
The second classification of municipal        Networks. The foregoing list does not
                                                                                            and being touched by, every residential
networks, which I’ve dubbed here as           preclude other modes to be used, and evi-
                                                                                            and business end point that falls within its
the Muninet, can be a territory-wide          dence of some newer modes has already
                                                                                            footprint, and often includes gateways for
network that serves the general popu-         begun to appear in the makeup of some
                                                                                            access to both the PSTN and the Internet,
lace. Like I-Nets, Muninets may consist       Muninets in both wireline (fiber) and
                                                                                            just as any other full-services incumbent
of either wireless or wireline technolo-      wireless designs.
                                                                                            provider.
gies, while many of them comprise both.
Some Muninets are all encompassing and        The now-popular Citywide Wireless Net-
                                                                                            On the surface, these distinctions may
may also include the I-Net as a subnet        work may start out by playing some of
                                                                                            seem overly academic or trite, perhaps
or intranet, while in some cases two          the more limited roles of an I-Net, often
                                                                                            even a bit confusing, but from the stand-
separate networks are maintained, from        adding to an already existing one. Its
                                                                                            point of joining either of the two larger
both the logical and physical points of       initial deployment is often followed by a
                                                                                            venues I mentioned, i.e., the PSTN and
view. The Muninet, being the larger of        phased progression intended to ultimately
                                                                                            the Internet, these distinctions may be
the two, generally covers the entire geo-     cover a much larger area, with some of
                                                                                            far more profound than one might first
graphic footprint of the municipality or a    them reaching the entire geographic area
                                                                                            assume. You can easily see this if you
major portion of it, supporting residential   of the municipality over a prescribed time
                                                                                            consider a Muninet entering the local
neighborhoods, businesses, and public         frame. The implication of this approach
                                                                                            exchange carrier (LEC) community for
spaces to the full extent of the municipal-   is that many citywide wireless networks
                                                                                            the purpose of offering voice services,
ity’s borders. Also, Muninets sometimes       begin life as an I-Net and morph, over
                                                                                            for starters, requiring State licensing and
run parallel to the outside plant feeders     time, to assume many of the attributes,
                                                                                            other industry-related registrations neces-
and distribution cable plants of incum-       roles and responsibilities associated with
                                                                                            sary for connection codes and access to
bent local exchange carriers’ (ILECs) and     neighborhood networks, until they meet
                                                                                            SS7 networks that would enable it to ef-
cable operators’ (MSOs) networks, and         all of the characteristics of a full blown
                                                                                            fectively serve as a CLEC, or a new ILEC
often use overlapping or shared rights        Muninet. Thus, in a graduated manner the
                                                                                            for the territory it serves.
of way. Note: For brevity I’ll refer to all   I-Net first satisfies a number of internal
terrestrial Cable TV operators as MSOs,       government-related needs, with mobility
                                                                                            Or, for the purpose of providing Internet
standing for Multiple System Operators.       and improved economics serving as two
                                                                                            access, consider a Muninet as a new ad-
                                              of its main enablers, and with successive
                                                                                            ministrator of IP address space and DNS
                                                               41
                        COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
services, along with the plethora of other lic housing complexes, residential co- of a territory’s underlying infrastructure
things that other ISPs do every day for operatives, condominiums, subdivisions, assets and upper layer service provision-
the public, which, when combined with multi-dwelling unit apartment buildings, ing, thus defining a different set of terms
its CLEC status, collectively brings the hospitality locations, and so on. While and architectural constructs than those
Muninet into service spheres that are these are neither municipal in nature that exist today. This last point is impor-
outside the purview of the I-Net.            nor served by the larger franchised op- tant to keep in mind, since it is central to
                                             erators (although some are contracted the formulation of a business model that
And for the third part of the so-called to the incumbent’s structurally-separated we will be discussing in greater length at
triple play bundle, I’ll only mention that subsidiaries, at times), they do, neverthe- a later time.
a Muninet would need to work arduously less, have an impact in mitigating the
at establishing relationships with video shortcomings that may have existed or Back to the present. Alternatively, most
content owners and specialists to whom been caused by incumbent “dead zones,” Muninets today are more apt to be re-
it would outsource many functions if including areas of non-coverage due hos- garded as the second or third entrant
it hoped to come close to matching the tile terrain, geographic distances, red-lin- of an oligopoly, competing with telcos,
level of sophistication that the MSOs ing and other causes.                             cable operators and WISPs on terms that
have achieved.                                                                          are essentially those of the incumbents
                                             Thus, this last type of network also tends for reasons I’ll now address.
So, while I sometimes use the terms I- to mitigate the extent to which a munici-
Net and Muninet loosely in some parts of pality would otherwise be called upon to The technologies chosen by most Muni-
this discussion, even interchangeably at provide relief in the locations they oc- nets, to date, have almost always been
times, and indeed I may talk about how cupy. And like Muninets, these privately copied directly from the scriptures of
one could morph to assume the personal- owned alternatives, sometimes referred ILECs, MSOs and WISPs, ranging from
ity traits of the other before splitting off to as private cable operators, or PCOs, F-O rings in the downtown business
on its own, these distinguishing charac- and condominium networks, or sim- district, to UTP- and fiber- based POTS-
teristics I’ve noted are, in the end state ply Condo Nets, may employ the entire DSL for commercial and residential tele-
configurations of each, very important gamut of carrier-grade and LAN-based phone and traditional data services such
and should be kept fresh in one’s mind.      wireless and wireline network technolo- as ISDN, TI, SONET and FTTX triple
                                             gies, including the cable industry’s hy- play services, to tiered wireless services
Multiple Dwelling Unit                       brid fiber-coax (HFC) model and telco- using WiFi/Meshed, and even the cable
Nets and Neighborhood in some of the larger installations, often analog NTSC video and Cable Modem
                                             style full-service area (FSAN) networks industry’s HFC systems using standard

Area Nets                                    supporting bundled, triple-play capabili- for data and voice delivery. And where
                                             ties. Although, many of the more recent Muninets of different transmission media
Another category of local networks that ones I’ve come across appear to be also types, i.e., wireline vs. wireless, have
I’d like to mention while I have the op- based on Ethernet LAN-like or Campus tended to be separate from one another in
portunity, although these are not consid- Area Network (CAN) architectures in the past, in the future they are more apt
ered Muninets, per se, are those that are support of Internet access and various to be more tightly integrated, or a hybrid
established by private citizens forming forms of multimedia over IP.                    of the two.
their own wireless access points and
relays consisting of license-exempt WiFi As I noted earlier, in some localities I’ll call the result a Hybrid Fiber-Wire-
technologies. The latter are sometimes Muninets may constitute the only game less Muninet, or HFW, although the ac-
called neighborhood area networks, or in town, so to speak, for an entire cover- tual methods used to achieve this are
NANs, and, while they are not officially age area. This means that it is the only likely to vary considerably from one
designated or sanctioned as municipal source of last mile-high speed access to Muninet to the next, with customization
networks, their presence and significance the Internet, the PSTN and to sources being facilitated greatly by the openness
cannot be overlooked or discounted, of cable TV programming. These occur- of standards-based interfaces. Interest-
since in some localities they may grow to rences, however, have been relatively ingly, this item holds the potential for the
become an influential factor for munici- rare up to this point and often are rel- Muninet, through support from private
pal planning purposes - an aspect that I’ll egated to extreme rural settings or where specialized wireless operators, to break
discuss more broadly a little later.         terrain factors have dictated that they be new ground by defining a form of single
                                             formed. But this is not to suggest that sign-on HFW coverage environment that
Still other forms of local wireless and those limiting factors will be the only not even the incumbents support today,
wireline networks are sprouting up that causes for this going forward, or that except possibly through the latter’s de-
fall outside the classifications of both some Muninets will not follow in their ployments of more expensive wireless
the Muninets and the existing oligopoly path. Quite the opposite may hold true cellular multi-mode applications where
providers, and here I’m referring to the in the future. Muninets will come to they exist.
growing number of privately-funded and actually assume sole ownership of the re-
constructed networks in private and pub- sponsibility of coordinating the sourcing An example of a wired NAN in the

                                                              42
                                       The COOK Report on Internet July August 2005
Bronx, NY using FTTB and DSL to resi-         are symmetrical have been surprisingly         connotes one who sends large amounts
dential apartments is described in a recent   successful, to say the least.                  of data of any type or purpose toward
newsletter from Dave Burstein, which I                                                       the Internet, whether it’s for peer-to-
discussed recently, here:                     Some overseas operators of symmetric           peer file transfers, performing large
http://www.siliconinvestor.com/readmsg.       systems are reporting that the combined        data backups to offsite storage sites,
aspx?msgid=21334550                           level of traffic being generated by their      video-conferencing, hosting residential
                                              power users consisting of SoHos, P2P’ers,      web sites, SoHo software compiling and
Service Offerings                             gamers, residential Web hosts, and offsite     data base replication, or for whatever
Fall Victim to the
                                              storage services has been higher in its        other reason an end user would have to
                                              upstream than its downstream require-          send large data files bi-directionally.
Incumbent’s Asymmetric                        ments, which even I found surprising. In
Network “Cookie Cutter”                       one town the operator noted how a new          Whether asymmetry was an intentional
Operations                                    off site storage business was blossoming,
                                              made possible only because of symmetri-
                                                                                             characteristic of unshielded twisted pair
                                                                                             (UTP) copper and coaxial broadband
                                              cal transmission on its system. I should       systems from the outset is arguable if not
Nota Bene: During the remainder of this
                                              note at this point that I shall refrain from   a moot point at this time, where incum-
paper I will make repeated reference to
                                              making citations for each of the anec-         bents are concerned. The design of early
the transmission attribute of a channel
                                              dotes I mention during this discussion         UTP high speed applications required
known as symmetry, or asymmetry, as
                                              when I deem them to represent generic          taking into account electromagnetic in-
the case may be. It may help readers
                                              occurrences, but I invite your readers to      terference (EMI) and spectral power dis-
to keep in mind that it is not my intent
                                              seek them out individually. Many of my         tribution levels affecting crosstalk and
to assert that any of the transmission
                                              references to recent developments in Asia      radio frequency interference (RFI) with
media mentioned, whether copper UTP,
                                              and Europe happen to stem from case            nearby surroundings, resulting in trad-
or Coax, or Air or even Fiber, are innately
                                              studies that were revealed in the March        eoffs that led to the lopsided profile
predisposed to asymmetrical properties.
                                              2005 issue of Broadband Properties             for UTP transmission that has come to
Indeed, each of these media types is ca-
                                              Magazine, for example, and because they        be called Asymmetric Digital Subscriber
pable of supporting the transmission of
                                              remain fresh in my mind I’m mentioning         Line technology, or ADSL.
information equally in both directions.
                                              them here, but they are not unique.
What I propose to demonstrate, however,
                                                                                             Today’s telco broadband deployments are
is how the quality of asymmetry has been
                                              Incidentally, the March 2005 Issue BPM         heavily dependent on ADSL and its heirs,
shaped by each of the sectors correspond-
                                              that I just mentioned should be required       such as VDSL and VDSL2/ADSL2, since
ing to these media types, including that
                                              reading for anyone contemplating enter-        these represent the most economically
of fiber, for the reasons that I go on to
                                              ing the first mile broadband space at          feasible alternatives they have for the
enumerate.
                                              this time, be it a Muninet or otherwise,       vast majority of end points they must
                                              especially because of its treatment of the     reach. The reason for this is that the DSL
Invariably, such cloning has resulted in
                                              business models of Asian and European          technologies I cited do not require new
creating “LAST” mile networks that are
                                              infrastructure companies.                      lines to the home. Instead, they reuse the
designed to deliver far more bandwidth
                                              http://www.broadbandproperties.com/            copper lines that were previously used for
handling capabilities in the downstream
                                              2005issues/mar05issues/march2005.htm           POTS. Whereas, FTTH necessitates the
direction, hence, far more content being
                                                                                             running of a new transmission line (fiber)
sent toward end users, than the end user
                                              This transmission channel attribute, i.e.,     to every subscriber’s location.
is able to send in the opposite (upstream)
                                              the heavy skewing of the channel in its
direction toward the network and to other
                                              downstream direction, is called ASYM-          The foregoing is true, despite the efforts
users or sites. While this form of lopsided
                                              METRY, and its implications are enor-          being made by some ILECs to push fiber
delivery profile may have sufficed for
                                              mous, if not almost entirely restrictive       out to neighborhoods, closer to homes
Web surfing, downloading and stream-
                                              in terms of the performance that users         – and in the case of Verizon, bringing
ing media applications up until now, it
                                              experience when sending large files to         fiber directly to each end point - in stra-
will not suffice for the types of two-way
                                              their upstreams, and the types of appli-       tegically-selected, mostly affluent, areas.
traffic that end users will increasingly be
                                              cations they are precluded from using          One notes immediately, however, that
demanding in “FIRST” mile networks in
                                              entirely due to the extreme uploading          for the majority of these installations the
order to unleash and exploit an “untold
                                              times required. To illustrate this point       new moniker ‘FTTP” is missing the let-
number” of new applications and their
                                              from another point of view, asymmetry,         ter “C,” for copper. Where BellSouth and
supporting business models going for-
                                              along with the incumbents’ Acceptable          SBC are concerned, for example, both
ward. And there will be no telling what
                                              Use Policies and Terms Of Service, pro-        are deploying FTTP solutions by using
the impact of those new and untold appli-
                                              vides a level of assurance to ILECs and        copper-based xDSL in their last several
cations and business models will be until
                                              MSOs that end users will forever remain        hundred to several thousand feet.
the upstream direction is unleashed, but
                                              consumers of content and not the pro-
all indications of results from abroad that
                                              ducers of it, where the term “producer”        In the case of SBC, fiber is extended to
I’ve seen from operators whose networks
                                                               43
                       COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
a field node, where DSL is supported          And until as recently as three or four          attuned to the ways of Internet Protocol
to each end point over copper, and in         years ago, this might have been their only      in general, they are apt to become far
the case of BellSouth, FTTC for ‘curb’        viable approach, but such is not the case       more discriminating. But more to the
predominates, where fiber is brought to a     today, as we’ll discuss later on.               point, the more users’ livelihoods depend
curbside pedestal, and from there copper                                                      on top rate performance from their Inter-
is extended to each residential or SoHo       The Problem                                     net connections, so, too, will the demands
                                              with Copying
end point. Neither of these Fiber-to-the-                                                     that they place on access and end-to-end
”Premises” designs, however, actually                                                         connectivity increase.
extends fiber all the way to the premises,    the Incumbent's
except when the broadest interpretation       Architecture                                    In each of the Muninet scenarios I’ve de-
of the term “premises” is used to in-                                                         scribed earlier, what the municipality has
clude the grounds on which buildings are      Where a locality is experiencing unfavor-       effectively done is use technologies and
erected, and then only the curb design, or    able service conditions persistently from       architectures that are taken directly from
FTTC, sometimes qualifies, but not that       either the MSO or the ILEC, or both, it         the ANSI/ITU/NTSC (Bellcore and Ca-
of the neighborhood node, or FTTN.            may likewise elect to build its own FTTH        bleLabs) camps, which means that they
                                              or HFC network, thus placing it either in       are installing systems that were expressly
Similarly, coaxial systems were not ini-      a direct competitive role with, or replac-      tailored to meet the legacy requirements
tially envisaged as supporting bidirec-       ing, the egregious provider, outright. But,     of incumbent service providers. Notably,
tional traffic. At one point a modicum of     as I mentioned just a few moments ago,          from the perspective of first mile data
traffic toward the head end was enabled       it will not be able to offer services that      channel delivery during the course of the
for supervisory and interactive data, and     are materially different from those of          past ten or fifteen years, the latter group
later for two-way video and voice servic-     incumbents, because it is still using an        has been notorious for its failing to keep
es, but it was never the intent to support    architecture that is taken directly from        pace with Moore’s Law.
large amounts of user data to the extent      the incumbent’s script.
that users are demanding today. Thus,                                                         Where typical enterprise LAN speeds
an asymmetric spectrum split for cable        While I’m on the topic of substandard           have increased by a factor of 100 to 1000
TV was established early on, just as with     network performance, allow me to di-            during the past fifteen years, the typi-
DSL, that has lasted to the present day.      gress for a moment and state that, as           cal last mile speed being provided as a
                                              time progresses the criteria by which           “broadband” service has increased by
Since there are far more 6 MHz video          consumers and enterprises evaluate the          less then a factor of 10 to 20, depend-
channels allocated in the downstream          quality of their Internet access service        ing on what one considers early stage
direction of the cable operators’ spectrum    will change dramatically. We’re already         broadband. A similar comparison across
plan than in the upstream, cable modem        seeing signs of this today, Users will          the total user population would probably
designs have been similarly skewed, sup-      become far more critical, and will take         result in an improvement factor of less
porting downstream capacity many times        into account far more than the obvious          than 5. Furthermore, enterprise LANs are
greater than what they permit to trav-        detractors of the past and present, such as     not designed to support asymmetric line
el upstream to the ‘Net. Consequently,        noisy lines, intermittent outages, conges-      speeds like incumbent last mile networks
when municipalities proceed to mimic          tion, mean time to repairs, video signal        do.
these two major designs of the Telcos and     quality and other annoying artifacts of
MSOs, there is little room for differentia-   content delivery.                               Most municipalities installing Muninets
tion left for them, except in the area of                                                     have been ignoring, or were previously
pricing and in miscellaneous application-     Users will increasingly become sensitized       simply unaware of, emerging capabil-
specific cases.                               to performance criteria that, heretofore,       ities that have evolved out of other
                                              would have concerned only the most              standards bodies, which elsewhere have
In localities that presently are not being    expert class of user, namely enterprise         been responsible for keeping both the
supplied with broadband services by their     power users, IT managers and Service            enterprises and the Internet apace with
providers it would seem only logical for      Providers. These criteria will include ex-      Moore’s Law. Here, I’m referring to both
a municipality to implement a FTTH            pectations centering on latency, jitter, line   the wireline and wireless transmission
network or an HFC system as a form            symmetry, packet shaping, port blocking,        capabilities at Layers 1 and 2 coming
of Muninet. Doing this would provide          intentional packet dropping based on            out of the TIA, IEEE and others, and the
customers with services that are on a par     context, disparities perceived to be taking     traffic routing, switching, shaping and
with what the telco or MSO would have         place in billing criteria for consumer ver-     management capabilities of IP standards
provided if they had acted in time to meet    sus business, impediments to true end-to-       at Layer 3 coming out of the IETF.
the demand. To be sure, end users would       end connectivity and the effects of proxy
benefit if this type of initiative were to    servers, and more. In other words, as           The salient point I am making here is
occur, rather than continue being without     users continue honing their Information         that, municipalities, especially those that
broadband services, entirely. In fact, this   & Communications Technologies (ICT)             are only now starting from scratch to
is exactly what occurs in some localities.    sophistication, and as they become more         plan the buildout of their territories, or
                                                                 44
                                        The COOK Report on Internet July August 2005
those that find themselves performing           an IP format for the delivery of program      demand copper connectivity, which will
major upgrades, rehabs or overbuilds of         video and VoD, although Verizon has           require special attention and treatment as
earlier networks, are no longer bound to        taken a phased approach to this by first      networks are converted to fiber and wire-
follow the paths of the incumbents when         introducing analog video over a third         less. Some of these are obvious, stem-
laying down new infrastructure and de-          wavelength in its PON architecture, while     ming from specialized forms of POTS
ciding on an architecture. Instead, mu-         awaiting the shakeout of its chosen IP TV     lines and PBXs that still require battery
nicipalities now have the option to use a       platform before deploying it (or so state     and ground. There are also telemetry and
model very similar to that of enterprise        the reports that I’ve read on this issue).    low current signaling lines, sometimes
LANs and MANs, whose longer distance                                                          used by electric power companies for te-
capabilities have now been made pos-            As encouraging as all this may sound, I       lemetry to substations. Then there are low
sible in the first mile due to the distance     want to point out that all of the RBOCs       speed current-loop circuits that are used
transparency that is afforded by the            FTTP platforms continue to employ asym-       to drive terminal devices in merchant
neutralizing properties of glass and air.       metrical bandwidth profiling, largely due     locations. While still others support fire
This is, in fact, the approach that has been    to their continued use of DSL in the last     and burglar alarm circuits that operate
used by a growing number of point-to-           several thousand feet in their FTTN and       electromechanical relays, sometimes sup-
point FTTH networks in the Netherlands,         FTTC deployments; through the use of          ported by a single wire conductor using a
Scandinavia, Hong Kong, Japan, and in           asymmetrical PON technologies in their        ground as a return path. Depending on the
the iPROVO and UTOPIA undertakings              fiber-direct-to-the-home builds; and, in      size of a service area, the number of these
in Utah, as well.                               a more subtle way, through the terms          types of copper circuits could vary sig-
                                                of use for consumers that are still very      nificantly. In the case of a city the size of
Some of these technical points have not         restricting.                                  NY, for example, there could be as many
been lost on the ILECs, I should add,                                                         as tens of thousands of them, or into the
since they, too, have recently been re-         Aside from their need to escape from          hundreds of thousands when combined.
evaluating their own FSAN-based archi-          asymmetry, there are other reasons why        I mentioned this here as just another one
tectures. Granted, some of the reasons          Muninets will no longer find it compelling    of those points that a planner should keep
for this may be to meet objectives that         to use traditional methods and technolo-      in the back of his or her mind when map-
don’t always meet the naked eye, but the        gies when installing new infrastructure       ping out a migration path to a new fiber
point is that they have begun to shift their    and services, especially now that voice       optic infrastructure.]
views on how they will negotiate their          has come off circuit switch platforms and
Internet Protocol futures.                      is now under the control of IP, and where     Thus far we’ve discussed only those
                                                few present-day residential assets exist in   types of networks that exist today for the
For example, recently some of the RBOCs         the customer location that require back-      purpose of establishing a common set
announced that they are now viewing             ward compatibility. This is especially true   of nomenclature and as background for
Ethernet in the First Mile more favorably       where the newer broadband CPE devices         further discussion.
than before. I’m sure this came at the ex-      are designed to handle a multitude of
pense of much horror and chagrin to the         interface types through media- and proto-     A New Framework for
                                                                                              First Mile Architecture
many who’ve waited for over ten years to        col- conversion techniques.
see their ATM-based broadband to come
into its own over fiber. Ethernet as it turns   So, even where a SoHo, say, is still using
out is being viewed as a replacement            ISDN and must continue using T1 TDM           Before moving on to explore a framework
for their previous asynchronous trans-          technologies, a suitably designed FTTX        for a new first-mile market structure, one
fer mode-based passive optical network          architecture should be able to handle         must first consider the relationship of
(ATM-based PON, or APON) platforms              those, too, either through the techniques     the physical composition of a network
that were based on the early-Nineties           I’ve described above or by using fiber        made up of wires and the content that it
full service area network (FSAN) frame-         modems that match those application           carries. Anyone who has spent any time
work.                                           interfacing parameters. Note that I do not    at all discussing last mile networks will
                                                mean to imply by stating the foregoing        immediately recognize the juxtaposition
It was only today (May 26) that the fol-        that a municipality can ignore the legacy     of these two considerations, i.e., “content
lowing article appeared on Light Read-          needs of existing users who are still using   and conduit,” and will anticipate that the
ing’s Web page: “RBOCs Are Gawking              circuit-switched technologies, especially     next concept I introduce is that of the mo-
at GPON.”                                                                                     nopoly. “Should the sale and subsequent
                                                if a new Muninet is intended to replace
http://www.lightreading.com/document.                                                         pricing of content (of all types, not only
                                                the incumbent’s network, which is a topic
asp?doc_id=74353                                                                              video, but voice and data, as well) be tied
                                                I’d like to discuss at more length later
                                                on.                                           to the ownership of the wire over which
Also telling, and a direct cause and in-                                                      it rides? And, should anyone ever be
spiration of the RBOCs’ new keenness            And on that point, I should also note         granted a monopoly in any type of public
on Ethernet in the story I just cited, is the   that there are still many miscellaneous,      service area, whether it be deemed neu-
recent decision on their part to move to        as well as popular, applications that still   tral, natural, de jure, or otherwise?”

                                                                 45
                         COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
Aside from the inspiring intellectual ex-         both incumbents’ next generation plat-        of their first mile networks was im-
changes that these concepts tend to faith-        forms begins to make a difference, it will    minent, not by viewing the matter as a
fully incite each time they’re muttered,          be many years out into the future, but        problem, rather as an “opportunity.” In
often delving into principles as far flung        it’s true.                                    so doing, they re-defined the meaning of
as natural law and the true meaning of                                                          the term municipal infrastructure, which
“is,” in my most humble opinion they              It may not be necessary to discuss the        previously was limited to rights of way,
have proved, over time, to solve abso-            tenuous financial footing of some of the      to include the lower sub-layers of the first
lutely nothing, except, perhaps, to ensure        incumbents, despite the positive images       layer of the OSI stack: the Physical Me-
that they will remain contentious discus-         they portray through their press releases,    dium. Which, in the case at hand, would
sion issues forever.                              while spending heavily on what many           mean fiber optic cable wireless rights of
                                                  consider to be a hunch and a bet, but I       way and structures. Since that time those
The best way to prove that these concepts         have to.                                      infrastructure companies, variously pri-
are impertinent, at least in the case of                                                        vate and public in some cases, they have
establishing a first-mile ICT business            I wouldn’t repeat the new criteria by         grown in number and they have been pro-
model, is to demonstrate that a better            which broadband quality will be assessed      gressing with business models that many
model can be built by precluding them             by users, as well as the manner in which      purveyors on this side of the pond would
in the first place. Such a model would,           incumbents respond to the need for un-        have difficulty comprehending.
by necessity, continue to meet the needs          fettered end-to-end connectivity, but I
and conveniences of the public. At the            promised David Reed and Bob Frankston         Yet, all of the indications I’ve seen in the
same time the private sector’s desire for         that I would.                                 press and those that I have experienced
a model that would support the potential                                                        first hand by talking with operators are
for making a profit should be assured, as         Some may think that it’s still too early      that they are moving ahead with success.
well. Before getting to how this might be         to begin discussing a hybrid first-mile       One needn’t take my word for it. These
achieved, let me first answer a couple of         access environment encompassing both          are all facts that can be confirmed simply
questions, because someone is sure to ask         wireline and wireless access methods on       by looking at the latest ITU’s interna-
them if I don’t: “Where is the problem            a municipality-wide basis, but it is not.     tional broadband rankings showing the
you’re trying to solve?” And, “If it ain’t                                                      progress these other nations have made
broke, then why fix it?”                          Some would disagree that Moore’s Law          while (and believe me when I tell you
                                                  caused changes to occur in the Internet       that it hurts to say this) the U.S. contin-
Six months ago I would have made a                an order of magnitude faster than the de-     ues to fall farther behind on the charts.
statement that went something like this:          preciation cycles of telco plant and their    Meanwhile, some competitors remain
“If the incumbents are doing a good               underlying 25-year bond maturity dates,       complacent and set in their ways, ironi-
enough job serving their respective areas         leaving incumbents far too top heavy in       cally continuing to hold on to the very
within a municipality’s service area, then        both obsolescing plant and staff to deal      model that is failing them - and everyone
there’s probably no good reason for the           with the rigors of 21st Century competi-      else who depends on them, in the pro-
municipality to get involved.” Likewise,          tion, but what is, is.                        cess, to boot.
I not too long ago stated to a colleague,
“With the RBOCs present push to install           And it may not seem important that an         We must not become blinded by the pro-
FTTP maybe things are finally looking             untold number of cottage industries may       motional starbursts of ILECs FTTP ac-
up, at least where the first mile is con-         still remain locked down in a wait state      tivities - and the promises being made by
cerned. After all, the net effect of install-     for the day when end users can send and       the MSOs of gigabit download speeds,
ing all of that fiber in the field can’t be all   receive high speed data in both directions    which in all likelihood will go to SMBs
that bad, right?”                                 equally, but that has been proven to be       instead of consumers, despite what is
                                                  the case repeatedly elsewhere around the      being promoted in the press today. Keep
Well, while both of these measures serve          world, so it must be true.                    in mind that the FTTP deployments are
to mitigate to some extent what I now re-                                                       beginning to stress the incumbent telcos’
alize is actually a very small piece of the       Understanding the                             financials at this time, and still represent
                                                  Difference Between the
total picture, they are proving to be too                                                       only low single digit penetrations going
little, and too late. Incumbents may well                                                       into the near and intermediate future.
have the ability to move off their present        Sea Change in Europe                          Also, we’d better note the initial round
positions if they ever choose to do so,           and Asia and What is                          of deployments of FTTP services has
but they won’t unless they are faced with
some real, substantive competition.
                                                  Happening in the US                           been strategically targeted at some of the
                                                                                                nation’s most affluent neighborhoods.
                                                  A number of European and Asian infra-
I don’t like pointing to ITU international                                                      Furthermore, even FTTP doesn’t do much
                                                  structure companies and service provid-
broadband rankings to prove my point,                                                           to remedy the technical skew points I dis-
                                                  ers came to the realization about six years
but I will. I needn’t say that before the                                                       cussed earlier, and since the content on
                                                  ago that a change in the basic framework
number of projected homes passed by                                                             those networks is still very much tied to
                                                                     46
                                        The COOK Report on Internet July August 2005
the network plumbing, users remain with-                                                      QoS-enabled services, like PacketCable
out a choice, since they will be limited to    We also have to recognize that, while          or PVC-based VoIP service from the
the modes of Internet navigation and to        broadband services are being provided          telco that effectively competes with the
receiving only the forms of content that       by the incumbents in many locales, for at      applications that the end user chooses
the ILEC dictate to them. This is not to       least a major portion of end users today       on his or her own. Users also seek assur-
suggest that end users could not bypass        those services are all well and good and       ances that their desired services won’t be
the ILEC and fetch content and services        meet what many users perceive to be            blocked arbitrarily, in other words, that
from the Web. Although, even this last         their basic broadband needs. This last         the ports that support certain Web-based
prospect, without sufficient guarantees        statement could easily lead to a Catch-33      overlay services like Web-based TV and
that throughput caps won’t be invoked          discussion over the three-way interplay        VoIP won’t be tampered with or blocked,
at some point on the Internet access part      of line speed vs. (a)symmetry vs. ap-          or de-prioritized, as well
of the triple play, or that there won’t be     plication creep, but I promise not to go
some future limits placed on the amounts       there today.                                   I grant you that it’s possible to obtain a
of streaming media they’ll permit, is still                                                   100 Mbps symmetrical channel today
an uncertainty.                                In any event, a growing number of broad-       that is entirely unfettered if you elect to
                                               band consumers who’ve grown to depend          lease an OC-3 from the ILEC or a special
Defining the Problem                           on their connectivity for their livelihoods,   assembly Ethernet extension from the
by Looking at Service
                                               and a growing pool of others who simply        cable operator and pay commercial rates
                                               lead communications-centered lives - and       ranging into the thousands of dollars per
Choices                                        I’m not referring simply to the cogno-         month. Meanwhile, I should note, we
                                               scenti of yore but to a growing part of an     read every day in the media where 100
COOK Report: Say something about               information savvy population of ordinary       Mbps services - and in a few cases gigabit
what you see as the source of the need         Joes and Janes who remain underserved          services - have already become common
for Muninets. What is it about the incum-      and unsatisfied -- this growing group of       in some locations around the globe, and
bents offering today that doesn’t quite        users across the nation will be demanding      they are being offered to the public at the
meet the mark?                                 far more than the incumbents are willing       same consumer rates and sometimes at a
                                               to supply at affordable price points during    reasonable premium to what one would
Coluccio: Someone recently asked me            the foreseeable future.                        pay in the US for a cable modem service
if the incumbents could deliver the types                                                     or a decent DSL service, with both of the
of broadband services that municipalities      COOK Report: Let me stop you here for          latter offering only 5% of the speed, and
are looking for, or if the incumbents could    a moment and ask, what else do users           in one direction, only, with the other di-
match what the municipalities would like       want besides the ability to download at        rection offering often less than 1%.
to install, themselves. This pre-supposes,     speeds now topping out at 5 and 10 Mb/s,
of course, that a locality is already being    and the availability of content and voice      Also of interest, even if I have to repeat
served with broadband services, which is       services?                                      myself on this point numerous times, and
not always the case. Of course, if there                                                      I will do that because it IS so important
were no broadband, then that absence           Coluccio: Again, that’s a very broad           in my eyes, is the fact those 100 Mbps
becomes a prime motivator for building a       question. Assuming you’re referring to         services found overseas are in most cases
Muninet in the first place. In any event, I    end users in the consumer category, what       symmetrical, meaning that a user can send
replied by saying:                             they also want increasingly is choice, for     and receive 100 Mbps both ways. On the
                                               one thing. While speed may very well           other hand most of the 100 Mbps offer-
“Sure the incumbents can deliver on the        be king in broadband, it only reigns su-       ings being touted stateside as “futures”
public’s expectations. No one is presently     preme if it is unfettered and is delivered     are PON-based or work on an advanced
better qualified from a technological, lo-     in the form of a channel that is neutral to    DSL principle, hence, for the most part
gistical and financial set of perspectives     content and excessive manipulation by          they are asymmetric. This means that
than the incumbents to provide what end        the provider.                                  they restrict the amount of data an end
users want and need, but for the reasons                                                      user can send, while very often placing
I’ve discussed earlier, the incumbents
just don’t. Worse, still, the incumbents
                                               Balance Needed                                 egregiously tight restrictions on the type
                                               Between What Is
                                                                                              of application one can use in general,
are showing little if any signs that they                                                     even in the case of Verizon’s Fios FTTH
ever will.”                                    Possible and What is                           services, unless a consumer chooses to
                                               Affordable                                     subscribe to a commercial grade of ser-
The latter conclusion was not merely a                                                        vice costing quite a bit more.
philosophical bent of mine, but it is a fact   Also, knowledgeable end users, whose
of life and a prediction that is borne out     number is growing daily, don’t want to         I have to complain for a moment about
of the incumbents’ own public statements       share capacity on a best effort access         this, so bear with me please. Incumbents
in the press, and by reading between the       channel with one of the incumbent’s            and their followers are arguing that the
lines on their own Web pages.                                                                 disparities I just mentioned are due to

                                                                47
                        COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
advantages that locations like Seoul and        expectations of Wall Street alone simply       If we examine a cross-section of Muni-
Tokyo enjoy due to the clustering of            won’t cut it. So, where do municipalities      nets that have been installed over the past
buildings and the proximity of end users        go from here?                                  several years we come to learn that there
in deep urban settings. The way I see it,                                                      are probably no two that went through
though, there are no victims in these ar-       It's All Local                                 the same exact set of processes, with each
guments, there are only participants. And                                                      receiving their motivation, and later, their
do you know what? It’s a little bit late for    As wireless maven extraordinaire, Peter        funding, in different ways. Except for
recriminations and finger pointing at this      Ecclesine, often states, “It’s All Local.”     when a constant source of designers and
stage of the game. What we have today is        When it comes to its place on the Inter-       engineers is used, no two municipalities
what we have. So, if we leave alone the         net, no one is capable of looking out for      are exactly alike in the manner in which
fact that the larger incumbents along with      a municipality’s welfare, and through          they are built and administered, as well.
their regulatory and politician partners        extension, the welfare of its citizens, like   Most of the larger ones tend to default to
had a major hand in the matter and they         the municipality is, itself. And today a       incumbent designs, but the smaller wire-
demonstrated very poor abilities in nego-       town’s place on the Internet equates to        less and downtown fiber nets are usually
tiating disruptive change, consider that        its place not only in the nation, but also     ad hoc in nature. Using some of the pre-
they are in some perverse ways actually         in the universe - hence, its economic vi-      cepts I’ve covered earlier as background,
correct when they now say that it’s not         ability and overall social health, as well.    and adding to them as we move along, we
their fault, and that it will take them years   Likewise, no one but a municipality can        should begin to consider a framework for
to fully catch up to the rest of the world,     determine if the provisions it’s been dealt    municipalities to use in plotting out their
assuming they ever will. And that they          by incumbent service providers meet the        networking future.
can’t work any harder or any faster or          needs of its citizens and businesses, both
any more economically than they already         present and future,                            Observing the evolution and growth of
have been in order to make things right.                                                       Muninets is interesting in many ways. It is
                                                But who, exactly, is this municipality that    similar to how large university networks
It’s nothing short of preposterous to think     I’ve been referring to, and where does it      grow. Each tend to grow organically,
that the US should have to wait for that        obtain the necessary knowledge, vision,        receiving funding for piecemeal projects,
period of time, or should have been put in      and wisdom to construct a model of             depending on who can win a grant or ob-
a waiting position in the first place. Don’t    governance to guide it in matters related      tain e-Rate commitments, say, in the case
you think so? What is even more prepos-         to its information and communications          of educational networks, or gain access
terous is to suggest that the economic          needs, and ultimately to be able to decide     to a larger statewide network for some
well being of a nation and all its citizens     what form of overall information and           other need. The pooling of networked
should depend entirely on the capabili-         communications infrastructure model            assets between formerly unrelated parts
ties of a few private corporations like the     best suits the needs of its citizens and       of the organization is not uncommon,
RBOCs. What is especially bizarre to me         other stakeholders?                            sometimes making for strange bedfel-
is that the government has provided the                                                        lows in the workplace while facilitating
protections to the ILECs that preclude          I’ll leave the mechanics of the politics       the discovery of new economies of scale
other providers from helping them meet          to each municipality to figure out for         and other synergies purely through ser-
national objectives. Now, how’s that for        itself, and continue to direct my focus        endipity. Funding for something on the
twisted logic, eh? Although when we             primarily toward architectural issues, but     order of a Muninet fiber overbuild would
remind ourselves that national political        to be complete I have to point out that        require a more focused approach, usually
leaders have been incapable of discussing       the management and leadership of a net-        necessitating the issuance of bonds or
national objectives because of avowed           work initiative, such as the building of a     other financial instruments that can take
beliefs that only the market, in the most       Muninet, is a vital component of the very      decades to pay down.
narrow of definitions, can decide, while        network architecture of which I speak.
thoroughly ignoring the fact that markets       Stated another way, staffing, organization     The very sound of the term “municipal
depend on the economic viability of the         and a chain of responsibilities are a vital    network” today elicits a myriad of emo-
nation’s local communities, our current         part of network architecture, too. For         tional, and sometimes visceral, responses
predicament may be seen as inevitable.          without roles and responsibilities being       stemming from the heated national de-
                                                clearly defined you may as well not have       bates that have been taking place over
The calculus of the last mile problem           architecture in the first place. Whether       both wireless and wireline municipal
has been screwed to a fare-thee-well for        it’s the Mayor’s office or the city council    network proposals and ongoing instal-
a while now. It’s time that it gets fixed,      that sparks the idea to move forward           lations. After all, there is a tremendous
but it won’t get fixed by stakeholders fol-     with a network initiative, or a group of       amount at stake. Sides have been divided,
lowing the same belief system, and their        citizens, a model for information infra-       ostensibly, over the spending of public
providers following the same blueprints         structure governance must exist and be         funds for activities that some say should
and roadmaps that they have up until            followed, and preferably this should be        be the sole province of private operators.
now. Which is to say, following the di-         assured from the very beginning.               At least that is what a large part of the
rection of Washington and the quarterly                                                        public sees as being the primary issue on
                                                                    48
                                        The COOK Report on Internet July August 2005
the surface of these debates. The issues       even today in the FTTH deployments               another entrant in an oligopoly, which
run deeper than that, however, and some-       taking place around the country where            could easily mean yet another FSAN/
times issues move more sideways and in         PONs are being used, there are already           FTTP or HFC owner competing with the
a nonlinear fashion than they do head-on       three wavelengths being serviced by the          incumbents on price alone for triple play
in response to one consideration, alone.       same, single fiber.                              delivery, providing services and content
                                                                                                over its own wires.
To assuage both sides in this debate,          But who would want to own and operate
many have proposed public-private part-        the primarily copper plant of an ILEC?           Option 2 might be to build its own
nerships, mainly in areas affected by          Not even the ILECs want to own that any-         all-wireless network integrating WiFi
wireless technologies, to date. Still others   more, as demonstrated recently through           (802.11) and WiMAX (802.16) services,
have suggested the creation of a local         the sales of millions of copper loops in         at the possible forfeiture of being able
loop company, which could be either a          depressed areas, and by the FTTP player          to deliver certain video capabilities at
new network built by the Muninet or a          Verizon removing copper access from              the present time due to bandwidth con-
part of one of the incumbent’s existing        homes once they’ve been connected with           straints.
outside plant facilities, as would be cre-     fiber. This last point is one that I’d like to
ated in the event of a spin off or divesti-    look into further because it bodes some          Option 3 would allow Muninet to be-
ture by the parent ILEC.                       implications in areas that don’t relate here     come an infrastructure company, such as
                                               but are important. Maybe we’ll return to         the overseas operators I discussed a bit
Muninet as LoopCo?                             this in your next issue.                         earlier. Here the Muninet owns the rights
                                                                                                of way, spaces and pathways (support
The best, and probably the most common,        But the question I asked a moment ago            structures), and rents the Layer 1 fiber
way to illustrate this model is by envisag-    about the ownership of old copper plant is       optic lines to service providers, while the
ing the splitting up of an ILEC, where its     a valid one. Except for those areas where        Muninet itself never engages in the direct
outside plant component, including all         distribution cables and their drops are          delivery of services to end users.
of it copper and fiber loops, field nodes      both extremely short and immaculately
and rights of way, become the property         balanced for future very high speed DSL          Following Option 3 as an infrastructure
of a structurally-separated or divested        applications, the only useful purposes           company, the Muninet might also take
operating entity that we’ll generically        that I can see for copper loops looking          control of coordinating and assigning
call “LoopCo.” Once LoopCo is created,         into the future will be where they are           wireless rights for rooftops, poles, tow-
the remainder of the ILEC continues            needed for legacy voice applications that        ers, and other support structures needed
to provide switching, content, directory       require central office battery and ground,       to provide antenna basing for specialized
services, its usual PSTN functions, in         and for the powering of field nodes              wireless providers to use, who, in turn,
short, and in fact any other service that      through recently ratified ANSI standards         would sell their services directly to end
it so chooses, except for loop services to     that delivery -24 volts DC to the field,         users. Also, as the infrastructure compa-
the customer, and it continues to operate      which could be used by the LoopCo for            ny, the Muninet might be responsible for
under its original name.                       powering optical signal regenerators and         ongoing design and integration planning
                                               for various future field mounted network         and coordination for a citywide hybrid
Hence, a newly created LoopCo has the          elements for wavelength switching and            fiber-wireless mesh that would, with the
potential of becoming the least common         dense WDM.                                       participation of specialized wireless pro-
denominator at Layer 1 over which all                                                           viders, support enhanced services such as
service providers proceed to compete           Then again, LoopCo could always run              SLA-backed availability guarantees, di-
for end user business. The point is that       composite cable consisting of both fiber         saster recovery, single sign-on dual-mode
nothing is written in stone and it would       and a copper count of its own for this           roaming, load sharing, and dual-mode
be left to the management of the Muninet       purpose, now that I think of it. Suffice         multi-homing for power users and SMBs
to devise a plan and a business model          it to state that, in the best of all worlds,     who demand it, to name just a few.
suitable for the particular needs of the       LoopCo would implement its own out-
municipality.                                  side plant to allow for an all-fiber infra-      For the remainder of our discussion I’d
                                               structure, with little if any contamination      like to talk about the last of these options,
While the LoopCos of today limit their         from copper or legacy field electronics.         Option 3, since I think that you’ll agree
market to the rental of fibers only, in        Ultimately the municipality must decide          that Option 1 requires the least amount of
the future they will also manage and sell      on a business model it will live with for a      description and clarification, and because
wavelengths, which will serve to mitigate      very long time.                                  Option 2 will, in part, be covered in the
issues over the need for multiple fibers                                                        discussion on Option 3 as we proceed.
to end points due to incompatibilities be-     In Part 2, We’ll Consider
                                               3 Options and Pick One
tween differing service providers serving                                                       Editor's Note: We expect to publish
the same premises. I’ll touch on this again                                                     Part 2 in our September issue in about
later on, but for the moment consider that                                                      30 days.
                                               It may choose Option 1, and become

                                                                 49
Symposium Discussion April 9 to May 9, 2005

Network Architectures and the Duopoly's Plans
for the Last Mile - A Discussion on Where the
Economics and Technology Are Headed
Highlights                                     Finally, the enterprises have their own
                                               set of requirements. These, as Melissa,       http://nytimes.com/2005/04/10/business/
                                               Frank and others have pointed out are         10phone.html
MCI-Verizon: A Happy                           very, very different from the rest of us.
Ending, But for Whom?                                                                        Here we see what a potential nightmare
                                               I want to cover them to the best of my        the ILEC acquisitions of ATT and MCI
COOK Report on April 9: My personal            ability. But I also I want to take a high     will be for the Fortune 100. I have talked
observation of David Isenberg’s F2C            level, globally interconnected point of       to Frank Coluccio about this. An inter-
meeting is that the ideology of the 90s is     view. As Thomas Friedman says in his          esting question has to be whether, given
dead. Long live the Stupid Network! My         new book- The world *IS* flat and very        the uncertainty the corporate IT manager
interest is in continuing to describe the      much interconnected. Just rereading my        is now faced with, he will be motivated
economic, policy and technology impact         story on Sam Pitroda and Indian telecom       to roll his own network rather than buy
of the on-going telecom revolution and         from last summer reminds me of the            from the newly merged mega carrier?
in doing so to prod and mediate a di-          huge potential for continuing positive
verse collection of viewpoints. The revo-      achievement in global telecom and IT.         Stastny: James Enck pointed in his
lution very definitely isn’t over. But the                                                   blog entry http://eurotelcoblog.blogspot.
world is not going to look much like we        So I ask you to rejoin me in our contin-      com/2005/04/its-skype-stoopid-got-
thought it would in the summer of 1997         ued exploration.                              my-copy-of.html to a very interest-
when David wrote his paper. Ultimately                                                       ing EURESCOM article: http://www.
it would be nice if it did look like that.     In getting started I call your atten-         eurescom.de/message/message-
Nevertheless, what will happen remains         tion to http://www.nwfusion.com/              Mar2005/It_might_be_big_but_it_will_
to be seen.                                    news/2005/032805-contract.html. This          %20never_be_dumb.asp
                                               article is on the Federal Networx bid.
I would like to explore the ramifications      One Question -- are the packages of IP        This article contradicts the stupid network
of the coming consolidation in the US          broadband dark fiber services going to,       idea, namely that only dumb operators
and see where the silver linings may be.       in effect, help the telcos bidding on them    will build stupid, or dumb networks.
Under the newly consolidating world,           redefine themselves as IP-based compa-
I will of course continue to have a few        nies? Or does this not even matter? If it     Coluccio: Hi, Richard. Prior to your
economic and political beliefs. First and      does not, why not? What meaning does          joining the list in December and several
foremost: in countless local communities       the concept of the “stupid network” have      times before, this list devoted months at
broadband and networks as community-           in this respect? Is it becoming stupid?       a clip to this topic, although it was often
owned and operated infrastructure are as       Or are the needs of the federal govern-       interspersed with other issues, fitted to
critical to the future of those areas as was   ment so complex as to render the idea of      the context of the moment.
rural electrification in the 1930s. I can’t    a Stupid Network meaningless? Given
think of a more important lesson that          the emphasis on the back office and bill-     I’m not by any means suggesting we
needs to be learned. But aside from this,      ing systems described in this article, it     cease discussing the topic of best-effort
I hope to be a more neutral observer and       doesn’t look like there is much of any-       vs. QoS. It is not merely peripheral to,
synthesizer of what is happening. One          thing driving things in a stupid direction.   it is central, to what many of us do for a
who looks for patterns in the continued        Do you see some big picture lessons           living. Today’s context, I would like to
unfolding swirl of change.                     here? Or perhaps I should ask - what do       suggest, should be with a view toward
                                               you see here?                                 the latest round of LEC/IXC mergers
In the meantime there are the cities, the                                                    that are set to take place. These marriages
enterprises and, as Farooq and others          Then there is another article on the          will have implications that affect the very
point out, very large numbers of people        same page worth looking at http://            nature of “broadband, “ as we have come
who can be served with gigabit and ten         www.nwfusion.com/columnists/2005/             to know that term up to this point in time.
gigabit Ethernet. And there is the rest        040405johnson.html                            Tens of millions of end users are slowly
of the world outside the US. A world                                                         and very subtly being corralled in ways
that looks in many respects very vi-           The NY Times shows today that Verizon         that will dictate how they will use their
brant. Broadband in Europe is one thing        has likely finally won since it bought the    network access, thus the modalities that
and technology and broadband in China,         43.4 million shares of MCI held by Car-       will drive overall utilization, and, con-
Japan and India is something else again.       los Slim Heru.                                sequently, the economic outlook of the
                                      The COOK Report on Internet July August 2005
larger combined landscape, as well.           have it that way, or not. It’s important     that they no longer want to support
                                              to understand this distinction, because it   overlay (parasitic) VoIP services such as
Consider the case of Adelphia’s sale this     plays into how much actual bandwidth a       Vonage and Lingo any longer, either by
past week and then contrast it with what      customer has left over for “electives.” Of   further tightening their bandwidth spig-
is taking place in the IXC/LEC arena.         which today’s overlay services like Von-     ots, by de-prioritization, thus frustrating
Adephia, a Cable TV operator that has         age and Web-based video are a part           their uptake in new and ingenious ways
been steeped in the most despicable form                                                   through the tweaking of CoS knobs. Or
of corruption and malfeasance and is          Services that were once supported on         they may elect to filter them out, entirely.
still in bankruptcy at this time, is offer-   dedicated swaths of bandwidth (cop-          Who is going to stop them, and on what
ing bundled TV-broadband services to a        per pairs for POTS, ISDN and T1s for         grounds? Lest we forget, they are provid-
relatively few, 5 million users, when you     video-conferencing and disaster recov-       ing information services - they are NOT
consider the universe of U.S. broadband       ery, etc.) are now consuming bandwidth       common carriers charged with meeting
potential. In a deal that was cut this past   elsewhere, namely in what the service        public necessities and conveniences, in-
week, TW and Comcast partnered to buy         provider calls its broadband channel.        cluding the provisioning of public tele-
out Adelphia’s assets paying two billion      An MSO’s voice- or other multimedia-         communications services. Returning to
dollars MORE than AT&T was able to            application, for example, when deliv-        the LEC/IXC landscape issue, all of this
attract from SBC for its entire long-         ered on the cable modem channel will         is highly relevant when you consider
distance and worldwide network assets,        be provisioned via PacketCable, and it       the pace at which diffusion is taking
with the largest list of enterprise custom-   will be guaranteed through the use of        place concurrently with the growth in
ers anywhere thrown in. Now consider          QoS mechanisms over the same up- and         bandwidth demand and utilization in the
what Adelphia’s price might have been         down- channels as best effort applica-       telecommuting and VPN spaces -- and
if it were not in Chapter 11, given that      tions that are invoked by the end user.      the growing emphases being placed on
assets sold in bankruptcy usually go for      Conversely, the end user cannot invoke       distance education and health care ser-
pennies on the dollar.                        QoS on competitive alternatives - i.e,       vices -- and who the dominant last mile
                                              those offerings by others that compete       broadband players are now, and what
This suggests that the value assigned to      with the Last Mile Providers’ vertically     players will remain in the future.
the last mile segment has become greater      integrated offerings.
on an overall asset--allocation basis than                                                 No longer do we have a situation where
those of the enterprise interstate and in-    LEC Survival Through                         the over-the-air TV viewing public of
                                              the Enforcement of Last
ternational segments, combined. Check                                                      1995 spends $45 to $60 per month on
out the ARPUs, after doing a little bit                                                    local and LD voice; we now have, or
of homework on the gross and net mar-         Mile Asymmetry?                              very soon will, a nation that is almost en-
gins achieved through the sale of broad-                                                   tirely cable- and FTTP- enabled, paying
band services when the physical layer         Even if we set aside this disparity, the     anywhere from $150 to $250 for their
is owned by the service provider, and         net result is that the overall amount of     combined services, perhaps bundles,
you’ll see what I mean. A more telling,       bandwidth that remains for Internet ac-      including work-at-homes facilitated by
and at the same time a far more com-          cess, FTPs and overlay services has been     VPNs. A trend that I see unfolding is the
plicated, measure might be to compare         lessened considerably during those times     manner in which the business models
enterprise head count with users served       of use by deterministic traffic, because     of the enterprise and consumer service
through last mile broadband delivery.         some portion of the “broadband” channel      sectors of the telcos are becoming af-
But I’ve got better things to do with the     has been allocated to services that were     fected by one another, in some rather
remainder of my life. So much for the         previously serviced through other media      incestuous ways. Consider the growing
value of customer ownership.                  and means.                                   number of enterprises that have taken a
                                                                                           part of, or all pf their networking needs
What does this have to do with best-ef-       In the end, we wind up with a model          in house, effectively building their own
fort and QoS? A lot, if you consider that     that supports QoS by default, since the      networks, either outright or through vari-
“true” last mile broadband is central in      service providers’ own voice and video       ous outsourcing means. Also, visualize
enabling one to experience the potential      applications will gain share because they    the IXCs becoming de-SONET-ized as
of the Internet. And why the quote marks      can be priced as low as necessary in         they begin to support Ethernet across
around “true?” Because all broadband          order to achieve it. Until, of course,       their MANs and WANs, further undiffer-
pipes are not equal.                          their models have become universally         entiating (commoditizing) their networks
                                              accepted, and then pricing is governed       in order to match those of their enterprise
Some broadband access lines are trans-        by other factors, but will surely go up in   customers’ IEEE LANS, while the gold-
parent (virtually clear channel), and in      any event.                                   en voice goose they’ve depended on all
the case of the MSOs and ILECs, some                                                       these years has just been cooked through
will impose QoS on certain of their own       Staying this side of trusting for an ad-     the introduction of VoIP.
bundled services, and relegate best effort    ditional moment or two, what if the ISP
status to others, whether we choose to        divisions of these last mile SPs decide      One shouldn’t have to wonder for too
                                                              51
                       COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
long why the RBOCs are placing so             business model could be disrupted by          tion non-existent will persist, perhaps
much capital in their last mile initiatives   PacketFront or WorldWidePackets kinds         forever. This nostalgia drives companies
today, hoping to at some point achieve        of operations that offered customers 30       off of cliffs in pursuit of the perfect
ARPUs that are high enough to off-            megabits per second bandwidth, upt to         long-term plan. And it’s easy to sell to
set the continuing erosion of revenues        a Gigabit in some instances, for a more       Wall Street, those folks who imagine that
that I cited above. Add to those their        compelling monthly fee. Or by a future        CEOs can produce “ruler stocks” in a
diminishing copper line rentals and the       wireless offering that is divorced from       dynamic economy without CFO fraud, or
shifts taking place to cellular wireless      the incumbents entirely. Such operations      hidden piggy bank offshore accounts.
and VoIP.                                     would allow end users to do for a lower
                                              price many of the things that the duopoly     Coluccio: You brought up some good
Again, consider the price that bankrupt       would prohibit, and with the approach of      points, some of which I can’t readily
MSO Adephia commands ($18 Billion)            IPTV would enable their customers to          discern whether they were in response
and then compare with those of AT&T           have cut rate video services, as well.        to me, or not. IN/AIN has popped up
(~$16 Billion) and MCI (~$7 Billion).                                                       recently in arguments keyed to dispel
                                              David Reed: Just as a side comment, the       the need for IMS (the ITU’s blueprint
http://www.siliconinvestor.com/read-          “stupid” network was a term invented          for the convergence of fixed-mobile),
msg.aspx?msgid=21211156                       to describe the opposite of AIN - a te-       and in other instances as a model to be
                                              lephony centric idea that the best net-       mimicked in an IP way elsewise. I would
I’ve only focused up to this point on to-     work was the one carefully designed           agree that there is plenty of territory be-
day’s common uses of broadband. I have        by “the [monopoly] phone company”             tween “stupid” and the extreme that was
not covered what I think could be at stake    to deploy all the services that any user      intended by IN/AIN, and perhaps IMS,
if bandwidth symmetry were introduced         might want, provided by central serv-         as well. Hence there is sufficient room
into last mile broadband offerings. If        ers owned and operated by the phone           for adding technological sophistication
and when the RBOCs and MSOs modify            company.                                      in even the most dumbed down of net-
their AUPs/TOSs and allow symmetry                                                          works.
on their pipes for consumers, entirely        It was NOT the opposite of putting
new possibilities begin to emerge. How-       high technology in the network.               ISPs can’t be all dumbed down, of
eveer, those new opportunities appear                                                       course. Not if they’re employing direc-
threatening to the incumbents who fear        The same arguments for moving func-           tory services, mail services, web caching
that loop symmetry would only serve to        tion implementation to the edges apply        and content distribution tools, traffic en-
further cannibalize their key revenue ser-    today.                                        gineering algorithms and their attendant
vices. And of course, they would be right                                                   router provisions, and so on. Is that
in thinking this way, because that is ex-     Question 1: Tell us about one phone           the form of technological sophistication
actly what is going to happen. And this is    company that has had the foresight to         you’re referring to, or did you mean
the main reasons why SPs’ have decided        predict the future of technology and user     something else?
to hold back on making symmetry avail-        desire so well that it could design all
able, notwithstanding the other physical      the services that anyone could possibly       True, “in economics, sunk costs are sunk
factors affecting the transmission limita-    want?                                         costs,” but economics is an imperfect
tions of the telcos’ twisted pairs and the                                                  discipline, and a follow-up thought to
cable operators’ coaxial spectrum plans       Build Adaptable Flexible                      this axiom might state that it doesn’t
                                              Infrastructure
that hinder symmetry, as the situations                                                     always hold true that sunk costs are
on their networks stand, today. Can the                                                     ultimately amortized by the same party
RBOCs correct those earlier shortcom-                                                       that did the initial sinking. I’m referring
ings? Of course they could. Especially        Question 2: Tell us why it is so incredibly
                                                                                            to, of course, the hundreds of billions of
since their new platforms are for the most    obvious that all the capital investment
                                                                                            dollars worth of first-rate assets that were
part fiber-based. Even where copper is        and risk should be centralized in one or a
                                                                                            paid for by Provider A, only to be handed
used for the last several hundred feet,       few operators? In economics, one learns
                                                                                            over through bankruptcy proceedings to
remedies exist. But they won’t, for all the   that “sunk cost is sunk cost”. The trick
                                                                                            Provider B, which now has the benefit
reasons I’ve cited above.                     is NOT to build infrastructure that
                                                                                            of using those assets without the burdens
                                              is incredibly optimized for one target
                                                                                            of paying them down in a way that Pro-
This ensures a regime where the last          application (“smart” infrastructure),         vider A would have been obligated to do.
mile user can be entertained but not          but to build infrastructure that can          Since this type of outcome became as
conduct useful business. If the LEC/Ca-       survive many generations of innova-           prevalent as it did, following the longest
bleCo duopoly can enforce this regime,        tion (now that innovation cycles in           bankruptcy spree in the industry’s history
it can turn the last mile into quite a        communications are < 3 years).                - both domestically and internationally -
cash cow that may offset declining en-                                                      all I can say is: So much for the econom-
terprise revenues. Nevertheless this new      The nostalgia for the days when change        ics affecting sunk costs. I realize that this
                                              was slow, and competition and innova-

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                                       The COOK Report on Internet July August 2005
goes off the point you were making, but        email; (b) Google; (c) IM; and (d) ubiq-
it’s germane in other ways, so I thought       uitous cellphones, including texting. All      Having said that, Bob Frankston’s com-
I’d include it here, anyway.                   of these things have burst onto the world      ments below are pretty good. They are
                                               over the last decade, give or take. Exhibit    certainly compatible with my overall
Reed: Frank - I wasn’t responding spe-         A for the proposition that there is much       objective of helping my subscribers to
cifically to you. Just adding to the pot my    more change to come just from these            understand the overall economics of con-
observation regarding Gordon’s “king is        technologies: on average, the behavior         tinuing changes in telecom technology
dead long live the king” allusion.             of the under-18 set with respect to them       and policy. To do this - then we see the
                                               is notably, profoundly different from the      costs as they are and costs as they could
Framing the discussion as an either-or         behavior of the over-30 set.                   be - as we specialists all know - are
battle between some strawman called                                                           very, very different. I think Bob is say-
the “stupid network” and another called        2. A lot of actual public good is therefore    ing let’s look at costs as they could be. I
the “intelligent network” misses a much        available, I submit, from what may at          say agreed. But I wonder whether it does
richer underlying set of learnings that        bottom be minor improvements in, and           much good to say that costs could be a
seem to hold true independent of the           true ubiquitization (boy, that’s a word)       lot lower? I wonder whether in order to
flags being flown by those who seek            of those technologies. Random example          make a strong case we don’t have to be
to fit every issue into a “two party sys-      to think about: email address portability      very specific?
tem.”                                          for the masses, so that it is trivial and
                                               normal -- not requiring any special ar-        Bob Frankston: I’m interested in the
I personally think the issue of “stupid        rangements, just the way it’s done -- for      actual cost figures.
vs. smart” is pretty much moot and             me to be chris@savages.com or some
not worth reviving. The new challenge          such, whether I am “served” by Comcast         COOK Report: Absolutely. I would think
is driven by the growth of techniques          or Verizon or via my work email.               we’d ALL be interested in that. The ques-
for nomadic and viral connectivity.                                                           tion is how does one get them? Can one
Purveyors of fixed-in-a-box services           3. As long as people have largely unfet-       get them?
(cable modems, POTS handsets, Set              tered and unfiltered (unless they sign up
top boxes plugged into satellite or            for filtering) access to the ‘net, it actu-    I’ll bet that Vijay and Ron know a lot of
cable) bind services to an immovable           ally doesn’t really matter if they get their   them. I’ll bet that others here to know
device. But as we see from the notes on        bits via an ILEC or a cable op or a 3G         a lot about this. But I will also bet that
Neilsen’s “people meters” that track           wireless system or a muni network or a         those who do know are legally bound
what a person sees as he walks around          T-Mobile WiFi hotspot at Starbucks.            from disclosing the specifics of what
(NYT this weekend), services are not                                                          they know. Yes? So how can one actu-
provided to boxes, but to people. The          A science fiction author I read in my          ally get any figures? Bob? Frank? I’d bet
businesses that get this will be riding        youth -- I have a vague recollection that      that Frank knows some figures but I also
on a wave of growth, and those that            it was Frederick Pohl, but maybe not           bet that what he could say is bound by
create services that are bound to plac-        -- once remarked that in the future, it’s      non-disclosure agreements. If not - great
es and devices will miss that growth.          not that today’s problems will have been       - let’s hear what is going on.
                                               solved; its that they will have been su-
The Internet debates about plant in the        perseded in actual importance by other,        Frankston: Note that we do have lots of
ground are tired, if they aren’t based in      different problems. I submit that it is at     first mile capacity even with the current
a discussion that includes their role in       least possible that it will simultaneously     infrastructure. CableCos are rolling out
this nomadic, viral future. The maga-          be true that (a) broadband access is pro-      their VoD infrastructure now and that’s
zine Wired has a column that contrasts         vided by a duopoloy or triopoly in most        with a history of artificially reduced
Wired vs. Tired ideas. The problem is          cases, and (b) the service isn’t nearly as     fiber capacity (so as to avoid making it
that “Wired *is itself* Tired” - the wires     cool as it could be (e.g., asymmetric, not     available to competition). There’s lots of
are irrelevant and the terminals are too.      “enough” bandwidth), and yet (c) neither       capacity all over not lit up -- I’m puzzled
(Credit me with that if you use it... :-) ).   of those “bad” things will matter very         by the Rogers Report that implies 6Gpbs
                                               much.                                          shortage of backbone capacity is a lot
Savage: In service of the “reset” idea, let                                                   when I also read about multiple terabit
me toss out a few thoughts.                    But Where is the IXC                           pipes even if they aren’t fully lit yet.

1. The mass market (people with com-           Acquisition Value?                             COOK Report: Bob, you are confusing
puters in their homes, small businesses)                                                      me a tad here. What you say is techni-
is a long, long way from fully learning        COOK Report: My number one objec-              cally correct. But the capacity will have
and exploiting what can be done with the       tive is to understand what economic            to be pried out of the cable co’s cold dead
bandwidth now available. Admittedly,           value flows out of the IXC acquisitions        hands. The whole reason that Adelphia
I’m an old fart, but I am still amazed at      and to whom? Who wins? Who looses              can bring in bankruptcy more than all of
the changes in daily life wrought by (a)       and WHY?                                       ATT is that it has a monopoly over the

                                                                53
                        COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
delivery of video to 4.5 million custom-        COOK Report: Great questions Bob. But         economics and let other business carry
ers. These are folk who pay ridiculously        who has they answer? And is there *AN*        the cost of bulk Internet? Go for cheaper
high rates for a service that, once in-         answer? It is not only the core (20 NFL       platforms? Go bankrupt (if no other busi-
stalled, costs pennies to deliver.              cities) but the feeder networks to the core   ness can carry the cost)?
                                                - just ask Jere Retzer - that each has its
What is happening now with the Internet         own set of costs and problems!                My guess is that going to OC768 isn’t
is that mass content markets are disap-                                                       going to be very cheap either... [End
pearing. With blogs and podcasts, and           Now from NANOG list today here is a           NANOG comment by Mikhail Abraha-
soon video-podcasts and Skype and all           pretty good comment on costs - and one        msson]
that sort of thing content is more edge-        that should give pause for thought:
based than ever before. One must sup-                                                         Frankston: What if I wanted to pay
pose that the cable co/telco model, cen-        On Saturday April 16 2005, Stephen J.         for my own connection -- how would
tralized content model will be running          Wilcox wrote: In general I’d prefer to        running a fiber (assume no regulatory
dry sooner or later no matter what. The         operate in a healthy marketplace, where       problems) cost from my house if I chose
way things are going in the US however          all parties are making money, there’s lit-    to pay for rather than say adding a room
it will take us another decade to get it.       tle risk of the supplier filing bankruptcy    to my house?
Meanwhile Europe and Japan are getting          and I am getting reasonable customer
it much sooner.                                 service. That can only lead to growth         COOK Report: Another good question
                                                of the industry, healthy businesses and       - but where would you connect? A neu-
But again I must ask - how can one              healthy economies. Unfortunately none         tral peering point? Where is that going
get figures on costs that stand up? It is       of these things appear to be happening at     to come from? And where is the utility
so very situation specific. And another         the moment.                                   model for long distance fiber transmis-
problem is that, unless you go to very                                                        sion - or if backbones are becoming
special towns like Newton, Mass. and            From Sweden, Mikael Abrahamsson               MUCH LESS important how do we
Palo Alto, California the number of folk        replied - Yes, it’s quite interesting what    stitch all the localities together?
in your average town (Ewing, NJ for ex-         has happened the past few years. I have
ample) who understand what those of us          seen Cisco OC48E/POS-SR-SC cards              Frankston: If we go with the utility
on this list do, is I bet, on the order of 1%   on the used market sell at $3500 back in      model then we can take a long term view
of the local population, if that.               2001/02, go up to $20k in 2004 and they       of the costs and value rather than look at
                                                seem to go for around $10-12k now.            short term ROI. It’s a very safe societal
So you are talking about how to drive                                                         investment in that it is very fungible --
and establish intelligent policy. IMPOR-        I also did some other calculations. Let’s     as long as we don’t build too much too
TANT for sure. But unless someone               say the average packet traverses 5 GSR-       soon. But maybe we’ve done that and
grabs the Pew Trust by the side of the          GSR links and you want to pay the             now need to salvage the result -- it’s a
head and shakes them up to pour major           CAPEX over 36 months and let’s say on         question of what creditors will get paid
money into a detailed study of COSTS            average you fill half those with customer     not whether they will abandon it.
of broadband as a utility infrastructure, I     paying traffic. Let’s assume you get 50%
don’t see how we can move forward. Do           discount from Cisco on these cards and        COOK Report: Bob, who is we? We on
you remember the guy from Pew who               you want to build OC192 links:                this list for the most part are somewhat
started Isenberg’s F2C? He went on and                                                        agreed, if not fully so, that a utility model
on and on about what Americans *DO*             List price for OC192 cards are $225k, you     is a good thing - but we on this list don
with the Internet? My reaction is who           need 10 of them which with the above          ‘t set anyone’s policy. This is why I
cares what we do? The relevant topic is         figures equals 225000*10*.5=1125k. At         have been a little leery of getting on this
what we COULD do?                               $1,125, 000 CAPEX you can carry 5             subject.
                                                gigabit per second of customer traf-
Frankston: Of course the early fiber de-        fic, over 36 months this boils down to        Frankston: The point of my essay is that
ployers lost because the underestimated         1125000/36/5000=6.25.                         getting there is the issue. If we can skip
the capacity they were deploying and                                                          over all the intermediate stuff it’s much
have a flood of it available. My conten-        So just the Cisco linecard CAPEX cost         easier. That’s why I find any time spent
tion is that the big expense is due to first    alone for this is $6 per megabit. With the    talking about LATAs and other issues
mile policy, not intrinsic cost. It would       market price seemingly hovering around        to be a diversion. As much as I dislike
be useful to drill down on that rather than     $15-25 per megabit per month in bulk,         the Powell/Martin decency campaign I
accepting cost figures. What percent of         this is a large portion of the total cost,    do agree that shifting to a connectivity
the backbone is lit and how much of the         considering DWDM systems and people           model as the carrot is a good idea.
backbone expense is being paid for with         don’t come cheap either.
that. Will lighting up a lot more cost pro-                                                   If we don’t have it things become more
portionally more?                               So what will people do? Stop selling          complicated and we can deal with al-
                                                when their networks are full? Ignore the      ternative paths, but I do believe that if
                                                                   54
                                     The COOK Report on Internet July August 2005
people understand the utility model it       vices industry solved this problem years     basis for re-sale to others. - Use of public
becomes compelling.                          ago. You turn the clearinghouse into a       tenders to advance the “social” aspects
                                             vast mutual organization owned by the        of public connectivity provision (e.g. we
COOK Report: Well yes - but I think          “users”, who are the megacorps who           won’t buy from providers who fail to re-
it depends what you mean by “under-          retail to the public. Credit card pay-       spect customer privacy, or who have usu-
stand”. That there could be a utility        ments, check clearing, settlements, stock    rious terms and conditions for consum-
model is fairly easy to understand. As for   markets -- it’s a solved problem. Sucking    ers). - Support of price discrimination
myself after the last 2 two month issues     MCI and AT&T back in adds up to much         to achieve social aims (e.g. FREE DSL
that I have published this year I am ut-     the same thing, just without the vision,     service, but only with access to govern-
terly convinced that some form of utility    courage or efficiency.                       ment/public sites, or sites with public
model is the only viable future. Question                                                 interest in having universal access -- so
is how to convince others? Without           There are many business model arche-         the unemployed can browse for jobs,
some specific answers to my questions        types -- the thing that makes your com-      take online courses, etc.) - Malcolm Mat-
I think it is not likely to happen give      pany uniquely good at something useful.      son’s OPLAN proposals. (http://www.
the telco/cableco ability to lobby to the    A better technology, product, production     freifunk.net/sc2004/OpenPlanet) - Local
contrary.                                    method, sales method, distribution sys-      mutual society provision of networks
                                             tem, etc. Traditionally communications       independent of government. (There are
You complain about talking of LATAs          networks won the day based on distri-        many precedents in UK for this).
and things - I am guessing you are refer-    bution; physical networks that reached
ring to Farooq’s essays. The 6 gigabits      more places (“Can you hear me now?”)         I’m sure others here have more and
came from there certainly. My under-         or virtual networks with more nodes (e.g.    better ideas and can see many holes in
standing is you look at the proposed ac-     AOL IM). (The stupid network wins            specific examples listed.
quisitions and say OK where is the finan-    because it’s a superior distribution chan-
cial benefit going to come from? Now I       nel for a wider range of applications.)      The genius of companies like Dell is to
am VERY Interested in asking WHERE           What we’re seeing is an inflection point     focus on the right kinds of innovation
the financial benefits to the LECs are       where advantage comes from innovative        (unique sales and production methods),
going to come from as a result of these      financing methods that better align user     when your competition is focused on the
mergers. At first glance it would seem       and owner interests. In other words, stop    wrong ones (product features, like IBM’s
that they are going to be very scarce.       worrying so much about fiber vs. wire-       PS/2). As most of us here are techies it’s
                                             less vs. copper, and look at how they’re     easy to get wrapped up in technology or
The Real Issue is to                         funded. The above “financial services        product issues, especially when there are
Find the Funding Path
                                             backbone” mutual model is just one such      still gaps between need and reality, and
                                             example.                                     a stream of new toys to fill them. But all
from “Here” to “There”                                                                    the activity is over in the economics of
                                             Bob Frankston’s idea of connectivity-as-     aligning user and owner interests. Mesh
On April 18 Geddes: I can immedi-            utility underwritten by taxpayers seems      networks are merely the degenerate final
ately think of one “scale efficiency” that   a large intellectual leap from A and B       case: all the network’s physical equip-
Farooq’s email seeks to find. Since SBC      straight to Z. A = Not enough connectiv-     ment is owned by the users. The real
and Verizon (co-)own cellular networks,      ity. B = want more connectivity. Z = Tax-    issue is to find the funding path from
but don’t have a nationwide local service    funded utility! I’d prefer experimenting     “here” to “there”, which has nothing to
footprint, they are paying dearly for        some less radical ways of promoting          do with technology.
backhaul from lots of cellular towers        first-mile connectivity and aligning user
outside of their home area. I guess ac-      and owner interests. For instance:           Coluccio: There’s no “bottom line” of-
quiring national IXCs gives them more                                                     fered in this message, only some obser-
points to cheaply hook into.                 - Using private-finance contracts for        vations with references to the writings
                                             public connectivity services as the UK       above. My previous reluctance to post
I started my career doing IT systems         has pioneered (with varying success, but     was because some things seem all too
for the banking and financial services       proof of concept OK). - Property-based       obvious to me, thus I began questioning
industry. I can’t help but notice the par-   financing, where liens are taken against     whether I was being too simplistic in my
allels between them and telecom. Farooq      properties (whose value is enriched by       analysis of the matter. Whether that’s
laments that the money from access           connectivity), and then securitized to       true or not, here it is:
doesn’t float up to the backbones in a       fund network builds. - “Municipal rights
fair and reasonable manner, presumably       of way” layer-0 networks, where just the     I’m not getting the sense that the issues
because once you’ve sunk your capex          piping, poles, wireless mounting points,     that underlie the transformations being
pricing in a competitive market is all       etc. are municipally run. - Parasitical      discussed are getting their due exposure,
based on opex (until you go bust -- rinse    connectivity, where any wired public         yet. It’s fine to speak in macroeconomic
and repeat). Although less extremely         building is obliged to host private relays   terms, using abstractions and theory,
biased towards capex, the financial ser-     that tap into the fiber on a “subload”       speak in support of broad economic anal-
                                                             55
                       COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
yses and industry trends, while referring     climb by acceleration factors surpass-            “Between 5% and 25% of the sales ex-
to historical frameworks and Acts of          ing those of the enterprises for a spell,         pected by most telco video efforts just
Congress that were never intended to          in terms of transport utilization over            disappeared. You’ll be hearing a lot as
work by those who penned them. But            incumbent broadband facilities. Those             this one percolates through Wall Street
what is it that is actually taking place      first mile facilities, however, will also         and the press. The first implication for
today that makes the landscape truly that     increasingly be used to support higher-           telcos is that between 5% and 20% of
much different than it’s been anytime in      level services that were previously pro-          your planned video revenues won’t de-
the past? I believe that all the elements     vided by those same incumbent last mile           velop. Jennie and I are working hard on
have already been discussed, and the an-      providers, resulting from users resorting         a Future of TV issue to develop the story;
swers, as clichéd as they are, are staring    to overlay IP offerings and edge-based            your ideas welcome.”
us in the face. But they’ve still not being   applications, as well.
connected in the manner in which I’d like                                                       Even if those numbers are only partially
to see them.                                  Regrouping, we see a rise in traffic              correct during the early phases of ILEC
                                              in the access and distribution layers in          triple play deployments, then what does
I need to break things down to where          both enterprise and consumer markets.             such a trend say for the out years when
there is a consumer market and an enter-      But we’re seeing decline in high-layer            those platforms are looking to go cash
prise market, where consumer includes         services being purchased by both con-             flow positive?
residential and SOHO, maybe with some         sumers and enterprises from the very
nomads thrown in, and enterprise con-         same access and distribution providers            Using Farooq’s analysis of transforma-
sists of commercial, educational and          (except for transport, of course) who are         tion combined with Martin’s financial
governmental organizations.                   providing access. Simultaneously, we              services analogues are highly instructive,
                                              see a rise in total enterprise traffic over       in my opinion. My intuitive draw on
It’s fine to say that the RBOCs are in the    long haul routes, with a corresponding            the matter, however, requires combining
process of acquiring the IXCs for the         decline in enterprise WAN dependence              those state qualities, in part, with the kind
purpose of gaining the latter’s enterprise    on incumbent IXCs for “services” over             of utility that Bob speaks of as a start in
customers, and for greater geographic         those routes, since enterprises, like their       rationalizing the tensions between trans-
reach, although there are some broader        consumer counterparts, are also taking            port, services and content in the local
and more-complicated reasons that tran-       service-provisioning and communica-               access part, at first, and then moving on
scend these that are being argued, as well.   tions application management in to their          to see what those implications portend in
But sticking with the basic premise I’ve      own hands.                                        the core.
outlined, what about the growth in the
residential space spawned by the spread       It’s cliché at this point to say this, but I’ll   Broadband, when limited to its “bit haul-
of broadband that is now having a major,      say it for continuity and completeness,           ing” role, is emerging as the most impor-
even accelerating, impact on driving the      anyway:                                           tant factor responsible for transforming
IXCs’ and Internet Broadband Providers                                                          the landscape today, bar none. Carriers at
traffic growth?                               It’s inevitable that the network will be          all strata need to realize that the “specific
                                              relegated entirely to its transport capa-         expectations” that users once had of them
Enterprise traffic also continues to grow,    bilities, while applications will be driven       are no longer valid. The carriers need to
but not through the types of services once    almost entirely to the user’s edge.               come to terms with the fact that they are
sold by incumbents, and sometimes not                                                           no longer the critical links in the value
even over incumbent network facilities,       I regard this as obvious and true, barring        chain for the delivery of actual upper
since many enterprises, as we’ve dis-         any potential draconian intervention; I           layer “services” as they once were, and
cussed here many times in the past, have      believe many others here do, as well.             might have been today. And this holds
by now resorted to multiple network fab-      Why is it that the incumbents have not            true for both consumer and enterprise
rics: Some are using dark fiber MANs/         been able to publicly swallow these pre-          customers who increasingly have built
WANs, some through competitive ac-            cepts, too? Unless, of course, commit-            their own services (application libraries)
cess providers, some over competitive         ting tens of billions of dollars to FTTP          at the edge and apply them either across
backbones and privately owned wireless        initiatives that include a shopping list of       the Internet or across “any old” dedicated
facilities, with many using a mix of these    upper-layer triple play services based on         pipe or form of radiated energy, where
all. Skyscrapers filled with enterprises      IP is merely a ploy? (I don’t think the lat-      they are available at commodity prices,
are being knocked over, one by one, with      ter is the case, just for the record.)            that gets them to where they need and
voice services moving onto VoIP call                                                            want to go.
managers and servers, where they were         The points I laid out above were ex-
previously pointing to Centrex and IN-        emplified nicely by a message posted              Historically, common carriers were top-
based voice VPN services in the WAN.          by Gordon earlier today, when he cited            heavy with vertical “services” and ad-
                                              one of Dave Burstein’s recent newsletter          hered to market principles that were
My take on the matter is that residential     items:                                            grounded in bandwidth scarcity. This
traffic is booming and will continue to                                                         regime has been turned on its head today,
                                                                   56
                                     The COOK Report on Internet July August 2005
although not fully. We are witnessing the    It’s only when their larger assets are      form of what is called “Naked DSL,”
ILECs making last-ditch efforts to re-       threatened with the prospect of being       i.e., DSL without the need to also sub-
package and add to the types of services     stranded that an incumbent will resort to   scribe to an underlying POTS channel.
they offer in the form of service bundles,   offering new transport services in order
and the are ignoring - or working around     to cut losses. Witness today’s release      Jere Retzer: I really must be missing
the facts outlined above - almost en-        by Verizon, where they are following        something in this discussion. It seems
tirely.                                      Qwest’s lead of last year by making their   as though folks are assuming that the
                                             copper loops available to users in the      surviving super-carriers are going to en-

Where Is Google Going?
COOK Report: Looking at the following, I would again ask          finding as they build their offering of a million programs.
what Verizon and SBC think they are doing?
                                                                  Google builds their own servers by the tens of thousands and
Again are there solid signs here that Google is going to be-      would probably rank as number three or number four manu-
come a bandwidth provider?? I’d really like to follow this up     facturer. To lower bandwidth costs, they are hiring for “Nego-
but am not sure what the best way to accomplish that is,          tiation and purchasing of IP transit services in North America,
                                                                  Europe, Asia, and/or Latin America; negotiation of partnerships
This in from Dave Burstein.                                       with Internet exchanges, regional peering providers, and paid
                                                                  peering arrangements with major carriers. Identification, selec-
Date: Mon, 18 Apr 2005 00:18:00 -0400 To: news@dslprime.          tion, and negotiation of dark fiber contracts both in metropoli-
com From: Dave Burstein <daveb@dslprime.com>                      tan areas and over long distances as part of development of a
                                                                  global backbone network.”
“Another humongous Google shoe just dropped” Xeni Jar-
din, Boing Boing                                                  Persistent rumors have Google jumping in to voice over IP.
                                                                  What I hear is they won’t be just competitors with Skype and
A very big thing. Distributing video will now become free (if     Vonage, but instead will offer a far more comprehensive set of
no charge) or a modest percent of sales (if charged). Really.     services that include video. But that’s unconfirmed.
Not just quarter screen - they suggest a minimum data rate
of 750K, and welcome MPEG 4 video at 1.1 and 1.5 meg              Press ZTE and Huawei, with over $10B of Chinese bank export
- pretty good full screen playback. Essentially, Googling is      money committed, look to be renewing the vendor financing
moving forward as though their internal cost of storage and       practices of five years ago, which almost bankrupted Lucent
bandwidth is approaching zero rapidly, jumping the Internet       and Nortel. The latest deal, $B provided to Indian IPTV and
possibilities years ahead. Google doesn’t think of itself as a    wireless operator Atlas, looks totally dubious. Ray LeMaistre
search company any more. Yahoo and MSN can copy search            of Light Reading does the story well at http://www.lightreading.
techniques, so Google has looked for other advantages.            com/document.asp?site=lightreading&doc_id=71912 . He has
Producing their own servers is part of it; building their own     Orca denying they were doing a financing deal their customer
worldwide backbone another.                                       claimed they did; now, Orca and BitBand will need to explain
                                                                  to customers around the world why they don’t get similar terms.
Between 5% and 25% of the sales expected by most telco            press
video efforts just disappeared. You’ll be hearing a lot as
this one percolates through Wall Street and the press. The        COOK Report: Here is the first part of the Boing Boing refer-
first implication for telcos is that between 5% and 20% of        ence
your planned video revenues won’t develop. Jennie and I are       http://www.boingboing.net/2005/04/13/google_launches_vide.
working hard on a Future of TV issue to develop the story;        html
your ideas welcome.
                                                                  Wednesday, April 13, 2005 Google launches Video Upload
and                                                               Program

Google wants to peer with you Building a worldwide back-          Oh, lordy -- another humongous Google shoe just dropped. At
bone In a decision that is changing the future of the internet,   present, Google Video allows you to search within an expand-
Google has told employees to move forward on the assump-          ing archive of TV content -- sports, docs, and news, mostly. But
tion that bandwidth and server costs will rapidly approach        today, with the launch of the company’s Video Upload Program,
zero. That’s a revolutionary development, whose importance        Google has begun accepting video content from anyone who
is being evaluated on Wall Street the press in several articles   cares to upload it. Submitted content won’t be available for
you’ll read next week. I was working on an article that the       viewing right away, the Google FAQ says -- they’re just now
cost of video had dropped to around twenty cents per hour         starting the gathering phase. And yes, would-be sharers must
or so, based on Tom Hammer’s comment on what Akimbo is            consider certain legal and technical details.
                                                             57
                       COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
courage folks to connect and supply            kind, but in so doing they received a rep-     nectivity to the backbone. The monthly
competitive services via their networks,       rimand, and, in at least one case where        fee will depend on bandwidth provided,
but it seems to me that is nowhere near        an independent telco blocked Vonage, a         Eventually also on an SLA, if finally
a foregone conclusion. In point of fact,       fine was levied against them, as well.         the Internet gets QoS working, and the
they may limit interconnection and peer-                                                      end-user is willing to pay extra (which
ing every bit as much or more than the         I believe that over time we’ll see legisla-    I doubt, because the major bottleneck in
large backbone networks have historical-       tion with sharper teeth discouraging such      QoS is at the last mile and this last mile
ly. At least one of the surviving ILECs,       practices, but until then SLAs offerings       is under the control of the end-user any-
if not all, also has a policy of holding       at the upper tiers that are marketed with      way). So the only issue for an SLA will
bits as long as they can, known as “cold       throughput and delay guarantees, may           be up-time 24x7.
potato routing” that can have the effect       be the only sure way around what you’re
of degrading performance when the des-         referring to. For now, at least.               Internet access is very often compared
tination is on another network. This, and                                                     to other commodities like gas, electricity
potentially restrictive policies on quality,   What is missing here, of course, is a          and water, but this is not quite compara-
ports, etc. may be used to disadvantage        comparable equivalence regime. Under           ble: As the deregulation in these areas
other networks, services, and content.         such an arrangement, lines equipped            show, you have here two issues: the
                                               with customer owned and maintained             network (infrastructure) cost and the
Aside from the (possibly remote) pos-          (COAM) equipment (CPE) must per-               consumption of the resource delivered
sibility of someone like Skype managing        form on a par with lines that use telco        (the content).
an endrun around this strategy, what rea-      gear. A little substitution or addition here
son does anyone see for anything more          of “edge applications” and Modem or            On the Internet you have the equivalent
than a duopoly to survive and offer any-       Cable Modem, and the picture becomes           in network (infrastructure) cost that
thing to the customers that has not been       clear.                                         is paid with the access, the payment
approved by the carrier? Seen from this                                                       of content is in another layer and is
gloomy perspective, which I’m not at all       Stastny: I think Martin Geddes has             peer-to-peer. So you may pay content
certain is correct, the ILEC move to take      made an important point here about the         for video and music delivered by a con-
over the major backbones can assume            meshed networks and the mid-term de-           tent provider, but you will NOT pay for
strategic importance in their battle with      velopment:                                     point-to-point, person-to-person video
the cable companies as this potentially                                                       or audio communication (e.g. VoIP),
gives them greater control over intercon-      But all the activity is over in the econom-    because the network resources are al-
nection. Please explain to me where I’m        ics of aligning user and owner interests.      ready paid by the end-users.
off base with this. Thanks.                    Mesh networks are merely the degener-
                                               ate final case: all the network’s physical     And there are only two centralized re-
Coluccio: The potential for what you’re        equipment is owned by the users. The           sources necessary for doing this: 1.
suggesting, Jere, is forever true, and         real issue is to find the funding path from    Directory (Routing) services so that one
indeed taking place as we speak, some-         “here” to “there”, which has nothing to        user may find the other (basically rout-
times with more subtlely than others.          do with technology.                            ing tables to find IP-addresses and DNS
This is true more so in the consumer                                                          including ENUM to find URIs and
markets today than in the enterprise,          Currently the user already owns the CPE        the connected-to identities) 2. Trusted
though. Taking the latter first, each sec-     equipment and has also (within the end-        third-parties to provide certified Iden-
tion of leased capacity must meet mini-        to-end philosophy of the Internet) the         tities (this includes certificates, SIM-
mum service levels under contractual           control and ownership about the applica-       cards, RFIDs, etc).
terms. End-to-end SLAs, are all the bet-       tion layer. VoIP is also an application.
ter, if you can afford them. ;)                                                               Skype is a very good example for this
                                               The next step will be the ownership over       type of communication: if Skype (or
In the consumer space, most service            the last mile, either buying it or renting     SIP P2P) opens up for standardization,
providers who still think they have a          it from a provider or the infrastructure       so anybody could run his own (trusted)
chance of gaining favorable market share       provider (real estate provider). If he has     client (this will be necessary finally
- which pretty much includes most of           wireless ”access,” he also own part of it      for enterprises to use this type of com-
the larger ones - will not be as likely to     and is free to peer with others, creating      munication) and adds the possibility to
resort to the level of restrictive practices   meshed networks.                               used trusted identities, this is all what
that would result in IP overlay service                                                       is needed.
disruptions, due to the negative PR and        In owning the last mile, the user has also
possible fines it would bring to them.         the power to decide to which ISP he is         Anybody may use this type of com-
                                               connecting (at the collocation point). Of      munication, access to the Internet by
Although, in recent weeks we’ve seen           course he will have to pay for this, and       any means (DSL, Cable, FTTH, WiFI,
parties engaging in overt acts of this         the ISP has to pay in turn for the con-        WiMAX, 3G-UMTS, etc. provided) All


                                                                   58
                                       The COOK Report on Internet July August 2005
current “service providers” including          I overhear in the bus. ;-)                     The salient point I want to make is that,
the mobile operators are reduced to                                                           where both industry groups are con-
Internet Access Providers, if they like        Coluccio: My contention is that transport      cerned, outside the cellular wireless and
it or not.                                     providers should have no business in the       enterprise spaces, the triple play remains
                                               delivery of content, which isn’t very rev-     the last vestige where both the telcos and
Done right, this could be a good business      olutionary, and I state it for clarity only.   cable operators have any hope of salvag-
case on its own. The current exercises         This may seem counterintuitive for me to       ing their wireline business models, the
they try in blocking certain ports, etc. are   state, since I’ve just posted the WSJ ar-      way they are currently constituted.
futile if the end-user has the choice to       ticle above that would make me appear to
select his ASP. You can only act against       be contradicting myself, but what the SPs      On the matter of the availability of fiber,
the customer in a monopoly, but not in         are doing with triple play is, in my eyes,     I admit that I’ve been spoiled, due to
a competitive environment. To enable           merchandising, and not networking.             having large enterprise coffers and clout
this will be the major task in future for                                                     behind me from some of the world’s larg-
the regulators, if the act according to the    And yes, for the time being the SPs are        est financial institutions. I’ve built routes
rules given to the by the laws (at least       delivering “content” of the second type        into suburban areas where fiber never
here in Europe with the NRF)                   I just described, but me thinks that the       existed for miles either way, and I’ve
                                               forces of natural selection are slowly         negotiated deals with city halls for fran-
Issues Affecting Triple                        working against this, where facilities-        chises to dig beneath cobblestone streets
Play Services and the
                                               based last mile providers are concerned.       where necessary. But I’ve also had cause
                                               The intermediate effects of this may be        to deal with branch locations, where
Market for Metro Fiber                         very subtle at first, with penetrations and    there wasn’t even a starting point (fiber
                                               package uptake lessened to just below          hub) anywhere in sight from whence to
Coluccio: To restate my views concern-         the levels needed to satisfy ROI expecta-      begin pulling fiber, so Fred’s point is
ing the importance of the triple play to       tions showing cash flow positives in the       well taken, even for the largest of institu-
the merging entities as the landscape          time frames promised to investors.             tions, at times.
morphs towards the edge, and the futil-
ity that I see resulting from their efforts    From that point on, the only two re-           Retzer: Is anyone else having problems
in this regard, I’ve just posted an article    courses these providers will have if they      finding folks willing to sell metro dark
to Silicon Investor from yesterday’s Wall      don’t change their expectations will be        fiber? The market seems to have shut
Street Journal that pretty much tells the      to increase their rates to subscribers, or     down here in Portland over the past year.
story the way I see it:                        to close shop. It’s THAT serious to them,      It’s surprising in that a lot of fiber was
                                               I believe, and I also believe we’ll see a      sold at auction as a result of bankrupt-
“Merger of TV and Web May Hit Cable            little of both of these outcomes before the    cies over the past few years. I suspect we
Industry Before It’s Prepared” By              final chapter is closed. Unless they inde-     have carriers sitting on a lot of unused
PETER GRANT, THE WALL STREET                   pendently or through other legal means         assets.
JOURNAL April 18, 2005; Page B1                are forced to see the light and change
http://www.siliconinvestor.com/read-           their structural relationships with others     Coluccio: What I’m seeing is a marked
msg.aspx?msgid=21243820                        in the overall value chain.                    increase in the interest of fiber compa-
                                                                                              nies to light fibers today, whereas, in the
Richard’s use of the term content, I           With regard to the WSJ article I stated:       past, they were happy enough to be able
believe, is confused with the concept          “That pretty much tells the story the way      to sell you dark alone. Some won’t overt-
of payload, wherein the very essence           I see it.” By that I meant that I agree with   ly come right out and say: “No, you can’t
of communications is fulfilled by the          the ease with which we’ll see standard-        have any more dark.” At the same time
transport of cargo bits. If the latter, then   and even newer-, more-independent TV           they spend a goodly amount of their time
I agree with what he said, but if content      content delivery moving over to a packet       selling you on lit, for now they realize,
is used in the more traditional sense that     format, and NOT that the RBOCs will            like their RBOC cousins, that once their
it is, when referring to canned goods,         necessarily come out on top as a result        markets have been saturated with their
then not.                                      simply because they are venturing there,       own dark routes they are actually cutting
                                               first, or that the Cable Operators will        themselves short, or out entirely in some
Statsny: Of course I meant what you call       eventually catch up, for that matter. The      cases, of ongoing revenue streams (or
payload. In the horizontal layered model:      diffusion that will ensue before long,         higher revenue streams).
content applications, call setup and rout-     based on customers going with new in-
ing transport access                           residence appliance choices coupled with       Stated another way, I have sensed that
                                               the availability of new content sources        some previous barons of dark fiber now
Everything above applications is content,      on the Web will render the matter moot,        fear that they will be cannibalizing them-
canned or not. People on the phone talk-       in my opinion. But most of you already         selves with each additional strand that
ing also provide content (although some        know this. ;)                                  they sell and don’t light. But in many
would not agree given the conversations                                                       large metros, especially deep within NFL

                                                                59
                       COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
and AAA city business districts, dark can      university- the University of Minnesota        spur which needs to be constructed and
still be had.                                  - (which is quite spread out, and has a lot    extended from the main route to the
                                               of fiber). It is usually cheaper to pull new   building. Sometimes this can be built and
In other instances, if the customer is too     fiber than use DWDM.                           extended from other spurs.
small to pay attention to, a dark fiber
provider might refer the customer to a re-     On the other hand, the entire US In-           Multiply this by two, often, if route
tailing CLEC, to whom the dark provider        ternet backbone traffic could probably         diversity delivered from the same fiber
wholesales. There are dark fiber com-          be squeezed into a single fiber if one         company is required. So, it’s not a cheap
panies that do this sort of thing almost       were to use the most advanced systems          undertaking by any means, even when
exclusively, pronouncing themselves as         around.                                        95% of the desired route is in place,
wholesalers only.                                                                             where cheap readily available, and ex-
                                               Coluccio: Bill’s points serve to highlight     pensive = hard to find.
In the final analysis, though, no purchase     our different market orientations. My
of dark fiber that has any level of im-        focus being enterprise and his more on         Bill, your point about the MSOs break-
portance associated with it is ever sold       the consumer, educational and research         ing out VoIP and Video on Demand and
outright without addenda clauses and           side although not exclusively, since any-      sending those over different fibers is
riders in the contract to cover outside        thing that is done to support the latter       intriguing to me. VOD in some instance
plant maintenance, sometimes managed           group can be leveraged for adjacent            can be achieved over shared IP, when it
services, and even hybrid configurations       SMBs and industrial parks, as well. Or,        is user-initiated and pulled down from a
where the customer provides equipment          at least this is how it should be.             Web site, but you’re right, VOD, when
in some locations and the fiber company                                                       supplied by most MSOs, is not, since it
in others. It’s business. As such, terms       Often a customer citing the competitive        most often rides over one of an estab-
based on even the most peculiar circum-        advantage of owning their own spurs            lished NTSC channel (which it shares
stances are often negotiated in order to       off existing carrier routes will write into    with others when digitized) defined in
meet customers’ operating needs.               their contracts that those builds are for      the operator’s spectrum plan. But voice,
                                               their exclusive use, since they’ve paid        when it is supplied by the MSO using
Retzer: This matches my experience.            for them. Maybe, but this is a very gray       PacketCable, is. But my same question
Actually, the dark fiber “sales” I’ve          area, indeed. Consider, the major work         still holds. Where does the breakout
known have been long term, typically           has already been done, once Right Of           occur? I qualified “most often” above
20 year leases for Indefeasible Rights         Way and trenching have been performed          because plans are afoot, and I hear one
of Use (IRU) where ownership remains           by the fiber company, and adding an-           MSO has already started trialing, plac-
with the seller, who is technically (at        other cable in a spare inner duct (there       ing their VoD services over broadened
least in Oregon) a CLEC and maintains          are three inner ducts placed in every 4”       IP channels,
appropriate franchise status, pays fees        duct placed, with usually a minimum
and such to the local government owning        of three or four 4” ducts placed along a       Wetzel: We face the same issue in Paris,
the right of way. If someone here wanted       route, sometimes many more) or to do a         where there are only a few people sell-
to “own” (or install their own) fiber they     surgical splice anywhere along the route       ing fibers. Furthermore as the metro
would need to become a CLEC and pay            is not a big deal.                             networks are often a mix of G655 and
the local franchise fees. That’s actually                                                     G652, CDWM often appears to be undo-
not a bad option in my opinion for some        I’m in agreement that dark is “harder”         able.
customers.                                     (depending on the definition of harder
                                               and easier, which I qualify below) to          Earlier Coluccio: Cable Operators
Bill St Arnaud: Metro fiber is getting a       find in many metros, especially out in         (MSOs) can and often do double as
lot harder to find. I am told this is driven   their fringes, and sometimes impossible        CLECs. I even have one in my area that
by the needs of the cablecos who are           in virgin situations, except where spend-      wears the hat of a state-sanctioned ILEC.
using their extra fibers to support VOIP       ing inordinately is not an issue. You’ll       I’m referring to Cablevision. Under their
and VOD (Video on Demand). Rather              recall, however, that I emphasized the         LightPath banner Cablevision doubles as
than mux this data onto their existing         relative ease of obtaining dark in deep,       an ILEC in NY and NJ, matching Veri-
fiber plant they find it cheaper to light      inner-city business districts, with greater    zon on a service-by-service basis across
up the spare fiber with inexpensive trans-     difficulty as distances from those centers     most popular offerings. But like Verizon,
ceivers                                        increased.                                     they too, will not forego the value of
                                                                                              their capacity by selling dark.
Increasingly we are looking to do over-        When client building locations are situ-
builds. This is not too expensive if you       ated outside this inner circle, the rela-      Coluccio: And yes, strands are being
can negotiate an arrangement either to do      tionship of targeted buildings to existing     sacrificed in lieu of WDM gear capex,
an overlash or use spare conduit.              overland routes must be identified, and        which I think may turn out to be a short-
                                               this usually leads to the need to per-         sighted solution, but “quarterly results
Odlyzko: That is also the practice at my       form a lateral build, or more likely, a        wait for no one” is what we’re dealing
                                                                   60
                                      The COOK Report on Internet July August 2005
with here.                                    available that was not available before.      provider? Even if the incumbents are
                                              Likewise, as the RBOC super-carriers          not compelled to restructure along ac-
When we began digging down into the           increase the amount of bandwidth avail-       counting and organizational lines, why
particulars of fiber builds and last mile     able to end users, so too will the cable      can’t they be mandated along the lines
architectures I had it in mind that doing     operators.                                    of service assurance to provide layered
so was justified in the context of the                                                      services with COMPARABLY EQUIV-
merger discussion because it was related      This is why the earlier discussions that      ALENT performance? And there I go
to what I consider to be a major part of      focused on the guarantees associated          again, wandering off into transmission
the most promising part of the super-car-     with transmission quality from incum-         matters. But seriously, I do believe
riers’ resulting assets. But I may have       bent providers, regardless of who is pro-     that it’s germane to the merger issue,
taken the matter too far, so I’d like to      viding the upper layer applications and       because, unfortunately, the new super-
refocus at this point.                        content, I deemed to be so important.         carriers’ success in the most profitable
                                                                                            part of their new makeup (the last
LECs Betting Their                            In short, and to repeat myself one more       mile) will, in large part, be dependent
Future on Bundled
                                              time, there is a need for comparably          on their frustrating end users from
                                              equivalent performance expectations           rolling their own Web-based and end-
Residential Services                          and compliance on last mile facilities        point application alternatives.
                                              transmission quality, including that of
To review what I’ve stated before, and        upstream transit to the core, being as-       Bob Frankston wrote: At the risk of
to echo in part what Tom Evslin stated,       sured to end users, regardless of what ap-    optimism -- it‚s a combination of the dif-
the RBOCs are placing all their bets          plication is being launched or by whom.       ficult of discrimination in a complex net-
on their futures of bundled services          Absent this assurance, as someone else        work and the wrath that doing anything
to residential and SMB/SME custom-            pointed out (I think it was Fred), the        too visible will elicit.
ers, since these areas represent the          incumbents will be able to stave off total
last vestiges of operations where ap-         cannibalization of their service delivery     Fred Goldstein: Discrimination in a
preciable profit margins still exist. But     aspirations a while longer, maybe a lot       complex network is not trivial; it can
unbeknownst to them, I believe (and if        longer, if things get out of hand and there   however be done if the commercial im-
they are aware of it, all I can say is that   is no means of monitoring the situation       perative is to do so. Remember that the
they’re on one hell of a denial trip), it’s   and safeguarding customer interests. Am       “Internet” exists as we know it largely
a dwindling bounty that they are seek-        I making any sense?                           because the privatized backbone quickly
ing, as newer, disruptive technologies                                                      devolved into a marketplace where no
that are under the control of end users       We’re now looking at the potential of         IBSP had Significant Market Power, so
continue to take hold and displace the        RBOCs and MSOs alike to be delivering         even if UUNET or Sprint or BBN/Genu-
vertical constructs that they are put-        terabits per second of capacity to neigh-     ity had wanted to be evil, they couldn’t
ting in place.                                borhoods and industrial parks. Through        get away with it. Once SMP exists, all
                                              extension, these can and will continue to     bets are off. This is especially so at the
In almost all of their planned offerings,     be expanded to larger commercial prop-        retail level, not the commercial level.
the RBOCs are actually implementing           erties, university campuses and munici-       Jane Consumer will, in the Powell/Gin-
many of the same technologies and mo-         pal government networks, as well.             grich “broadband” model, have roughly
dalities for sale to the public, in their                                                   two choices of provider. If both choose
quest to compete with the MSOs, that          I think that it’s safe to assume that the     to install Bytemobile-style layer filters
end users have already begun deploying        amount of “discretionary” bandwidth -         (as I’m sure RIAA/MPAA would prefer)
on their own, with VoIP and TV over IP        i.e., bandwidth that can be used by con-      to raise the garden walls, then that’s what
being the most pronounced of those at         sumers and SMEs for browsing, overlay         she’ll get.
this time.                                    voice and video, whatever - that will
                                              be let to consumers will continue to be       Frankston: Look at the reaction of a
As the state of the art of Web-based dis-     throttled down and otherwise de-priori-       small carrier’s attempt to block VoIP.
tribution techniques and its supporting       tized through de facto means so that this
middleware gains maturity, the depen-         bandwidth does not interfere or deter         Goldstein: I wouldn’t bank much on that.
dence that end users now have on the          users from using the incumbents’ own          There was no fine levied. Indeed, there
RBOCs for common overlay services             vertical services.                            couldn’t have been, because the perp,
will go away, especially as the enablers                                                    Madison River, probably did nothing
for them to do it themselves become           Whether it’s the telco or the cable           legally wrong! Of course being Madison
more widespread. And the principal en-        operator at this point, I don’t think         River, they didn’t know what they could
abler at this point is the increased level    it makes a difference. So why do we           or couldn’t do, or how to do things the
of bandwidth that the RBOC’s FTTP and         still have the distinction between com-       right way, and I suspect that they suffered
advanced VDSL offerings are making            mon carrier and information services          for their historically well-earned role as


                                                              61
                       COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
FCC whipping boy. Powell was doing             ing the case. Technically no wrongdoing         I’ll be the first to tell you that I really
his friend Citron a favor, starting a meme     is admitted, which is why it’s not a fine.      can’t tell from what you’ve stated what
that VoIP blocking by ISPs is against the      Madison River agreed not to continue to         you’re looking to achieve.
rules. It’s not -- ISPs can basically do       block Vonage for 36 months or until the
whatever they want -- but the underlying       FCC rules on it.                                It almost seems sometimes that capac-
common carriage has to be neutral, so                                                          ity analysis in optical communications
long as it exists. The RBOCs do not want       Powell and Citron rolled them like a            deserves its own language. In situations
the underlying common carriage layer           drunk in an alleyway. It’s kind of like         where the same entity is using mul-
(which provides access to competing            seeing a couple of bullies mug a drunk          tiple physical assets (strands), but never
ISPs, some of whom won’t block VoIP)           that you really don’t like. You’re not          stressing the capacity limits of any
to exist, and that’s pending at the FCC        happy that somebody got mugged, but             of them, the result can be that there’s
now. Note that most rural ILECs *do*           hey, at least it was somebody deserv-           barely any capacity left for others to
want DSL common carriage to remain             ing, and the same bullies are less likely       work with. In such situations, all of the
-- it is eligible for Universal Service sub-   to succeed in mugging someone whose             strands are spoken for, in other words.
sidies, which ISPs can’t get.                  defenses are the least bit up.                  Yet, very little capacity was actually
                                                                                               utilized, compared to the upper limit
Frankston: It will also assure with 100%       Goldstein: A utility model works -- it          of the fiber’s potential. Bill’s example
certainty bypasses by those who buy            provides steady profits. But it doesn’t         of the MSOs backhauling VoIP and
bulk capacity.                                 provide the kind of unregulated monopo-         VoD from field locations over multiple
                                               ly rents that the RBOCs dream about.            strands instead of using WDM systems
Goldstein: That’s true; the risk is largest                                                    to achieve the same end is a perfect
to the mass market, and to SMEs whose          Optical Capacity                                example of this. Where a single pair of
                                                                                               fibers might have sufficed using WDM,
locations are only accessible via ILECs.
                                               Analysis                                        maybe twenty to forty strands are being
Frankston: This is one reason I think                                                          used, instead.
                                               I’m trying to reconcile the snippets about
that the end-game will be some sort of
                                               the fiber infrastructure. While Gordon          Looking at the matter from the other
utility model -- gaming will be futile
                                               has pointed to some pricey reports [Edi-        end, some extraordinary things can
in a commodity marketplace. The carri-
                                               tor - Telegeography] I’ll settle for a          occur over a mere one or two fibers.
ers might have dreams that you should
                                               general sense of how much fiber there is        Consider, Deutsche Telekom for years
worry about but in the end they’ve got
                                               in major cities and between them. And           ran its entire European Optical Back-
empty pipes and will be filled.
                                               what percentage is lit and/or utilized to       bone over only a single strand, at first,
                                               anything near capacity. I’m interested in       until it upgraded to two fibers. AT&T’s
Coluccio: I fully agree with your stand
                                               the major fiber build outs not the cable        national network utilized less than a
that there are no binding regulations in
                                               stuff.                                          half-dozen strands between city pairs,
place to force SPs who are not filling
roles of common carriage to treat overlay                                                      where some of those were backups and
                                               I’m not sure if the carrier PONs and other      some were used for “rolling over” from
(parasitic) services equally, or to permit
                                               such efforts count but. to the extent they      one set of pairs on one SONET Mux to
those services to traverse their facilities
                                               do, what is the sense of the capacity? Be-      those of the next, while Wiltel’s Vyvx
in the first place. That said, I have to
                                               hind this is the question of what it costs to   Network utilized only one strand to
question your position that states that
                                               buy enough to do something like Google          satisfy the nation’s sportscasting needs,
“there was no fine levied... “ in the case
                                               is doing to make capacity available. I see      where terrestrial fiber was indicated.
of Madison’s blocking action against
                                               this as an arbitrage opportunity -- Google      And so it goes.
Vonage. In every account of the incident
                                               gains by the availability of what they can
that I’ve read, a statement to the contrary
                                               buy at a fixed cost.                            During the last build out some carriers
was made, stating that Madison was
slapped with a $15,000 fine. Maybe I’ve                                                        were placing far beyond the typical 72
                                               What if companies like Microsoft, Sun           and 144 strands per route. Some were
not kept up with this the way I should,
                                               and other decide to disrupt the market-         placing multiple 288-, 864- and 1152-
but was the fine rescinded, or is there
                                               place by taking this to the next level so       strand cables, sometimes pulling three
some other explanation for your taking
                                               they can have more value in their devices       of those within the same conduit, while
an opposite stand? Curious ...
                                               and services (putting aside the question        placing multiple conduits along major
                                               of whether they have the wisdom). What          corridors and rail/utility/pipeline routes,
Goldstein: No fine was levied. Instead,
                                               kind of dollars are we talking about? I         with many of those conduits being re-
Madison River entered into a Consent
                                               know this is a vague and general question       served as spares for future growth (i.e.,
Decree and made a “voluntary payment
                                               but if I intrigue the right people ...?         future cable placements inside).
to the Treasury” of $15,000. This is typi-
cally what you do when you think you’re
                                               Coluccio: Bob, you have to know that            Most of those strands still lie virgin,
guilty of something and want to put it
                                               you’ve got my interest level up, but
aside, and don’t want to continue fight-                                                                                  Cont'd p. 69
                                                                   62
                                        The COOK Report on Internet July August 2005

Can One Apply Strategy                                                  BTW, does anyone on this list have copies of the Sidgmore and
to Telecom?                                                             O’Dell presentations from conferences during the boom years? I
                                                                        would greatly appreciate copies of anything that is available, as I
                                                                        am still trying to assemble a more coherent picture of how those
COOK Report: One thought that I am having is revisiting all these
                                                                        folks managed to do so much damage.
topics from the pure telecom point of view and not much else year
after year after year grows boring and dissatisfying. I have this image
                                                                        Goldstein: Anyway, I saw this article on CNET a couple of
in my mind of telecom being chased into a cul du sac with a pack
                                                                        months back. Odlyzko and Tilly took Metcalfe’s Law seriously,
of braying wolves called “commoditization and global outsorcing”
                                                                        then came up with a more appropriate real formula, which makes
barring the only exit and behind me a rope marked “strategy” thrown
                                                                        more sense to me:
over the wall and leading who knows where? Hmmm, yet again. ;-)
                                                                      http://news.com.com/2100-1033_3-5616549.html?type=pt&part
Can one apply strategy to telecom? Is there a whole missing world out
                                                                      =inv&tag=feed&subj=news
there? Thoughts? Comments? If anyone has a comment here great. If
not, this is a topic about which I will be thinking for sure.
                                                                      Frankston: I haven’t asked Metcalfe about it directly but I’m
                                                                      sure he’d agree that it was a talking point and people who take
Tom Evslin: Am in the middle of a series of posts on my blog on
                                                                      it too literately deserve what they get. But on the other hand it’s
some of the same subjects although probably at a more elementary
                                                                      important to understand the law. Having 20 phones on a network
level. For example, explained Metcalfe’s Law today and implications
                                                                      in a house with one person is not the same as having twenty
of it for starting a communications company.
                                                                      people with twenty phones.
Goldstein: Funny you should mention it. I always thought that it was
                                                                           Odlyzko said: “The fundamental fallacy underlying Metcalfe’s
just a glib aphorism, an intentionally-exaggerated saying designed to
                                                                           (Law) is in the assumption that all connections or all groups are
emphasize a point. But such sayings took on a life of their own in the
                                                                           equally valuable,” the researchers report.
‘90s, most notably “Stluka’s postulate” (to coin a term here), that “the
Internet is doubling every 100 days.” Never true, but echoed enough
                                                                        Frankston: This is a duh moment - obviously everyone has to be
times to be believed, causing capital to be misapplied.
                                                                        a full participant for the law to work. At Vortex, Reed Hundt (in
                                                                        McKinsey mode) quoted the law but missed that point since he
Odlyzko: It was not quite “never true,” but it was not true for long.
                                                                        was talking about a broadcast model. Metcalfe was sitting near
                                                                        me and calmed me down a bit by saying that I wouldn’t be able
As the person who found Tom Stluka and persuaded him to talk to the
                                                                        to explain this to Hundt.
press (having been led to him by reports that he was the most assidu-
ous opponent of the myth at WorldCom, and having had numerous
                                                                        Odlyzko: But then Bob goes on to say that group forming á la
run-ins with his managers), I have had extensive discussions with
                                                                        David Reed produces an even faster growth in value. Well, the
him. While he does take “credit” for forecasting that bandwidth could
                                                                        point of the paper that Tilly and I wrote is to point out that if any
grow as high as 10x annually under ideal circumstances, he does not
                                                                        compact valuation measure of a full communication network is
deny that it did grow about that fast for a while. The Feb. 19, 1997
                                                                        to be used, then n*log(n) seems a very good candidate.
WorldCom press release that talked of “traffic over the backbone al-
most doubling every quarter” was probably correct. But that growth
                                                                        Frankston: Does that mean that the carriers make billion dollar
of traffic slowed down then or soon thereafter. Capacity took a while
                                                                        decision based on misunderstanding a heuristic and then treating
to catch up, and showed high growth rates even later.
                                                                        it as a law when they abuse spreadsheets? That might explain
                                                                        Excite@home and other ways in which the fools recycle billions
Stluka was the key person in the preparation of the notorious three
                                                                        into the rest of the economy!
slides in the O’Dell presentation deck at <http://stanford-online.
stanford.edu/optic/main.html> which showed the UUNET network
                                                                        David Reed: Odlyzko and Tilley’s paper is quite interesting, and
in mid-1997, mid-1998, and mid-1999. Those were apparently the
                                                                        as you can imagine, I have a reaction to it.
same slides that Sidgmore and O’Dell were showing everyplace all
the time. They showed annual growth rates of 7x to 8x. According
                                                                        The use of the term “refutation” in the title is unfortunate, in
to Tom, those slides were prepared in early 1998, and the dates were
                                                                        that it mischaracterizes their result, and frames the paper in
chosen specifically because they corresponded to high growth rates.
                                                                        the context of a debate about “accuracy” of Metcalfe’s Law
But those growth rates were still to be achieved! The 1997 data was
                                                                        (or Reed’s Law). In fact, they are building on the fundamental
correct, the 1998 figures likely came close to be achieved, but the
                                                                        idea of network externalities that Metcalfe’s Law expressed in a
1999 figures for the UUNET network were probably not reached until
                                                                        powerful way (and was by no means original with him). I have
2000 or later. Yet as late as the O’Dell presentation of May 2000, they
                                                                        to assume that they chose the hyperbolic phrasing in order to
were being presented as historical facts for mid-1999!
                                                                        grab attention, and I agree that capturing attention to the subject
                                                                        of network externalities and the value of the options to connect
One of the mysteries I have not been able to solve is how the reports
                                                                        that are created.
of astronomical rates of network growth (bogus as they were), which
is what Sidgmore and O’Dell were making most of the time, got trans-
                                                                        Odlyzko: Yes, part of it was to capture attention, but partly it
lated into reports of similarly astronomical traffic growth.

                                                                 63
                         COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
was because many people continue to cite Metcalfe’s Law as literal           Odlyzko: While it is certainly true that precise valuations are
gospel (see, for example, Rich Karlgaard’s most recent column in             impossible (especially if one looks for parsimonious descriptions,
Forbes).                                                                     such as Metcalfe’s n*n, or the n*log(n) that Tilly and I propose),
                                                                             there is some point in them, and David himself at times seemed
Reed: The point of Metcalfe’s Law was that network value is not              to be much more enthusiastic about them, as in his http://www.
merely measured in bits per second, but in the “value” of the set            contextmag.com/setFrameRedirect.asp?src=/archives/199903/
of connections you can make, which increases with the size of the            DigitalStrategy.asp
network, assuming that the network supports connections to all par-
ticipants equally. (But this is not true if there is no directory service,   Reed: The conclusion they reach, that large networks gain less
for example).                                                                than small ones from interconnection, is a bit confused. There
                                                                             are two parts of the situation - the value gained by the networks
Odlyzko: Well, yes, and that is precisely the point in proposing the         including their users, and the value that can be captured by the
n*log(n) rule.                                                               network “operators.” The assumption that O&T make is that the
                                                                             large network “owns” its customers, and thus the decision to inter-
Reed: However, the notion of utility (value) in economics is a subtle        connect is a simple two-choice decision, connect or not.
one. There is a fundamental notion that utility cannot be measured
except as a relationship with other utilities, and only when one can         Odlyzko: There is indeed a serious question of how much value a
trade one thing for another. For example, my phone connection is             service provider can extract from a network. But the main point is
worth $100 only because I cannot make one or buy one that has the            that while Metcalfe’s Law gave such rapid growth that it was easy
same capabilities for less money. The price I will pay for the phone         to believe that both service providers and users would benefit, our
and connection depends in a monotonic way on the number of people            n*log(n) grows slowly enough that it is not always clear whether
I will ever want to reach, how many times I will expect to call them,        a mutually satisfactory arrangement can be arrived at.
and the price of speaking to those people on that phone compared to
the price of speaking to those people on any other phone.                    Reed: But in fact, except when the government grants monopoly
                                                                             rights over users to the network operator, communications is
This is way too hard to calculate! It depends on my a priori expecta-        fungible. A user can connect to both, and groups of users can
tion of whom I might want to reach, how much my reaching them                organize to build an overlay network that uses each network as
will mean to me, etc. But the crucial thing Metcalfe’s Law points out        a component. This is a complicated form of “network arbitrage”
is that there is value in the *option* to connect, even if the connec-       - and has the result of transferring the returns to interconnection to
tion never happens - precisely because I can’t know who I will want          the users, leaving the operators out of the picture ALTOGETHER,
to call. Thus Metcalfe’s Law reminds us to remember that that value          as far as the net value increase created by the larger pool of op-
increases much faster than linearly.                                         tions.

But in my writings and speaking about Metcalfe’s Law and Reed’s              In the overlay case, the refusal to interconnect costs the larger
Law, I always pointed out that there was another constraint on               network more, because it sets up the overlay network to buy and
“value”. It’s the size of the users’ wallet, and the time they have          sell capacity, thus arbitraging the original networks’s value. In
available. Though each user has a different wallet size and a dif-           particular, if there are many users who have alternate ways to
ferent social propensity, the total dollars and eyeball-time they            connect to each other, the option value moves substantially to the
have probably grows only linearly in the number of users. Thus,              overlay network, thus destroying what the larger network and the
ultimately, the realizable price you can gain is constrained, and a          smaller network each created.
network competes for a fixed pie.
                                                                             The way to think about this is not by following the attractive idea
Odlyzko: Not quite. Historically, telecom has grown slightly faster          of “precise valuation” of networks in dollars. The way to under-
than the economy as a whole. Broadly construed (i.e., including snail        stand Metcalfe’s Law and Reed’s Law and other externalities
mail,...) telecom is around 4% of GDP in US now, whereas it was              such as Moore’s Law (that innovation drives the cost to replace
about 0.2% around 1850.                                                      a capital asset declines very rapidly over time and has nothing
                                                                             to do with its functional lifetime) is that competition is about
Reed: Thus, the value of connectivity options and group forming              understanding the way externalities can be manipulated by new
options is essentially context-dependent, and not amenable to the re-        competitors and that your customers will get most of the value
ductionist formulas that Odlyzko and Tilley provide. The calculation         you create, for free.
depends on both a priori models of user’s propensity to assign value
to future capabilities, and also on assumptions of the alternatives that     Andrew Odlyzko: Since Tom Evslin brought up Metcalfe’s Law
will be created to satisfy those users, and finally by users’ assump-        and Fred Goldstein then cited my paper with Tilly debunking it,
tions about the future existence and pricing of the alternatives.            let me give the URL for that paper:

This context-dependence renders the attempt to calculate value pre-          http://www.dtc.umn.edu/~odlyzko/doc/metcalfe.pdf
cisely according to mathematical models essentially futile - in large
markets, information may be shared, but there are a fundamentally            In the next revision, we will have a bit more to say about the
diverse set of knowledge states in the network about the future com-         history of this “law,” and will include the original Metcalfe slide
munications needs and capabilities.                                          from around 1980 where it was formulated (although it was only
                                                                             named Metcalfe’s Law by George Gilder in the 1990s).
                                                                       64
                                       The COOK Report on Internet July August 2005
today, due to the overbuild that took          But I’d caveat that by saying it doesn’t      Frankston: I’m asking about available
place, with the major problem being that       take many fibers to do a lot between any      strands because, as you note, it doesn’t
too many fiber companies were placing          two points in a topology, or among many       take many to do a lot. My goal is to have
too many oversized cables along the            points of connected nodes in a topology.      an impact on the marketplace. Impact
same long haul routes between the same         The catch, of course, is that at the very     here is more in the sense of putting a
city pairs, and not enough operators           least it takes as many fibers (or their de-   pulse into a system and see how it re-
were placing cables laterally across over-     rivative wavelengths) as there are points     acts.
land reaches outside the NFL cities, and       in the topology.
perhaps the next tier down. And where                                                        The strands are not available anywhere
the national fiber barons omitted pull-        I have to ask, then, what is the scope and    but they are available in key market-
ing glass as just described, the task was      geographic reach of your intentions with      places. My assumption or theory is that
left to regional companies to pick up the      respect to the number of discreet geo-        if you have “free” connectivity and the
slack. And then of course there are the        graphic node sites and their relationships    result is exciting it will give people an
regional Bells and the MSOs, although          to one another, and what type of topol-       understanding of why it is a valuable
those entities do not normally make their      ogy would your pulse net require?             utility. Of course the message is likely
glass available to anyone unless they’re                                                     to be confused and people may confuse
involved in what very often turns out to       Discussing the mere physical placements       fiber with connectivity but that’s a sec-
be secrective capacity swaps.                  and inventories of existing fibers may not    ondary issue.
                                               be as key in enumerating all of the giv-
With the above as a backdrop, perhaps          ens here, as their presence or proximity      The question then is what would it cost
you can restate what it is you’d like to       to carrier hotels and collocation centers     to introduce this disruptive pulse? The
achieve? And by all means, comments            that would facilitate the type of global      more open question is whether the idea
and corrections from other listers are         pulse dissemination that your seek, if        makes sense and how it would play out?
welcome, as well.                              I’m reading you correctly. And it’s very      But I’m trying to gauge the leverage per
                                               likely that the economics driving your        dollar to see if it’s at least arguable.
Frankston: I’m asking about available          solution may dictate looking for man-
strands because, as you (Frank Coluc-          aged wavelengths to do the job, instead       I’m confident it will happen over time
cio) note, it doesn’t take many to do a        of whole fibers, such as the strategies       but can we accelerate the process and
lot. My goal is to have an impact on the       initially taken by some of the RBOCs to       avoid more “broadcast bit” debacles and
marketplace. Impact here is more in the        span the continent prior to their recent      other efforts to preserve the Telco busi-
sense of putting a pulse into a system and     decisions to go with national IXCs.           ness model in the misguided confusion
see how it reacts. The strands are not                                                       between business and markets.
available anywhere but they are available      It was only about 18 months ago,
in key marketplaces. My assumption or          in fact, that Seidenberg of Verizon           Coluccio: What I’m hearing is your need
theory is that if you have “free” con-         stated in rather unequivocal terms at         to be close to the source of fiber facili-
nectivity and the result is exciting it will   the time that his company would not           ties. Where you would like to be is in the
give people an understanding of why it is      seek to buy an IXC to satisfy its long        center of a large carrier hotel that serves
a valuable utility. Of course the message      haul opportunities. Since wavelengths         as the nexus for 200 or more facilities-
is likely to be confused and people may        could be obtained on the relatively           based service providers.
confuse fiber with connectivity but that’s     ridiculous side of cheap, he asked,
a secondary issue.                             why bother taking on the additional           http://www.carrierhotels.com/news/
                                               baggage of a legacy long haul carrier?        September2001/60hudson.shtml
The question then is what would it cost to     And the crowd ooh-ed and aah-ed,
introduce this disruptive pulse? The more      while chanting: “He ‘gets’ it.”               Actually, somewhere in the center of
open question is whether the idea makes                                                      the country, perhaps Missouri, would
sense and how it would play out, but I’m       Costs? Those would be dependent on            be a better vantage point for you than
trying to gauge the leverage per dollar to     volume and term. Some fiber-based long        60 Hudson Street, unless you wanted an
see if it’s at least arguable.                 hauls today like L(3), Wiltel and Broad-      equal shot at Europe. ;)
                                               wing I’m sure would provide you with
I’m confident it will happen over time         some very attractive deals in order to        Carrier hotel “meet-me” rooms are the
but can we accelerate the process and          take down or offset some of their inven-      largest market places for fiber access,
avoid more “broadcast bit” debacles and        tory surpluses. But attractive doesn’t        anywhere. Since hotels are linked to
other efforts to preserve the Telco busi-      mean cheap.                                   one another via fiber, you gain access
ness model in the misguided confusion                                                        from one to another’s downstreams and
between business and markets.                  Let’s hear what Bill and maybe some of        upstreams just as you would at Layer 3
                                               the others here have to add (or, forsooth!,   through peering arrangements, giving
Coluccio: Correct, it doesn’t take many        detract) from what I’ve stated above.         you near ubiquitous reach at the optical
fibers to do a lot, often only one or two.                                                   level (with the caveat being that you
                                                                65
                        COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
must maintain signal level through am- 15mbps to the home, they are doing an charge smaller competitors to send traf-
plification periodically).                 IPTV project that seems to be just like fic to them *and* to receive traffic from
                                           the cable TV model.                        them. (This is how long distance carriers
I see a hidden metaphor in your descrip-                                              currently interconnect with all local ex-
tion, somewhere, but I have to tell you The claim is that I can’t get what I want change carriers, under the Access Charge
that I’m still pretty much as a loss when because it’s too expensive -- the carriers regime.) If the competitor refused, and
it comes to what you mean by: “Putting assume a 100:1 or such ratio of capac- went away, then the competitor would
a pulse into a system and see how it ity at the edge vs the backbone/peering have a hard time selling its barely-con-
reacts.”                                   they are paying for. I’ll put aside issues nected service. The ILEC would win by
                                           like QoS games to advantage their own default -- given the choice of a network
Frankston: For the list I realize that content. If the cost of distributing the with 1000 subscribers or 200,000,000,
when I use a word “pulse” I need to be video over the backbone were zero then which would you choose to be on? The
clear and make sure I use the right word. the economic argument would be inde- startup has no chance without compul-
I meant “impulse” in the terminology fensible and glaringly so. To make the sion. The Internet, once fully privatized,
of system functions in a mathematical point one can skim or cherry-pick mar- never had monopoly “incumbents” trying
sense. It can also be viewed as extreme ketplaces that have sufficient capacity. to leverage that monopoly. Thus there is
arbitrage.                                 I do need to be careful about what I ask free-market peering (big to big) and paid
                                           for -- if Disney does it then that sets up upstreaming (small to big). ILECs want
What would happen if some player who the wrong incentives. It has to be some- to pretend that they need only be treated
gets value from the network’s availability one who benefits from the availability of as ISPs (unregulated), but that denies the
rather than the network itself decided to symmetric capacity not just companies power of monopoly. Whether it’s Metcal-
introduce a lot of connectivity at a very looking for alternative distribution for a fe’s talking-point numbers or Odlyzko’s
low or zero cost? We can use that for a specific product.                             smaller, perhaps overly-studious rejoin-
single service like making video avail-                                               der numbers, there is certainly value to
able but the big impact comes if others Unfortunately I don’t really expect Mi- having a larger sphere of connectivity.
can benefit from its availability.         crosoft or Intel to understand this since Odlyzko’s view, however, is more in
                                           they have shown a remarkable ability keeping with the recognition that offer-
Widespread “broadband” in Korea and to get themselves co-opted. Intel dem- ing connectivity to a competitor may be
Japan should be such an impulse but I’m onstrated this with Cometa -- they were less valuable to a dominant player than
disappointed in that I haven’t seen pub- going to roll out 802.11 everywhere maintaining monopoly power.
licized “nonlinear” effects or market in- but their main concern was billing it to
novations. I hope to see something more death. The reason I’m not excited about Now let’s switch to what Bob and oth-
than just people watching soap operas on WiMAX is that it seems to be designed ers were talking about, the power of that
cell phones while commuting. That’s one to create billable paths -- am I wrong? single strand of fiber and raw connectiv-
reason for wanting such an experiment in Microsoft seems to be trying to fund ity. There are some real problems in the
the US market. -- I expect more interest Comcast and to sell to Verizon. It’s hard way of making that strand widely avail-
in trying out new ideas from hackers and to give up big bucks up front and take a able. It can be done, and should be, but
entrepreneurs and a sufficient supply of risk in hopes it would make PCs more it can’t happen easily given the current
shameless fools for those bad ideas that useful when they lust at being a televi- regulatory climate or the current tele-
accidentally work.                         sion company.                              com-industry business model.

It’s a multidimensional problem but I        Goldstein: I don’t want to get into a         Connectivity
                                                                                           Frameworks
want to try to narrow it while trying to     debate here with David Reed over Met-
not lose the essence of the general point.   calfe’s Law. I don’t see all connectiv-
I’m not too worried about the “where” at     ity as equally valuable, though -- most
                                                                                           Connectivity can come at different layers,
this point beyond having some proximate      people communicate most of the time
                                                                                           which I’ll suggested for this discussion
access to capacity somewhere. Backhaul-      within a limited community of interest.
ing to a “hotel” may double the capacity     Additional connectivity to the network        can be broken down thusly, as viewed
needed but that’s a linear factor.           adds marginal value for all users, but that   from the pipe owner’s perspective:
                                             value, to a given user, declines as their
Even though it’s not really innovative,                                                    - Content. This is the highest layer,
                                             community of interest is connected.
it would be disruptive to be able to do                                                    where the network owner actually con-
casual video from any source. Right                                                        trols end user access to content and
                                             This is quite clear in the behavior of
now the claim is that the carriers have a                                                  leverages it. Think “pay per view” or the
                                             ILECs who are compelled by law to in-
special role in bringing broadcast video     terconnect as peers with CLECs. So far        traditional CATV broadcast model. This
to a head end because it would be too ex-    as the ILECs go, peer interconnection         is what mobile operators like to do with
pensive for people to get their own video    is a regulatory compulsion that they’d        WAP (and we see how that flopped) and
feeds directly. Even if Verizon gives me     rather do away with. They would rather        still are allowed to do with their IP opera-

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                                       The COOK Report on Internet July August 2005
tions, using Layer 7 filters and the like.    Bell’s books were wildly inflated at the      metro business districts. In a number of
                                              time, causing the baseline to be too          instances where distances from hotels
- Information service provider, or ag-        high.)                                        and existing fiber routes did not yet sup-
gregator. This is where an ISP comes in,                                                    port fiber to where it was needed, I’ve
offering broad access to other providers’     So at a time when the Bells are pushing       had it built, or extended from my dark
content, but not a raw bit or even packet     the FCC and Congress to remove what           fiber carrier’s existing routes, and where
pipe. Telcos are here now via their ISP       little regulation they are still subject      circumstances indicated, directly from a
subsidiaries, and want to make this their     to (like common carriage), and they           carrier hotel.
exclusive offering by eliminating the         are trying instead to force themselves
next option down. Cable modems are            up the ladder closer to “content”, it’s       Granted, sometimes this is more costly
here.                                         pretty hard to expect them to open up         than others, a lot more costly, in fact,
                                              raw pipe. Yet due to natural monopoly         and I grant you again, that I’ve had
- Common carrier. This is what telcos         effects, it’s very hard for a third party     the benefit of serving clients with deep
are required to offer now. The pipe is lit,   to make money doing it in competition         pockets. But dark fiber is, like you and
at a given speed, but the payload of the      with them.                                    others have stated, missing or decreasing
packet (if a packetized service like Frame                                                  in availability in many locations, espe-
Relay or ATM) is entirely off limits. This    The only obvious answer that comes            cially as you leave the inner-city business
lets them extract a value-of-service pre-     to mind is structural separation. If the      district. But it is extensible to where it
mium or cannibalization-substitute tax        Bells were broken up above the pipe           is needed if the enterprise is willing and
for speed. Hence ILEC tariffs like the        layer, then alternative common carri-         able to do so.
VZ one I cited last week, where SONET         ers, information aggregators and content
prices are not based on cost but upon         providers could innovatively make use of      Fiber advances across the landscape in a
their ability to substitute for toll calls    fiber, which would be owned by a neutral      slow and inexorable manner, resultant in
and many loaded copper voice-frequency        pipe owner (LoopCo). That is likely to        what I term “fiber creep:” Where fiber
wires.                                        require some heavy-duty antitrust action      is installed it remains forever, and only
                                              though, at least for the duration of the      grows outwardly and never looks back.
- Raw pipe (fiber, copper). This is           current administration, whose “proper-        This occurs without design and usually
what a fiber “carrier’s carrier” offers,      tarian” impulse is to view unbundling         unwittingly, i.e., out of happenstance,
and also includes loop unbundling. Raw        below the content layer as needlessly         more often than not. I may build fiber
fiber availability seems to be drying up      burdensome on their campaign contribu-        to a warehouse-turned-data-center in a
in some places. Until recently (I don’t       tors.                                         district that was previously unserved by
think this is a coincidence), ILECs were                                                    dark fiber, or where only lit services
required to make “spare” fibers available     Until then, there is simply no available      from the ILEC were supported, such as
to CLECs as the Dark Fiber Loop UNE.          fiber going to end users. There’s plenty      SONET and ATM.
The FCC ended that with the Remand            now between carrier hotels, but so what?
TRO, announced in December and ef-            There is not even any common carriage         By virtue a new build, the dark fiber
fective in March, though technical still      (not counting dial-up) available where I      carrier now has a route in place that it
under appeal. Since ILECs don’t have to       live, though two cable companies do pro-      will leverage for others by following a
give dark fiber any more, their competi-      vide reasonably unfettered ISP service.       geometric progression to other previous-
tors (CAPs) have less incentive to do so.                                                   ly-unserved sites nearby, until the avail-
                                              Coluccio: Your observations, in my opin-      ability of fiber exists for many buildings
Note that as we move down that ladder,        ion, are spot on with respect to the frame-   in adjoining locales, where previously it
the value extracted by the facility owner     works of common carriers and tariffed-        did not exist at all. In some situations that
goes down, but the utility to the custom-     or even individual case basd- scenarios       I’ve been involved in this has resulted
er goes up. Innovation that Bob speaks        involving the resale of fiber facilities.     in scores of smaller enterprise locations,
up really only happens when there’s a         Provided, that is, that your conclusions      branch offices and some municipal build-
decent-sized raw pipe to work with. It        remain limited to the framework of in-        ings enjoying access to dark fiber, or to
can happen with common carriage if            cumbents and competitive carriers, as         secondary CLEC offerings, that would
the price is set at a cost-based level, vs.   noted. My experiences on the enterprise       not have existed without the catalyst of
a “value of service” level, but the cur-      side, in contrast, bring me to a different    the first build.
rent rules (again, this is about to open      set of circumstances that tell a slightly
for Comments at the FCC under the             different account.                            Even where the ILEC can satisfy “lit
pending Special Access docket) allow                                                        fiber” requirements, such as SONET
the ILECs to adjust prices within caps        I’ve been able, in almost every instance      and now LAN-type and storage network
that are based on 1993 reported costs,        where I’ve had to deploy dark fiber           services, as well, most enterprises imple-
before the Internet drastically increased     “from the carrier hotel to the enterprise     menting data centers or other mission
demand. (I say “reported costs” because       building,” to obtain it in one way or         critical locations with intense informa-
as Bruce Kushnick has pointed out, the        another, and this is especially true in       tion processing requirements will still de-

                                                              67
                       COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
mand multiple carrier sourcing, making         tory. The Massachusetts DTE functions        assumption that they would do two
the dark fiber build a prime alternative       as Verizon’s outside law firm. But true      things: 1) provide universal service, and
for consideration.                             deregulation simply lets the incumbents      2) invest in R&D to provide that service
                                               cut the links to the surviving competi-      at the most efficient possible level.
Bringing this back to the common car-          tors and rape their monopoly ratepay-
rier resale framework, also notable with       ers.                                         They did (1) but screwed around with
respect to dark providers is this: The re-                                                  the definition of (2), deferring aggres-
lationships that dark fiber builders have      Frank, I’m not sure exactly what points      sive implementations of even those in-
with CLECs are far more conducive to           you’re trying to make. The Verizon DSL       novations that were created in their own
their acquiring strands from them than         issue is complex. First, they’ve made        labs (such as the transistor, microwave,
from the ILECs. During a recent campus         it harder for CLECs to get unbundled         and fiber), and were allowed to do so
project, I had four routes built by one        loops. Line sharing is gone, which makes     without challenge until the computer
dark company. Some of the strands con-         residential price-sensitive competition      industry’s innovation rate created the
tained in those builds were eventually         difficult, especially in more rural areas.   Internet which could succeed even given
leased to an out-of-region RBOC wear-          Loop unbundling itself can Go Away           the incredible advantages of a monopoly
ing a CLEC hat, who wound up deploy-           once a house is passed by FiOS -- they       incumbent.
ing its GbE and SONET offerings over in        aren’t compelled to make the now-spare
competition with the ILEC.                     copper available, though for now they        Startups like the Internet do have a
                                               might. That leaves their DSL Special Ac-     chance to win without compulsion.
In the same campus I had three other           cess Service, and they’ve petitioned to
carriers build independent fiber routes        Do Away with that. And if they replace       Goldstein: Huh? That sentence implies
to two buildings each, totally something       your POTS line with VoIP, even modems        that “The Internet, Inc.” is a startup busi-
like sixteen street cuts and associated        may no longer work. So for the Mass          ness. But the Internet is a totally nebu-
diverse routes, in all. Since these were       Market, there is a huge crisis looming.      lous thing. It is the voluntary intercon-
considered parts of those carriers “public                                                  nection of a large number of separately
rings,” despite the fact that they were vir-   The cases you cite, where dark fiber         owned and managed packet-switched
gin builds, I was able to avoid paying for     becomes available, occur for large insti-    networks. No one network within the
them because their availability to other       tutional or enterprise users whose budget    Internet is dominant, so in every case the
customers along those routes removed           is in the six figures or higher. Sure, for   value of joining exceeds the competitive
them from the realm “private rings.” The       $100k a lateral can be strung across         loss. And -- quite critically -- end users
latter may be a handy piece of informa-        a city street (though sometimes it’s a       have to date had some degree of choice
tion to hold on to.                            lot costlier), or a pole route can be run    of which network (ISP) to purchase con-
                                               across a suburb. But what works for an       nectivity from.
Frankston: Yes -- the Regulatorium             “Enterprise” is off-limits to The Rest of
must die.                                      Us. Even a large CAP only lights a few       Reed: IBM dominated the computer in-
                                               thousand buildings. So we’re really talk-    dustry ... yet without compulsion the
Even Mike Powell agreed that we need           ing about entirely different issues.         PC hardware and software innovators
to wipe the slate clean with a simple IP                                                    entered in a set of markets that did not
model (whether or not he fully under-          I see a very real scenario in which          exist, and having taken the margins there
stands it).                                    smart American net users will become         despite IBM’s attempts, were able to
                                               like Chinese or Saudi ones, who have         slowly and inexorably kill off the main-
Goldstein: Except that it’s the other way      to resort to encryption and secret tun-      frame-centered businesses. Yes, IBM still
around. The Deregulatorium must die,           neling protocols in order to get past        exists, but as a services company, not a
or the owners of the physical facilities       content controls to secret network por-      major computing hardware or software
will move up the ladder to exclusively         tals. It won’t be done by the government     power. I will note that cablecos have
sell the Content layer, what they call         but by the “Broadband” (Ding Dong            been able to take the Internet business,
“Broadband”, like Sprint PCS’ new fea-         the Internet is Dead, chant the Bells)       and DSL Internet is essentially dead.
ture of Fox News all day every day on          providers who will sell selected Con-
your phone. Monopolies will misbehave          tent. The other 98% of the public will       Goldstein: Not exactly true -- DSL’s
if allowed. Regulation is the only way to      see Approved Content, a combination          market share is rising, though still be-
keep them in line.                             of propaganda (some masquerading as          hind cable. DSL suffers, of course, from
                                               news) and mass-market formulaic en-          loop qualification issues, as well as from
The “regulatorium” fails when it is            tertainment, appropriately DRMed.            being run by ILECs.
controlled by the industries that it regu-
lates without concern for the public           David Reed: The case of ILECs vs.            Reed: So much for a dominant set of
interest. Powell was working for the           CLECs is irrelevant to the Internet.         endpoints in the hands of the ILECs.
Bells. His chief strategist, for instance,     ILECs (when they were AT&T) were             Again, their dominance of one market
was married to BellSouth’s VP-Regula-          granted monopoly power based on the          did not give them the valuable connec-
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                                      The COOK Report on Internet July August 2005
tivity options that would cause a new         I wouldn’t go as far as saying that            at times they don’t work, and even when
customer to prefer them.                      there is a major movement behind the           they do, they’re apt to be reduced in
                                              convergence of residential networking          scope before the intentions behind their
Goldstein: Since DSL is common car-           and enterprise networking, although, to        planning are fulfilled; and
riage and cable isn’t, DSL provides the       some degree, there is.
only means for third-party ISPs to have                                                      [iii] at best their intentions are to satisfy
access to subscribers. Comcast and RCN        I would say, however, that the underly-        requirements that are very local, with no
provide their own ISP service; other          ing technologies that support residen-         one paying any attention to, or caring
ISPs Need Not Apply. I think that’s           tial networks and those of enterprises         about the needs of the greater “network”
short-sighted, but that isn’t the advice of   appear to be aligning rather quickly,          at large.
mine that they’re taking. Cable ISPs are      with the LCDs in both delivery schemes
generally providing pretty good service,      being Ethernet and IP.                         [Editor: A discussion of EvDO occurred.
modulo some serious DNS failures late-                                                       I have arbitrarily excluded it except for
ly, but there is a tendency of duopolies to   Earlier this evening I emailed an ar-          the following.]
become collusive.                             ticle URL to Gordon that I’ll share here,
                                              as well. I wrote: “I would encourage           Goldstein: A more interesting question
Odlyzko: That last point is very impor-       you to read this week’s article in Net-        is: What is the *cost* per bit of provi-
tant, especially since in the past, cable     work World that talks about the political      sioning EvDO service? Flat rate services
and the ILECs have been careful to stay       squabbles that sometimes ensue when            are popular in the marketplace, and are
out of each other’s way. They can’t do        local officials can’t agree on the next        profitable so long as the service provider
that any more, but there could be a lot of    phase of implementation of a simple wi-        wins on the averages. If most EV-DO
collusion. That’s where I see broadband       fi network.                                    subscribers have wireline access and
wireless playing a major role. Even if it                                                    only use it while out of the home or of-
does not take much of a market share, it      “Expanding city Wi-Fi net proves no day        fice, then the average usage will be low.
could help destabilize and thus discipline    at the beach” http://www.nwfusion.com/         But if people start replacing DSL with it,
the duopoly.                                  news/2005/041805widernet.html                  then usage will rise.

Coluccio: I sometimes feel like the odd       I think the point I’m making here is           Reed: Cost per bit is a meaningless eco-
man out here for precisely the reasons        obvious. The land is not inhabited with        nomic question. The marginal cost of an
you stated, Fred, given the usual context     the likes of those of us who inhabit           EvDO bit is zero today in areas where
of discussion that takes place here. Most     the COOK Report list, or NANOG or              the equipment has been deployed. The
often it is not about enterprise WAN is-      Cybertelecom. Those represent a woe-           replacement cost is zero today.
sues, focused instead on the end-to- end      ful minority against the larger popula-
principle as it relates to the individual     tion. I’m assisting several citizens in a      Goldstein: I hope you don’t expect the
user.                                         California town in evaluating several          world to go along with that equation.
                                              options for their next build out phase         That’s the extreme “short-term incre-
To view networking in an all-inclusive        after they successfully implemented a          mental cost” formula, until you hit the
manner, however, enterprises certainly        downtown mesh. Suddenly, as though             step function. EvDO networks are still in
are a major part of the “rest of us,” which   the latter accomplishment were cause for       an early stage of deployment, compared
is something that Gordon has on numer-        viewing what follows anti-climatically,        to their market potential, so the level of
ous occasions asked me to address.            because priorities appear to have shifted      utilization really does translate almost
                                              elsewhere. After reading the referenced        linearly into cost. Wireline and wireless
Broadband                                     story above from Network World about           bandwidth follow different cost mod-
Technologies Impact
                                              the town that was cited, I phoned my           els. Wireline has high fixed costs and
                                              contacts and asked if the story had actu-      miniscule usage costs. Wireless is the
Both Enterprise and                           ally been written about them, instead.         opposite.
Last Mile Networks                            No, it hadn’t, but it could just as easily
                                              have been.                                     Reed: It only becomes meaningful given
“Broadband,” whether we consider it a                                                        a whole lot of context - what economists
Trojan horse by larger carriers, or the       I’m not viewing any of this in a defeatist     call “externalities”. Unlike more well-de-
legitimate capacious pipe we all want         manner, but I bring up the issue to dem-       fined “goods” the goods sold as commu-
it to be, is now playing a crucial role in    onstrate that:                                 nications functionality must be thought
the diffusion of many larger enterprises’                                                    of in very complex ways. They are much
network flows as seen by the millions of      [i] not all grass roots initiatives are cre-   more complex than airplane seats, and
so-hos and telecommuters today using          ated equally, and very few of them, thus       the economic cost of an airplane seat
VPNs via cable modem and DSL for              far, have made it out of the gate at all;      varies depending on the analysis used by
three or four days out of the work week.                                                     three orders of magnitude.
                                              [ii] municipal launches are sporadic and

                                                               69
                       COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
Telecom historically has used “govern-         future usage is repressed, lowering its        They are entirely political statements
ment accounting” because it was regu-          FAFFG, lowering its cost, lowering its         cast in the forms of equations. They be-
lated. That accounting, by law, could          regulated price....                            come real only through quasi-religious
not consider externalities. (There is a                                                       acts of faith. Truth by loud and repeated
famous decision by Brandeis that said          FDC7 is obsolete, but telecom account-         assertion.
that telecom prices could not be based         ing is full of judgments. The current
on estimates of future costs or demand)        method for setting unbundled network           Coluccio: David, you’ve captured the
Lacking connection to reality through          element rates, TELRIC, is based on “for-       essence of “rate element” folly rather
either realistic economic models or com-       ward-looking” costs. The cost of build-        nicely. How would you suggest that one
petition, managers (Bellheads) were able       ing the network in place is not supposed       accounts for the need to recover costs
to invent a consensus reality that had no      to be counted, merely the hypothetical         for $pectrum, construction and the costs
contact with real economic realities. In       cost of rebuilding it. ILECs do not like       associated with SG&A? Are those all ex-
such fantasy worlds, there was a well-         TELRIC.                                        ternalities, too, or do they fall within the
defined “cost of provisioning per bit.”                                                       walls of a legitimate economic modeling
                                               Wireless networks are, in general, barely      calculus?
Just because you can ask: “What is the         regulated. They are of course strictly reg-
weight of a photon?” doesn’t mean it           ulated as to spectrum occupancy -- fed-        [Editor: Lengthy discussion between
exists.                                        eral law requires commercial spectrum          Bob Frankston and Fred Goldstein and
                                               to be competitively auctioned, as a form       Frank Coluccio omitted.]
Goldstein: I can’t imagine that you’ve         of tax -- but they are not price-regulated.
worked in telecom regulation over the          If there were enough vendors to create         Jim Forster: [Returning to the list after
past thirty years or so. Externalities such    a non-collusive marketplace -- the six-        an absence. ] I read some of the post-
as forecasted demand are central. To           vendor model of Hundt and Kennard,             ings and was tempted to reply but felt
be very specific, in 1977, the FCC had         for instance -- then prices would tend         I should give it some more thought and
to decide how to price-regulate AT&T           towards a Smith cost-based norm. The           care. I will say that in the recent dis-
now that leased lines were competitive,        Powell three-vendor model is giving            cussion between mostly Bob/Dave and
though switched long distance wasn’t           vendors hope of extracting at least some       Fred, I find I agree with some parts of
supposed to be (yet). Naturally, they          monopoly rents.                                what each of you are saying and disagree
feared that AT&T would shift costs to-                                                        with some other parts.
wards monopoly areas and lower com-            Reed: Your note proves my point. Thank
petitive prices. The price model selected      you.                                           So it’s interesting.
was called Fully Distributed Cost Meth-
od Seven. As with any cost model built to      Regarding “cost per bit,” you are correct,     Communications and
                                                                                              Phase Change
the 1880s Uniform System of Accounts,          there are step functions, among the many
it had a good-sized user manual (which I       problems with cost per bit. But the real
did skim through -- rather dry).               problem is deeper - it assumes a particu-
                                               lar usage model, and in the case of wire-      David Reed: I don’t think any of us has
Now what distinguished Method Seven            less, it ignores the highly variable costs     a monopoly on being right, nor do any
from the earlier Method One (five other        of matching deployment to anticipated          of us have a monopoly on being wrong.
versions were lost at sea and never heard      demand (if you assume all phones are           With Fred, I’ve been focusing on how
from again) was that it took spare capac-      in cars, you get one answer, and if you        “conventional wisdom” focused on the
ity in the network and classified it as        assume that people are so irritating as to     conflicts of the day (such as ILEC v
“Facilities Available for Future Growth”       want their EV-DO to work in elevators          CLEC around UNE-P) is founded on
(FAFFG). This was pre-optical fiber so         or the cores of skyscrapers, you get other     sand being washed away by the tide of
there wasn’t all that much. Instead of         answers).                                      technological and usage and social and
dividing the cost among the network’s                                                         application changes.
users, or (as Method One put it) allocat-      The marginal cost per bit of an installed,
ing the cost of FAFFG according to his-        unloaded system is zero, except when           I would summarize my point of view as
torical usage levels, it used a forecasted     it’s infinite (either because of saturation,   being focused on a sense that the com-
future demand for FAFFG and allocated          lack of coverage, etc). Averaging a sum        munications services are undergoing a
costs to the different rate baskets ac-        over many zeros and many infinities,           phase change - analogous to gases con-
cording to the sum of current usage plus       with arbitrary weighting of each leads to      densing into liquids or crystals. If you
forecasted FAFFG usage. Needless to            an indeterminate result - very sensitive to    focus on individual atoms, you miss the
say this left a *lot* of judgment to the       assumptions.                                   phenomenon altogether - it’s a collective
                                                                                              change.
regulators, who presumably liked it be-
cause it gave them a lot of leeway. A lot      The rest of your note, as I said, proves
                                                                                              The Internet is, above all, not a “ser-
of time was spent debating “repression”        my point. There has NEVER been any
factors -- raise the price of a service, and   scientific validation of the “models.”         vice” provided by a cable provider or

                                                                   70
                                      The COOK Report on Internet July August 2005
a Telco, but the “uber-network” that          phones that could only send sounds to          head either, in the Cisco sense. My home
enables fungibility among all possible        other phones, TV that could not be re-         turf, “competitive service providers,” is
transports. This changes the game from        corded or re-edited, first class mail that     neither Bell nor hard-core Internet. What
“What services do I offer?” to “How           could only be carried by the post office,      I do for a living, first and foremost, is
can I help move bits from here to there       etc. We can even try to pass laws that         act as a translator between Netheads and
in support of whatever big picture so-        keep certain behaviors in their “custom-       Bellheads. I mostly consult to ISPs who
cial applications the populace decides        ary roles” and keep new startups from          have become CLECs, and who are going
it wants?”                                    cherrypicking customers away from the          nuts with the cultural and, especially, the
                                              old standard ways of communicating.            linguistic difference. And so the things
The idea of “commoditization” is just         Some will even argue that the “good            that Netheads take for granted are dif-
plain wrong. That implies that there is a     old ways” of communicating were more           ficult for the telco folks I deal with, and
“standard commodity” called a packet.         humane and comfortable than the new            the things Bellheads take for granted are
But that “standard commodity” is not the      fangled ways that make executives like         difficult for the Netheads I deal with.
unit of value - the value isn’t the packet,   Seidenberg fear their own customers’ re-
but the context it supports. The packet       quests enough to treat them with extreme       The way the “regulatorium” handled this
is meaningless (and thus valueless) be-       disrespect.                                    for many years was for the Internet to be
cause it gains all of its meaning from the                                                   deemed the payload of common carri-
context, which is not in the network. The     But ultimately, the businesses that will       ers. It is verboten for a common carrier
network creates value not by “discon-         win are the ones that question the con-        to peek inside the envelope. So the two
nection” (scarcity) but by “connection”       ventional wisdom, try to get the big pic-      worlds coexisted via an RS-232 jack, or
(options to relate).                          ture, and learn to operate through the         an RJ-11, or whatever the “demarc” was.
                                              phase change.                                  The problems I’m playing Cassandra
This is a phase shift - the complexity                                                       for are those that can occur when the
of connectivity we are able to sustain        Coluccio: Thanks, David, for bringing          common carrier stops seeing ISPs as
among end-devices means that the net-         those concepts into a coherent state-          its customers and starts seeing them as
work is not separable from every prod-        ment.                                          its competitors, and tries to shut them
uct and service on the planet. I cannot                                                      down. That’s the current situation fac-
sell a product today if I don’t have a        I think that your phase change concept         ing the ISP world. They’re on the en-
web-based help desk for it. Preferably        is something the list may want to collec-      dangered species list.
one that connects to the product itself.      tively pursue. It certainly appears worthy
I cannot sell a service if it somehow         of the type of theme that Gordon’s been        Forster: I presume you mean ISP’s that
doesn’t relate to the Internet in its         seeking to exploit for his thesis. Phase       depend on telco-provided DS-x connec-
fundamental stuff (even lumber and            changes are not episodic in nature as          tivity to their customers? Yes, they’re
coal are intimately tied to the Internet      much as they are time varying and con-         highly threatened, but they are not the
through logistics today).                     tinuous, requiring one to use a camera to      only form of ISP. We have cablecos with
                                              snap a picture of what’s taking place at       HFC/DOCSIS, which are doing quite
Those who view the communications in-         any given point in time.                       well (in the US at least) and a smatter-
dustry as standing “outside” and sepa-                                                       ing of others, including WISPs and some
rate from commerce and culture are the        Bob Frankston wrote: For those on this         non-ILEC metro fiber providers. And
last to see this. (The) communications        list, and Gordon in particular, I hope         then we have the mobile operators with
(industry) is now like intercourse (trade)    belaboring these points is useful rather       EvDO type technologies.
- it’s something you do, not something        than distracting. I feel it’s more interest-
you buy. And like intercourse/trade,          ing than speaking to Netheads. I suspect       Goldstein: So 90%+ of ISPs are threat-
there are specialists for some aspects,       that Fred thinks of himself as a Nethead       ened, and customers will go from having
but everybody has to do a little bit of it,   but I’d label him a crypto-Bellhead. Is        a choice of many to having a choice of
and it all fits together into a big system.   that an insult? Unfair? My big problem is      maybe two or three. Let’s not expect too
                                              that I’m trying to summarize a decade of       much from CMRS wireless.
A universal representation of informa-        thinking about this and lots of conversa-
tion, plus the ability through cheap com-     tions, especially with David. I realize it     Forster: Well, OK we understand each
putation to transform any form of infor-      takes a long time to shift ones conceptual     other, but I don’t see having a bunch of
mation into any other form, has made          framework.                                     ISP’s that all are totally dependant on the
the boundaries go soft, so that instead                                                      same base (telco-supplied) access tech-
of a collection of individual particles (a    Goldstein: I don’t want this to go on          nology as a much better situation than
gas), communications is now everywhere        endlessly, and I think we’re nearing a         two or three suppliers competing with
entangled, like a liquid or solid.            good closure -- our goals are common           different technologies. I think that the
                                              but we differ on what is the most practi-      cablecos moved the telcos much faster
We may hark back to cameras that only         cal way to achieve them I’m definitely         than lawyers & regulators could have,
could produce slides and paper prints,        not a Bellhead -- but then I’m not a Net-      and the result was good for the public.

                                                               71
                       COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
                                              you’ve got. As long as the stuff is cheap    such as the Yankees in NYC, or Red Sox
Goldstein: IVSPs aren’t all identical.        and you have a use you have a market-        in Boston, or each year’s new rock/movie
I’m talking about the vertical ISPs, the      place dynamic. The fact that the Internet    stars, but that’s a different matter. Those
retail ones who have the customer rela-       can carry voice is a freebie. I don‚t need   outfits have far more pricing power than
tionships and purchase bandwidth from         to convince anyone it can because it just    the networks.
telcos and who purchase upstream ca-          can and it can do so for free because
pacity from IBSPs. Unless you have a          that’s just a byproduct.                     Frankston: The PSTN loses simply be-
bad one, you don’t know what the prob-                                                     cause it has one purpose and that purpose
lems can be, I suppose. But competition       Goldstein: All well and good, but it         has no value. It doesn’t matter if SS7 is a
at the IVSP layer is still, I suggest, a      presupposes the existence of an Internet     signaling system or a transport. It doesn’t
prerequisite for the edge-focused ap-         to carry the bits! And since there’s a       matter whether packets are supposed to
plications that people want. Look, for        series circuit between the end user and      work or not. They do.
contrast, at wireless, and at the recent      the rest of the world, anyone who can
Geddes interview. Sprint isn’t the only       choke off an end user from the Internet      Goldstein: Frankly I don’t see it as los-
wireless player, but they are still focused   will want to do so, if a) they think they    ing (economy of specialization some-
on premium-rating the packets, not on         can sell costlier “walled garden” content,   times trumps economy of scale) but
user applications. There isn’t enough         and b) they’re allowed to do so, and         that’s only the current situation. The
competition to prevent them. Having           c) they’re evil. Put ‘em together and it     future is fuzzy.
two vendors (cable and ILEC) doesn’t          spells “Bell.” I want to save what mar-
prevent collusion.                            ketplace dynamic exists. Bells are pan-      Frankston: If you need to invest big
                                              icking about municipal wi-fi networks        bucks in the future you want to have
Frankston: I’ll answer Fred’s previous        now, paying off the state legislators to     some guarantees. That strategy loses
question - “Why are we arguing this           ban them, as well as banning municipal       against one that is opportunistic and
anyway? What realistic, politically-sell-     fiber and coax networks. They want to        takes advantage of whatever is available
able policy do you propose? What busi-        sell their evil “broadband,” which pre-      cheaply. Yeah, that makes it hard to put
ness opportunity does it lead to? Uncle       vents you from doing what you want, in       a giga-buck in fiber. It’s a safe bet in the
Sam isn’t going to pay to turn the whole      lieu of the Internet you and I want.         sense that the commodity will be useful
country into a big Ricochet network.”                                                      but it’s hard to get a real ROI. That’s
I’m arguing about huge business op-           Forster: Both the telcos and the cable-      why I look for alternative models of
portunities that come from the fact that      cos would love have a walled garden          funding and, yeah, it means getting into
Uncle Sam doesn’t have any say here           and they certainly talk about it, but I      politically-sellable. That’s why I don’t
- where talking about a marketplace that      don’t see them getting a large premium       do it head on but look at arbitrage and
is opportunistic and aided and abetted by     for content/transactions inside their        other approaches that get us there with-
rethinking basic “facts” that turn out to     walls. The problem is that they simply       out having to convince they who cannot
be not so factual either in themselves or     don’t have a monopoly or a choke             be convinced (like the son who has not
when rethought in different contexts. I       point, and too much of our economy is        wit to ask at the Seder).
don’t need something politically-sellable     brand-based products that will seek to
-- just a process that defies attempts to     maximize their own revenue by selling        Goldstein: So we both do see the prob-
govern into backward looking metrics          through all possible channels. These         lem -- getting free-as-in-speech fiber
and precedents.                               brands may give up a couple points in        (not FiOS) to the end user is not trivial,
                                              return for some deal involving place-        because such freedom limits returns.
This doesn’t mean politics can’t be-          ment in the walled garden, but they          That’s why I favor a regulated-utility
devil us or that we shouldn’t try political   don’t have enough margin to give up          model for the raw pipe (not IP).
means but we can’t and needn’t depend         more than that, and they won’t want to
on them. This is especially true as we        offer different priced for the same prod-    Forster: Possibly nit-picking, but the
have a political regime that vets people      uct depending on whether it was ordered      opportunity, and issue, is not limited to
for loyalty rather than knowledge. It’s       from a DSL, HFC/DOCSIS, WISP, or             fiber. Hybrid Fiber-Wireless might be
essential as we opt out of a world that is    Cellular/EvDO network. So both the           very nice. And what’s the raw pipe for
moving ahead because we have achieved         consumers, the sellers, and any other        wireless? In some cases it might be sites
perfection and must protect the incum-        business will seek the best deal, routing    with poles and power that would be great
bency. It’s as if we were Britain protect-    around the choke points. I’m not say-        to regulate and run like a utility. Service
ing Watt’s steam engine against upstarts      ing it won’t happen at all; I’m saying       providers would rent space and put their
while the ingrates in the US steal the        walled garden product placement is           packet and RF on the poles.
invention and run with it.                    only worth at most a couple points and
                                              therefore not a very big deal.               A bigger problem lurking here is that reg-
The essential point of the Internet is that                                                ulating anything higher on the stack than
you find out what you can do with what        There are a few content monopolies,          utility poles, fiber conduits, and primo


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                                      The COOK Report on Internet July August 2005
wireless sites could be messy. Well, I        big telco, but it seems like a significant      [And later] Frankston: I should’ve been
guess most things in life are messy,          barrier to an overbuilder. Why not let          more precise. An ISP need not be an
but what concerns me is whether this          them sell only retail if they think that’s a    access provider. It can be just a service
viewpoint, favoring “a regulated-utility      good business model? Why do we have             provider. Email is a pretty trivial service
model for the raw pipe (not IP),” implies     to have an extra supplier in the value          but without being burdened by facilities
that access network technologies which        chain for would be overbuilders, now            we can see a growth of all sorts of new
have only IP at the packet layer would        that we have 2-3 competing players?             service companies. It’s just that they
be forbidden or deprecated. Would we be       Maybe there’s no money available for            need to have something beyond com-
required to have gratuitous extra levels,     overbuilders these days, but I did get a        modity “Internet”.
with attendant Sub-network Dependant          couple glimmerings of such in the last
Convergence Protocols. SNDCP’s aren’t         year, and I’m not really in a good posi-        For End user
                                                                                              Infrastructure -- What’s
really all that bad, and we certainly have    tion to know if they’re starting again.
lots of them (ARP is one), but do we
have to perpetuate them forever? MPLS         Goldstein: And I’m not calling for a            Meant By a Raw Pipe?
has value in some cases but let’s not         statutory monopoly. I am recognizing the
mandate it or things like it.                 natural one, but if you want to compete         Coluccio: Fred stated: “That’s why I
                                              against the utility, fine. That’s differ-       favor a regulated-utility model for the
Goldstein: You totally misinterpreted         ent from Powell’s view, that every ISP          raw pipe (not IP).”
me. There is no such thing as raw IP! It      should put up its own phone poles or
requires a physical layer and data link       trench the streets itself.                      As do I, in principle. Or do I? I guess
layer.                                                                                        it would depend on what you mean by
                                              Forster: I think we agree here, that poles      raw pipe. Some folks mean 100 Mb/s of
Forster: And I’d like a vanishingly small     and trenches should be regulated and            uncontaminated Ethernet. Others mean
data link layer to be legal and not forbid-   shared.                                         direct access to fiber. If you go with the
den.                                                                                          former, it becomes the gating factor. Why
                                              Goldstein: Yes. But given the realities         not 10Mb/s or 1 Gb/s, if it’s to be capped
Goldstein: You’re stretching my words         of poles and trenches (in most populated        anywhere? And what’s that I hear said?
mightily to think that I’d want to regulate   areas, the poles are “full”, so make-ready      We’re not going to do 10 Gb/s anytime
the data link layer! I’m merely suggest-      and pole replacement costs make over-           soon?
ing that a) there *is* a data link (or Sub-   building extremely costly. Trenching is
network) layer below IP, even if it’s as      outrageously expensive in many cities),         Goldstein: I most certainly do not mean
pathetically lame as SLIP or as baroque       I’m calling for one provider of regulated,      Ethernet. That is one particular data link
as MPLS. I’m not saying to regulate it!       shared (“carrier’s carrier” wholesale) out-     layer. It really, really sucks for isochro-
                                              side plant that rides on the poles, making      nous applications, especially under load.
Forster: I don’t see much value in the        optimal use of their one-foot “gain.”           And it’s just so 1980s! ;-) Seriously,
data link for some media, like fiber. The                                                     there are real issues in trying to deploy
media is usually deployed point-to-point      Frankston: Take handoffs -- a totally           any connectionless protocol as the sole
(excepting PON), so the IP header and         spurious idea. When you connect to a            utility. I do have a client who is plan-
any old framing is sufficient. It is true     website and then suspend and reconnect          ning to do 100 Mbps to the home, and
that some folks like to use the Ethernet      later you can continue the session as if        is having fun with his bucket truck and
header and do initial switching on it or      nothing had changed! You don’t need the         backhoe. His initial rollout is overbuild-
VLAN tags and the like and use that for       network to maintain the relationship and        ing a nasty little ILEC (Madison River)
wholesale and retail models, which is         if you don’t need it to you don’t want it       and he expects to win a majority share
OK in limited usage, but to scale it would    to. This is also true for voice – it’s just a   of the homes passed. But he’s not trying
require duplicating a lot of stuff at both    matter of algorithms that make the node         to be the sole utility, and he’s doing it on
the network and Ethernet layers. That’s       transitions seamless and I can think of         the cheap.
fine for those that want to do so, but I      lots of ways to make that happen. This
would not like to see this sort of thing      captures the governance frustration. The        Coluccio: If, on the other hand, we mean
required through regulation.                  incumbents assume they have a vital role        access to the fiber itself, there’s more to
                                              and they don’t.                                 think about than I’ve seen written any-
Goldstein: I’m merely saying that the                                                         where up until now.
raw pipe (copper or glass) should be          Goldstein: It’s what they call a Small
made available to all comers as a regu-       Matter of Programming. Handoffs (cell-          Goldstein: Yes, that’s the plan. But I also
lated wholesale utility. If you want to run   to-cell mobility) that don’t lose the voice     mean the copper. And the FCC...
DECnet or BNA or MPLS or TDM or IP            connection are difficult. Yes, there are
that’s your business.                         algorithms, but they’re not trivial to          Coluccio: Upon giving this more inspec-
                                              implement.                                      tion, especially since we now actually
Forster: That’s fine for muni fibers or                                                       have working prototypes to examine in

                                                               73
                        COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
the states - unlike Sweden, the Nether- - DS1 loops, delivered “however” it they never made real money by being
lands and other locations, where such has works                                        evil either. With AT&T and MCI being
existed for the past seven years or eight - DS3 loops, likewise (optical or electri- gobbled up (would you want your com-
years already - I ask: Do we really want cal handoff)                                  pany backbone run by SBC?!), their LD
an open model that provides end users - SONET loops (optical handoff)                  and IP backbones look suddenly very at-
with access right down to the bare fiber? - Dark fiber, by the strand                  tractive to enterprise users too. And they
Or do we mean at Layer 2 Ethernet?            - Lambda, with optical or electrical could be most successful, I suspect, by
                                              handoff                                  focusing on a “no evil” approach -- be the
Goldstein: No, end users don’t get access - BPON, with various handoffs (POTS, company that moves its customers bits
to the bare fiber. They don’t buy engines Ethernet, ATM, analog TV spectrum)           around most transparently. They’ll never
separately from cars either. Airlines do, - GPON (adding GigE+ handoff)                succeed in complex billing.
but not their passengers.                     - 100 Mbps Ethernet (electrical hand-
                                              off), delivered “however”                I wonder if Bob missed the irony of
The model I have in mind is whole-                                                     his statement that billing was their core
sale-only, a carriers’ carrier. It would And while that would be in the loop competence. Sprint was notorious, in
essentially work on a BFR (Bona Fide plant, the LoopCo would also own the the early Equal Access years, for awful
Request) and Tariff basis. It would own intra-LATA interoffice raw bandwidth, billing. Your calls might be billed a year
the outside plant, including the actual so the LEC, ISP, OVS, or other retail late, or billed wrong. It was very bad. It
telco wire center buildings. So the old service provider (its wholesale custom- took years to get straightened out -- many
ILEC would become a collocator, just er) wouldn’t need to collocate every- enterprises refused to use them precisely
like everyone else. This would turn every where. This would probably stay at because their billing was so screwed up.
central office into a carrier hotel, re- the TDM level, or maybe ATM (as an Contrast: Around 1992, a Wiltel guy told
moving the current (somewhat insane) option, not mandatory), but definitely me, grinning, that their entire billing
restrictions that limit ILEC-CO colloca- not IP as an Internet-connected service department was twelve people. Not a lot
tion to that “required for interconnec- -- that’s reserved for its customers. But it of work to bill wholesale DS3s to other
tion or for access to unbundled network might provide support for IP-based ser- carriers, which was their main business.
elements, including multiplexing but not vices. For instance, its DLCs could use Billing by the call is costly.
switching.”                                   VoIP as well as TDM. So a voice service
                                              provider might rent IP connectivity from So What Kind of Access

services it was asked for, provided that it (Megaco is especially good for this) to Does LoopCo Sell?
This “LoopCo” would provide whatever its facility to a dozen COs, and use VoIP

could recover its costs with the usual fair provide full-quality telephone service
rate of return. No price caps, either -- rate using analog gateway (IP-DLC) ports Earlier Coluccio: Let’s devote a little
of return would have to be the model, or rented from the LoopCo.                       time talking about this, because I think
something close to it, perhaps a proxy                                                 it’s important that we come to some kind
rate of return (hypothetically efficient So we could then have Bob’s Ethernet of understanding over this beyond that
cost). Enough to attract “widows and ISP and Fred’s TDM Telephone Compa- which currently exists. We can use UTO-
                                                                                       PIA as a conversation piece, or the hope-
orphans” low-risk capital, but not long- ny and Brian’s HDTV Company all take
                                                                                       fully soon to be Opportunity Iowa. How
odds venture capital.                         lambdas (or SONET VCATs, or PON
                                                                                       many different variations (brands) of
                                              slots, or whatever does the job most
                                                                                       Ethernet provision do we want on those
Now what are the actual, real-world cost-effectively) off of LoopCo fiber,
                                                                                       systems before you start to entertain who
physical possibilities? They will change selling to our respective customer bases.
                                                                                       can come in at L3, and then the content
over time. A lot of what they offer will And precisely *because* LoopCo has no
                                                                                       folks, above?
be boring, but the actual retail carriers permissible interest in classifying pack-
will be their customers, not competitors, ets, bits, or anything else, it will provide
                                                                                       More than one Ethernet provider choice?
so they will have a mutual interest in a truly unintelligent network that can
                                                                                       What happens, then, is that you wind up
maximizing the value of the plant. If it support any and all edge applications.
                                                                                       dividing your potential user population
were to happen today, we’d see, for some Including protocol stacks not yet devel-
examples:                                                                              along the lines of WorldWidePackets
                                              oped. I don’t think that’s Stupid.
                                                                                       vs. OSI vs. Allied Telysn vs. whomever.
- Dry copper loop, for plain old telephone By the way, I really enjoyed that discus- Before you know it mixing and matching
service (POTS).                                                                        upper service provisions with the raw
                                              sion of Sprint this morning. There’s a
- Voice-grade ports on Digital Loop Car- company with great assets and a failure pipe provider becomes a boolean affair.
rier (DLC), for POTS.                         of management to know how to deal
- xDSL ports (whatever is available) with them. They nixed Martin’s project It’s only been recently that this issue has
on DLC, with choice of CBR or UBR because it offered what users might have stuck its head up in my face (up until now
backhaul                                                                               I was in denial over this ;), so I’m looking
                                              wanted, and was thus not evil enough
                                                                                       for opinions and views from those on this
                                              to gouge by packet classification, yet
                                                               74
                                       The COOK Report on Internet July August 2005
list who are experts on matters like this,    I’m just looking for simplicity -- for        Goldstein: That indeed would happen
including Tom Hertz from FiberUtilities       V1.00 an RJ-45 with IP over Ethernet is       -- telcos are, in practice, downgrading
of Iowa, since he is one of the individu-     a useful start as long as it really is just   buildings. New greenfield areas have
als to whom I just referred, above.           raw IP.                                       fewer wire centers and more fiber huts.

Of course, the scenario I painted above       Goldstein: “Raw IP” is as easy to provi-      Coluccio: However, I asked a question
is based on the prospect whereby a            sion as “raw sushi”. It may look easy         concerning two fiber nets that are in the
citywide or countywide municipal fiber        to you but it’s not easy to most of the       process of being installed, and you re-
buildout is installed with the intent that    people who actually run it. Conversely,       sponded by describing what you would
multiple transport providers compete          I wouldn’t want most router gurus to be       do with fiber, copper, FTTC and legacy
with one another at Layer 2. And pos-         climbing poles, digging trenches, or wir-     line protocols and formats.
sibly Layer 3 and above, as well.             ing main distribution frames.
                                                                                            Goldstein: I guess I’m generalizing -- I
Such happens to be the case in some           Odlyzko: I agree completely. One thing        don’t think greenfield areas should be
cities overseas, and I believe that this      we should not forget is that as members       different. The FCC does -- their current
is what’s been contemplated, at least in      of this discussion group, we are not          view is that a greenfield plant installed
part, in the locales I mentioned above.       representative of the population as a         by an ILEC is subject to their total con-
It’s a common notion about open access        whole. The “walled garden” approach           trol, up through content, on grounds that
fiber networks that I’ve heard expressed      is anathema to most of us, but it is quite    the provisioning of facilities to a green-
more than once.                               appealing to many people. Note that           field is nominally competitive, so the
                                              half a dozen years ago AOL, with its          first one in wins. (In practice, it’s often
Frankston: There is indeed irony when         “walled garden,” had about half of all US     the one who gives the developer the best
a company whose sole competence is            residential accounts, in spite of charg-      bribe.) That really sucks for the residents
billing is incompetent. But then why          ing higher prices than the competition.       though.
can’t Telcos call-centers know the num-       If AOL had not gotten seduced by the
ber I’m calling from and pass the infor-      “content” deal with Time Warner, they         So for new areas, and new fiber builds,
mation around. It’s a sign of late state      might have been able to build that into       yes I think there should be a neutral car-
ossification as companies can’t even          something enduring. (In retrospect, they      rier’s carrier, a WACCO (wire and cable
keep up with their own technology.            did the right thing for their sharehold-      company) or LoopCo or whatever you
                                              ers, even if for the wrong reasons. Their     want to call it, that pulls fiber into new
I wonder why you have an entity be-           astronomical stock market valuation was       areas on behalf of any and all potential
tween me and the network? Why can’t I         not sustainable in their sphere, no matter    users, even the cable company (if they
just get my IP connectivity directly from     how well they managed their “walled           choose to use it). That way, residents
the municipality like I do water?             garden,” so grabbing the considerably         of new homes will not be prisoners of
                                              less overpriced Time Warner, they got         walled gardens.
Goldstein: If you, Bob, personally want-      their shareholders a good deal.)
ed to buy raw wholesale service, I don’t                                                    Coluccio: While I’m on that point, it’s
see why you couldn’t, but you’re not the      Coluccio: I’ve been intrigued with read-      interesting to note that most of the legacy
average consumer. The skillset needed         ing the replies from both Bob and Fred,       protocols you mentioned in your reply
to run routers is totally different from      but neither have responded to my ques-        can now be encapsulated in Gigabit
the skillset needed to run fiber. (Note       tion, which had to do with greenfield         Ethernet over fiber links - over one of
the different meanings of “run”.) I’d call    competitive optical carrier environments.     the GPON variants, today, and I presume
up the IBEW for one of them, the IEEE         Whether one likes it or not, and whether      over pt-pt EFM links in the not-too-dis-
for the other.                                one would like to re-purpose copper or        tant future. I’ll have to check on that last
                                              not, the fiber networks I referenced in       point, however, for more specifics.
The capital structure of outside plant        my opening question do exist, and those
(long life, capital-intensive) is differ-     were the only focus of my questions.          Goldstein: What is called “Gigabit
ent from the capital structure of ISPs                                                      Ethernet” is not necessarily a constant.
(short life, technology-intensive). That’s    Fred, you’ve successfully answered how        GPON can do pretty much anything,
one reason why the ILEC shareholders          you would reorient, salvage and recon-        not just connectionless flat-addressed
would benefit by a breakup along these        stitute the telcos’ outside plant and CO      frame relaying (what’s called “Ethernet”
lines.                                        assets. I’d do the same, except that I’d      nowadays). Circuit-over-packet, though,
                                              close a number of those COs-turned-           strikes me as inherently ugly and unreli-
Frankston: Electricity I buy directly but     colos, because fiber’s ability to render      able. Packet-over-SONET, however, is
because it is a strange regulatory beast, I   distances transparent obviates the need       a growing standard, and -- telco bashers
do pay for capacity at some source.           for so many of them as exist today.           notwithstanding -- becoming dirt cheap
                                                                                            to implement, because (taking Bob’s
                                                                                            point) that is just a matter of electron-

                                                               75
                         COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
ics, and there are now chips that do the management is the same just with the also does Ethernet atop it.
SONET and the Ethernet framing all on incentives aligned for connectivity and
one part. Just add protocol-agnostic SFP they are now complementary rather than Coluccio: Assume a small town that has
optics and power.                           competitive.                                been entirely overbuilt with fiber. All
                                                                                        copper feeder and distribution cables
Re: “IP Utility”. This reminds me of Coluccio: Good point, in that I omitted have been duplicated throughout the ser-
when I was a telecom manager in the stating that the end state will consist of a vice area with fiber, effectively, which
1970s, and I said I was in charge of a hybrid fiber-wireless universe. My ques- will be used to displace existing copper
company’s phones. Somebody said “but tion was more limited than that, though, pairs and the current services that they
you just plug the phone into the wall and again looking at two discreet fiber imple- support, over time. This is not a hypo-
it works, what’s so hard about that?” A mentations only.                                thetical situation. It’s one that exists in
well-run utility looks easy; a badly-run                                                a growing number of locales around
utility looks hard. This creates a para- Frankston: The problems become dra- the globe as we type, with UTOPIA in
dox where doing your job well gets less matically easier when we don’t have to the State of Utah being but one among
respect.                                    feed the billing engine nanoscraps. The them.
                                            first step is to decide what the standard
Coluccio: But again, my question wasn’t utility is and IP is a good starting point as I’ve limited the type of end point dis-
in the least concerned with existing telco long as we don’t lock it into a regulatory cussed here to residences, including
assets. From where I sit, at some point all straightjacket.                             SoHos, and the smallest of SMBs:
of those copper cables can be reclaimed
as scrap, placed on barges and shipped Coluccio: A pure transport scheme is 1. Fiber is installed and maintained by
to the Staten Island Copper Smelting Co. what facilitates raw usage measurement, LoopCo, either directly or by its desig-
Only the very shortest loops that are in as can be seen in the peering and transit nated contractors.
the best physical condition should be left areas, that is unencumbered by differenti-
in place where they can support multi- ating bit types as defined by exotic appli- 2. Ethernet is the preferred Layer 2 trans-
hundred megabit transport in the future, cation-specific switching arrangements port, although alternative L2 protocols
preferably in support of FTTP solutions á la DACS/ATM and ISDN. So yes, IP may be used at the discretion of the SP.
such as FTTC and FTTB.                      over a fluid under carriage does to a large In the absence of a standard L2 protocol
                                            extent permit all you can eat or electric for any given SP, the SP may elect to pro-
Bob, your logical description of an IP meter-like measuring of usage.                   vision an L2 solution at the time of each
utility is fine for high-level discussion                                               installation, on an individual case basis.
purposes, but you’ve not addressed how Frankston: Your comment about the IP
you would support the transport of bits utility is correct. But it’s the same prob- Goldstein: Ethernet is your preferred L2
at the physical layer. Your characteriza- lem great actors have -- you don’t know transport. A LoopCo should not dictate
tion of a utility is done with abstractions they’re acting and that’s their greatness. that, but rather offer it. My hypothetical
that are several layers removed from If you want to be appreciated you have to telco probably wouldn’t touch it for dial
the situation I described in my original make them see you sweat and fail often tone service; I want an isochronous pipe,
question.                                   enough for them to appreciate when you and Ethernet doesn’t transmit timing.
                                            don’t.                                      Data users might be perfectly happy with
Frankston: In the old days there was a                                                  it though.
big difference between copper and cable Coluccio: Sometimes when you write
and wireless and barbed wire. To me they a problem out longhand the answer be- Coluccio: 3. IP is supported over the
are just bit transports.                    comes self-evident. That’s exactly what L2 protocol in a manner determined by
                                            happened here, as seen below. I’ll enu- the SP.
Coluccio: To the extent that they all fa- merate the issues as I saw them initially,
cilitate bit transport, and we even include anyway, for discussion purposes, and to 4. Each SP owns and manages its own
fiber to your list, you’re correct. But the demonstrate where I was going, and then routing, and optionally its own ISP-,
degree of utility that each supports in you can tell me if you concur with my infrastructure(s) within LoopCo’s co-
a volumetric sense, and where each is conclusion. And then you can answer my location facility, or elsewhere, at the
optimally suited for use, differ consider- additional questions that ensued ;-)         discretion of the SP.
ably. Even if we assume that all of those
media types were equal, my focus is on Goldstein: I’ll give my views... You’re 5. Every residence has a LoopCo im-
the means by which bits were attached pretty close. However, Layers 1 and 2 are posed standard quantity of 1 (one) fiber
to those media, differentiated only by both part of the hop-by-hop domain, and delivered to it, with greater numbers
the vendor that is selected, and not the there’s no requirement that the LoopCo of fibers deliverable under customized
medium itself.                              even get involved at Layer 2. It’s op- terms.
                                            tional. BPON is Layer 1, after all (which
Frankston: The physical and logical is where raw ATM lies), though the NID Goldstein: That’s arbitrary. Drop wires

                                                               76
                                      The COOK Report on Internet July August 2005
are cheap. I suspect that the standard        gear, as well.                               work,” could be inside a common carrier
drop wire should have two or four                                                          network. Layer 3C, ““internetworking,”
strands, since the incremental cost is        Goldstein: Yep. LoopCo will provide          was by definition outside of the com-
pennies. Hooking each up would of             any SP with access to any potential          mon carrier network. Once carriers start
course have a cost, since rolling trucks      subscriber, but they don’t pull fibers for   mucking with IP, it’s definitionally bro-
costs something.                              free.                                        ken. And that can be expected to lead to
                                                                                           further intrusion upon content, which is
Coluccio: 6. Each L2 SP chooses its           Coluccio: So, the problem as I originally    what a LoopCo is there to prevent.
own [vendor/manufacturer] platform,           envisage it now seems manageable, as
and may choose to deploy either a PON         long as the potential conflicts of this      On April 28 Frankston: This is a good
or an active Pt-Pt Architecture.              type are limited to satisfying conditions    model but it’s important to distinguish
                                              where only two L2 SPs can exist. Which       between the model and the implementa-
7. Multiple L2 SPs co-exist over Loop-        raises a new question, which is: Should      tion. The beauty of getting incentives in
Co’s fiber plant in competitive modes.        the potential for this type of conflict to   line is that we don’t have to over-specify
                                              exist be mitigated entirely by having        a solution. You do that when you don’t
8. L2 SPs may support an unlimited            LoopCo, itself, assume the role of L2        trust the market and the players.
number of upper layer services that are       provisioning in addition to providing L1,
selected by their subscribers, such as        the fiber itself?                            With connectivity we have a simple mea-
Vonage, IP Video (Web TV), etc., as they                                                   sure -- bits per second with some bounds
deem appropriate.                             Goldstein: Actually, that would be bass-     on latency and jitter and not too much
                                              ackwards. The solution is for LoopCo to      congestion. Yeah -- vague but that’s OK
Goldstein: Don’t forget good old fash-        stick to as low a layer as possible, the     as long as there is a process for feedback
ioned HFC TV, non-IP, which is part           least common denominator that every-         and improvement.
of BPON (Broadband Passive Optical            one else can ride over. So staying lower
Network).                                     in L1 could make more room for diverse       Of course we don’t want to be too naïve
                                              L2 operators.                                -- the infrastructure must be “open” in
Coluccio: Assume that you’ve been                                                          the sense that one can switch contractors.
using Service Provider “A”’s 100 Mb/s         Coluccio: But think about it, while          That does make money-making more
SYMMETRIC Ethernet service for In-            considering Item #3, above. If IP is to be   problematic but it’s akin to switching
ternet access and phone service, only. SP     supported over Ethernet in the manner        garbage collection companies rather than
A uses an active point-to-point configu-      prescribed by the SP, then doesn’t this      switching CableCos. The town owns the
ration, which is contention free over the     mean that the L2 provider must also get      basic infrastructure though the utility
last mile.                                    involved, since most QoS and prioritiza-     support company would have its tools
                                              tion schemes are dictated by L2 settings     and expertise. The town would also own
One day SP “B” comes along and offers         in Ethernet, as well?                        the backbone connection.
you an ASYMMETRIC 30 Mb/s pipe
that supports a full palette of TV offer-     Goldstein: The LoopCo might need to          Of course this need not be rigid. If the
ings that they make available over a third    provide QoS options of its own, via          backbone connection is not a simple util-
wavelength in analog form, in addition to     Ethernet or ATM parameters, when it          ity there might be other kind of arrange-
the local school district’s distance learn-   provides switched services. Raw fiber,       ments. There’s a lot of room for learning.
ing programming and access to its colo-       though, leaves the QoS to the SP. When       Which is why I don’t want to over define
based storage facility, which it makes        in doubt, go down the stack, not up.         the solution.
available only on a bundled basis.
                                              Coluccio: Which points to yet another        You seem to assume that the LoopCo
Keeping in mind that network gear that        question, and that is, should the entire     provides a fiber drop? Why?
has been designed for PONs does not           network sub-stack be managed by Loop-
interwork with those designed for point-      Co, instead of limiting LoopCo to only       Also, the SP should not be the one to
to-point solutions, you must at this point    the fiber part?                              provide the IP-tone. And the upper layer
choose between two options: You can                                                        services are outside. The town should
either choose to disconnect the 100 Mb/       Goldstein: See my last sentence.             not make any arrangements for this other
s SYMMetric offering and go entirely                                                       than as a courtesy. I’d rather see what
with the 30 Mb/s ASYMMetric PON               I guess I still like how ISO 8648 put it.    you call the LoopCo be the IPCo and do
alternative, if the total number of fibers    That late 1980s International Standard,      whatever makes sense. If the neighbor-
available to you is limited to one, OR        “Internal Organization of the Network        hood has fiber then use it. If there’s a
you can request to have the second fiber      Layer,” which was written in context of      segment on copper then take the bundle
installed at the incremental cost associ-     a world of common carriers strictly sepa-    and use it as an IP medium if that makes
ated with pulling it to the home, and the     rated from “enhanced” service provid-        sense until there’s a reason to change?
having the second L2 SP install their         ers and customers. Layer 3A, ““subnet-       Got a big river, just send a beam across
                                                               77
                       COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
and don’t bury a cable. Want reliability      station, the inner linings of pipelines and   and administrative issues, only.
route at the IP layer.                        the flow controls of your water supply
                                              model, and not the water that is deliv-       I would remind everyone that the hypo-
Or maybe route at the Ethernet layer --       ered, itself. IMO, to dispel the potential    thetical overbuild that I presented for
that’s an implementation decision. The        for multiple transport SPs is to invoke a     discussion purposes would certainly be
users should just expect to get an IP ad-     monopoly situation, when both technol-        supportive of IP. Although, left to the
dress. Even though I think V6 is too little   ogy and the free market system, not to        discretion of the market and the service
too late we can assume V6 for extending       mention the differing requirements that       providers who would rent the glass from
the addressing at least at first.             users have, clearly supports a model          LoopCo, proprietary systems, even those
                                              based on diversity. Getting from here to      mimicking the telcos’ legacy constructs,
Your A/B model is problematic because         there isn’t a point-and-click matter.         could and probably would also play a
you are mixing facilities and services                                                      part, as well.
just like the good old days of Ma Bell.       My service preferences and needs may
I don’t believe that two LoopCos can          be far greater, or far different, than my     I say this because there is no easy way
exist any more than two PowerCos can          neighbor’s, based on different through-       to break with the past, and this becomes
maintain their own poles or conduits. But     put and traffic handling requirements. In     doubly obvious when one takes a closer
it makes even less sense in the case of       the ideal, we’d both have a wide-open         look at all usage domains within a com-
connectivity because of the mixing and        pipe supporting unlimited bandwidth.          munity, and not simply those of residen-
matching.                                     But in keeping within economic con-           tial end users and SoHos and telecom-
                                              straints, physical networks aren’t con-       muters. All one needs do is walk into the
One final note -- without a premium on        structed with that kind of delivery in        main telephone closet of an enterprise
scarcity those who want to run their own      mind. At least not yet, they aren’t.          and perform a line inventory and they’ll
fibers should encouraged and assisted. If                                                   know exactly what I mean. Yes, most
they want to compete with the LoopCo,         IPCo Versus LoopCo                            of those battery and ground, loop-start,
fine. But more important is to allow indi-                                                  ISDN, Frame Relay, T1 and dedicated
viduals and companies that want to move       Geddes: I’ve been watching the debate         private line circuits can be replaced by
ahead of the community to do so. Dark         unfold and have changed my mind sev-          IP alternatives, and probably fit nicely at
fiber which makes this easier shouldn’t       eral times. Some persuasive rhetoric and      some point under the umbrella of EFM
be a requirement for the reasons stated       logic for this easily muddled mind.           (Ethernet in the first mile) GbE.
above but some communities may choose
to have that as a distinct option.            To help me understand the differences         However, the governance and architec-
                                              and advantages of each approach, I’d like     tural oversight of the condo build that
Coluccio: Forgive me, Bob, I became           answers to the following:                     we’ve been calling LoopCo - and now
carried away with my service delivery                                                       added to by Martin with IPCo - doesn’t
scenarios and took a couple of short cuts.    IPCo questions: What are the fore-            extend into decisions affecting private
And I know that it may appear that I’m        gone opportunities of moving up to            networks and their owners, where much
just being argumentative, but I’m not.        IP? What if I want switched light-            of what the latter are using still works, is
Trust me. ;)                                  paths to send quantum-encrypted               still depreciating, and due to the preced-
                                              photons? (http://news.bbc.co.uk/1/hi/         ing two reasons, remains a low prior-
The first SP that I referred to does no       sci/tech/4496893.stm)                         ity for businesses, except where marked
more than facilitate the transport of bits.                                                 competitive advantages are at stake.
In truncating what I wanted to say about      Coluccio: Martin, I hardly think your
the second scenario, for brevity, I erred     mind is muddled ;) The discussion of          And then there is e911, power company
by lumping in the content delivery with       the past several days has been one of an      telemetry lines, burglar and fire alarm
that of the transporter.                      exploratory nature on my part, and not        circuits, loop-current circuits of many
                                              a prescription for moving forward with        types, not to mention the millions of ana-
If I had used a longer explanation than       anything resembling a real network.           log lines still feeding PBXs, with most of
I did, I would have stated that a content                                                   the foregoing still dependent on twisted
supplier or aggregator came along and         My main question centered on, for lack        pair circuit properties that are offered
offered those services, instead. And those    of a better term, a community fiber           today only by the local telcos.
services, based on the SP B’s PON’s           optic condominium network, or simply a
availability of an analog channel for         “condo” build, and how many compet-           So, contrary to the notion that LoopCo
video, were better suited to SP B’s net-      ing service providers at various levels of    would be pitted against IPCo, if that
work than they were to SP A’s.                the stack it could support. I didn’t even     is the inference anyone has picked up,
                                              touch on any of the economic implica-         I note that LoopCo’s overall makeup
In the horizontal model that I attempted      tions of a multiple-provider environ-         treats IPCo’s needs as inclusive, and not
to describe, the L2 SPs don’t provide         ment, since my focus was on the logistic      antithetical to its mission. I’d also remind
content, per se. They are the pumping                                                       everyone that nowhere in this discussion

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                                     The COOK Report on Internet July August 2005
were architectural principles proposed       - What if your IPCo just isn’t delivering     ment are heightened considerably, in
except to suggest a couple of high-level     the bandwidth I need -- not locally, but      my opinion. Likewise, if only a single
design templates for the transport needs     with my upstream international partners?      ISP were permitted to operate, then the
of the local community.                      What do I do then? (Example: Hong             same would hold true. I stated the latter
                                             Kong, very fast on-net, merely fast off-      concerning the ISP for completeness, de-
With that prologue behind me, I’d like to    net).                                         spite my feeling that it would be a highly
address some of your questions concern-                                                    unlikely occurrence.
ing both IPCo and LoopCo. I just want to     - What if IPCo has great local coverage,
state that despite my not painting an eco-   but nothing else. On the other hand,          Geddes: - Do you agree you’ve got to
nomic blueprint for LoopCo to follow,        hypothetical Nozirev Inc. has this great      make your case that IP is the *lowest*
much less prescribe that LoopCo would        nationwide wireless network I want to         possible layer the utility can run at, not
meet all of the attributes that you’ve       use, and they’re bundling in DSL for just     the highest?
ascribe to it in your series of questions,   a few bucks more. Why would I bother
I’ll answer your questions for the sake of   buying from IPCo?                             Questions for both IPCo and LoopCo:
discussion as though I actually did. ;)                                                    Are LoopCo and IPCo mutually ex-
                                             - In the UK we used to have state-owned       clusive?
Geddes: IPCo questions: What are             gas and electricity provision. In most
the foregone opportunities of moving         places these are now not only private, but    Coluccio: If we come to terms that
up to IP? What if I want switched            the market is forcibly divided into layers:   LoopCo is merely a sheet of glass, then
lightpaths to send quantum-encrypted         unregulated retail, regulated distribution/   no. It’s agnostic.
photons? (http://news.bbc.co.uk/1/hi/        wholesale and semi-regulated “source”
sci/tech/4496893.stm)                        (i.e. power generation, gas extraction,       Geddes: Why can’t a muni create both,
                                             LPG transport). What dissatisfaction          with IPCo just being a lower bound on
Coluccio: That’s a spot on question, and     drove people away from monopoly ver-          price and service for pure Internet ac-
one that occurred to me about midway         tical integration of utilities?               cess?
through this discussion, not to mention
many times before, as well. The idea of      Coluccio: While the questions you asked       Coluccio: One can’t generalize about
returning to a switched optical path/link    are timely, and coincidentally along the      municipal networks as easily as that.
paradigm is nothing new. It is being         same lines that I’ve asked about the          Some muni nets that exist today are en-
employed already, in fact, although not      current proposal before Congress in the       tirely HFC-based and they presently treat
by using Toshiba’s quantum encryption        U.S. to privatize certain aspects of what     IP as an also carry. Some are wireless,
techniques, but through the use of IP        the National Weather Service does, I          where IP is the favored regime. Fewer
(and other protocols) over lambda tech-      don’t see where anyone has actually           still are popping up that are fiber based,
niques.                                      proposed an IP monopoly, per se. Are          and those are the ones I’ve been ques-
                                             you referring, instead, to the apparent       tioning here, since it wasn’t adequately
Where individual end users are con-          hegemony that IP has achieved as a            defined in these terms yet. In principle,
cerned, like you sending a file to me,       protocol of choice? If anything, one          however, where I was going with it was
such an approach doesn’t really scale        probably couldn’t find a more decentral-      to be supportive of whatever a qualified
very well beyond the smallest of in-         ized, diffuse model of ownership than         service provider could market and sell to
tramural environments - yet. But it is       those who run IP networks for a living.       a waiting community of subscribers. But
being done as we speak in backbone net-      If your question concerning IP being          this is a marketplace consideration, and
works, both in the Internet’s core and in    (paraphrasing) “the lowest possible layer     not something that hinges on technology
collapsed campus and riser backbones,        that a network must run at” means it’s        alone. Conceivably a transport provider
through the use of IP over lambda tech-      the least common denominator, then I’d        would make it possible for end users,
niques. And as we’ve seen happen time        answer that it increasingly is. Save for      themselves, to pick and choose what
and again, technologies that cut their       the hold-outs I began to list above. Yes.     suits their need. Such was the potential
teeth in the center often find their way     It’s fast becoming the LCD. If you meant      I described offered by SP B, and even
over time out to the edge.                   something else, please elaborate.             there we’re still only referring to satisfy-
                                                                                           ing residential requirements.
Geddes: What if I want to check the          Geddes: What innovative care, bundling,
freshness of the food in my fridge by        pricing, distribution, technology, loyalty    Geddes: Since you’re cleaving the stack
sending InstaSequencedTM genome              or other approaches are we foreclosing        below the application layer (ostensibly
samples of my chicken dinner across          by having a monopoly IP supplier?             a Good Thing), how will you allocate
the Net for evaluation, and CPU-inten-                                                     network costs? What if LoopCo or IPCo
sive slow old gigabit IP from IPCo just      Coluccio: I believe I broached this point     costs a mean of $20 a month to deliver,
doesn’t hack it? Or I just want IPv6 and     yesterday. If LoopCo supports a single        but the value people get from it var-
you’re only offering IPv4?                   transport provider, the odds for ending       ies well on either side of that amount?
                                             up with a stagnant network environ-           Will you engage in some form of price
                                                              79
                       COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
discrimination to make partial service                                                       have to break here with answering your
available to low-end subscribers? How?        - You propose that there will be multiple      assumptions on the basis of your inter-
Would a market approach to conduit or         competing private IP and content com-          pretations of what has been stated earlier,
connectivity better align payment and         panies. How do you know that a level           and make a few points that we never got
value received?                               playing field will be preserved?               to discuss.

Coluccio: Great questions. I’d begin by       Coluccio: At the physical level, I don’t       To reiterate, the assignment of the name
asking who are the parties affected by the    know that this could be achieved, and that     LoopCo in the earlier part of this discus-
building out of LoopCo?                       was at the heart of my question concern-       sion was done for convenience, in order
                                              ing how many SPs a LoopCo could actu-          to address a limited part of what might
- The End User as a citizen                   ally support, given the different types of     eventually become a community network
- The End User as a business                  delivery vehicles that might be used over      fabric. LoopCo, in itself, did not repre-
- The LoopCo itself                           a limited number of fibers per home. My        sent the final word, much like IP doesn’t
- The Service Providers and Vendors           take is that there is room for a relatively    represent a final word. On the wireless
- The Community                               low number of L2/3 providers at the            point that you brought up:
- The Local Government                        physical switch and router levels. At the
- External Entities                           application level, however, the number         One benefit that I personally see in ex-
                                              of Web-based providers would naturally         tending fiber ubiquitously throughout a
While it’s a simple task to amortize the      be limitless, barring any shenanigans or       service area is its ability to support very-
cost of the build across the total number     foul play (or cognitive decision to assert     high-speed wireless extensions used for
of end points that are served, how does       some right of ownership) at the central        both fixed and mobile access purposes.
the resulting number play against the         office or head end (renamed: colo).            Such a hybrid fiber-wireless (HFW) ar-
actual value that the network delivers to                                                    chitecture has yet to be outlined under
each of the parties listed above? What        Geddes: To what extent are you just            the guide lines of a single architectural
I’m getting at, of course, are the eco-       providing subsidy to existing cable and        statement, to the best of my knowledge,
nomic and social benefits that the com-       telcos by moving capital risk of new ac-       except where separate businesses are at
munity receives from being brought into       cess networks off their balance sheets?        play, as within an ILEC that maintains
the 21st Century as a result of the build,    Will their existing customer relationships     two separate universes through its ser-
despite the intangible, or at best, dif-      and customer inertia mean they just get a      vice gateways: Wireless Cellular and
ficult-to-estimate, value of the benefits     free ride?                                     Wireline POTS. But it’s something I
received. The answer to your question, I                                                     strongly believe needs to be achieved.
suspect, lies in politics more heavily than   Coluccio: Since the incumbents’ net-
in economics, and I’m all ears to anyone      works are not only vertically integrated,      Frankston: OK, I can’t resist but will
who has thoughts on this topic they wish      but done so in such a way that they are        try to be brief. Well that was plan A but
to share.                                     not commutable without some pain onto          as I went through the questions (even if
                                              open access systems, I don’t see them          a bit out of order) I just went with the
Geddes: How will your municipal net-          leveraging LoopCo without undergoing           flow because they are wonderfully easy
work avoid “political capture,” with con-     some triage on their interfaces, first. Even   to answer in my model. Of course others’
nectivity being dished out on a preferen-     if they were to leverage LoopCo’s assets,      realities may differ but my point is that
tial basis to those who vote the “right”      however, as tenant providers they’d still      with the right model things can become
way? Or connectivity punishment to            pay rent to LoopCo for under-carriage.         simple. Just ask Copernicus.
those who express dissent?                    This is not an issue of concern, but of
                                              opportunity.                                   I hope others answer in terms of their
Coluccio: The type of discrimination                                                         models. Again, I assure you, I do know
you ask about is unlikely to occur along      Geddes: What incentives will drive the         how hard it is getting from there to here.
political lines, although I see it happen-    choice of access technology? If “cost          Comparing how to answer the questions
ing already along the lines of modality       plus,” might we get fiber where wireless       in each model might help understand
one chooses. Such as, where one elects to     would have done just fine?                     the cost/benefit of incrementalism vs
use an overlay service such as Vonage in-                                                    realignment.
stead of going with the proprietary voice     Coluccio: To the first part of your ques-
offering of the dominant provider (Pack-      tion, capacity will drive the choice of        The essential point is that I’m talking
etCable alternatives over HFC, or ATM-        access technology the end user will elect.     about aligning incentives in a market-
based offerings over APON/BPON). (If          If you meant on the part of the service        place. The gas example is telling - the
anyone else here has experienced or           provider, it will depend on their reading      marketplace was architected in layers.
witnessed the type of discrimination that     the market accurately, deciding where          That allowed real competition as op-
Martin’s alluded to, please speak up.)        opportunities exist, with each access al-      posed to the trick of creating false dif-
                                              ternative contributing to what will ap-        ferentiation. The layers allowed remixing
Geddes: Questions for LoopCo:                 proximate a state of equilibrium. But I        at each boundary. The key difference is
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                                       The COOK Report on Internet July August 2005
that if the fuel is delivered in trucks or     Frankston: If I seem indifferent to PONs      The Proper Place for
                                                                                             IP and How to Create
tankers then that is a unit of competition.    vs Cable vs Copper it’s simply because
It’s harder to compete by building mul-        they don’t really matter for the dynamics
tiple roads, pipelines or electric grids.      of the marketplace any more than wheth-       LoopCo
Garbage collection is an interesting ex-       er your fire engines are red or lime.
ample - in the US commercial collection                                                      Editor’s Note: On Sunday May 1, Fred
is competitive but in the larger cities it’s   Coluccio: Do you mean this literally?         Goldstein and Bob Frankston shared
a common municipal service. One can            The reason why one part of your state-        with me the following off-list exchange:
think about why but that’s getting into        ment might have been partially correct
too much detail.                               up until recently is because end-users        Frankston: Once again I have a long set
                                               have not been permitted to exploit their      of comments that allow me to summarize
Having an IPco shouldn’t preclude people       connections in the upstream direction         the point.
building their own. We used to have the        here in the states, as they have else-
idea that it was bad to compete against        where, so they don’t know yet what            I think we agree that the big problems are
the US Post Office. If you put a letter in a   they’re missing. For example, in some         the Regulatorium and Tellywood. There
UPS (vs USPS) box you were supposed            Scandinavian cities where symmetric 10        is enough physical capacity even if the
to put a stamp on it. But that was just a      or 100 Mb/s transport services have           equipment isn’t “provisioned” for it.
hidden tax to subsidize the post office.       been available for the past several years,    There’s sufficient connectivity in enough
An honest approach is to just fund it di-      operators have begun reporting heavier        places to put an end to arguments against
rectly if that’s considered important. The     upstream usage than downstream, IN            doing anything - we just need to shift to
danger is in funding the utility with such     PART due to the propensity of smaller         utility funding to get past the last hurdle.
hidden taxes. We must be explicit about        shops - e.g., ~ 25-person offices - creat-    If Tellywood wants to go direct that will
not falling into the canards about how         ing virtual enterprises. In so doing they     happen even faster than defeating the
difficult it is to share the rights of way     have set up web servers in residential        broadcast bit and even before people are
- that’s just self-serving lies by the car-    and SOHO locations, something that            sent to jail for defying the DMCA by
riers that purposefully and willfully keep     DSL speeds and CM upstreams would be          whistling happy birthday in public.
bad records and make up stories. I’m not       hard pressed to support, due to their pal-
speculating - just reporting.                  try upstream capacities. Those virtual of-    There will be lots of teething problems
                                               ficers also perform daily network-based       but nothing insurmountable.
So if you can’t get the gigabit you need       backups to on-net (on-last mile net, i.e.,)
then you can hope that everyone agrees         disc storage locations.                       There isn’t a transition - just a problem
that it is important or else you should                                                      with what to do with a used Telco and
be able to do it yourself with your own        It absolutely does matter what kind of        whether to jail the execs or pay them
fiber or wireless approaches. But that’s       under carriage one uses and how it is         off.
no different from needing the electricity      provisioned for bandwidth. Try sharing
for the aluminum smelting plant in your        your cable connection, as you suggested,      Goldstein: I agree on the bulk of it, just
basement or having to dispose of your          with three or seven other users, and          not on how to get there. Bankruptcy
old house that’s lying around after you        watch what happens when several of            doesn’t fix things. When an asset owner
built the new one or maybe driving your        them are talking simultaneously using         (think “MCI”) goes broke, it doesn’t
Hummer XXX with its 10 meter wheel             Skype or Vonage, or whatever, never           shut down, or revert to its customers, or
base. I would argue that an IPCo has the       mind video conferencing. In my home           revert to the government. It reverts to its
least stake in a particular infrastructure.    up to four connections could be going         debtholders, who seek to milk the maxi-
                                               at the same time. Multiply your four or       mum value from the asset. Thus it gets
If you want to run IPV6 - well, that’s a       eight coaxial shared connections by four      reconstituted as a bankruptcy asset com-
good example because I’ve written about        in-home users and you have the potential      pany, under nominally new ownership,
this. This is not an IPCo issue - you can      for anywhere from four to 32 users vying      though sometimes the management stays
just run it at the edge and tunnel across      for the same upstream. Even without           in place. (This isn’t always a bad thing --
IPv4 right now. The question is why            sending files while speaking, the differ-     CLECs have had to use creative Chapter
more people don’t. For the most part we        ence in Skype performance will be high-       11s in order to stave off Bells and their
are waiting until Microsoft learns how to      ly noticeable, where it doesn’t become so     fraudulent billing claims.) Even if the
build software that “just works”. But you      distracting as to become intolerable.         manager is jailed (think “Ebbers”, prob-
can do it now in XP, Unix or whatever if                                                     ably), the tune usually doesn’t change
you want to.                                   Unless the service company upgrades its       much. By the way, when I’m asked by
                                               facilities to the next notch up in speed,     the press for investment advice -- not my
[Editor: For the sake of brevity I have        over time such sharing arrangements will      real forte -- I suggest looking for bottom
made some arbitrary excisions in Bob’s         only get worse.                               feeders and bankruptcy asset players,
arguments.]                                                                                  who survived the Meltdown and got
                                                                                             the bargains. Not that it always works

                                                                81
                       COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
-- Level3 is still risky, for instance, and    could provide multiplexing (DSLAM,           they wouldn’t be saddled with the debt.
IDT still managed to lose on Winstar,          SONET, WDM, DLC, PON, etc.) but              Cingular and VZW would stay with the
after calling it a bigger bargain than $24     not switching (IP, PSTN, SS7) or any-        ServiceCos, perhaps minus some debt.
for Manhattan -- but they have a better        thing above that. This way, existing         Yes, a gift, but worthwhile to Make the
chance than their predecessors.                ISPs could continue to provide IP con-       Deal. If Wall St. thinks that VZ and
                                               nectivity, and they’d be guaranteed the      SBC are in any risk of Chapter 11, they’d
So how to get there?                           bottleneck facility that the Trinko case     demand action. Too much equity is on
                                               says just might not be covered under         the line.
Frankston: The magic of IP is that one         antitrust at all.
size does fit and none at the same time. I                                                  Or it (LoopCo) could be ordered by regu-
know how terribly bad the current Inter-       COOK Report: Now this is beginning to        lators, as the Pennsylvania PUC *almost*
net is and if I didn’t have to tell you how    make sense to me. But who is going to        did a couple of years ago. It would not
great it is, I could get on to tell you what   be the king that waves the magic wand        be confiscation; the shareholders would
an utter disaster it is.                       to create this?                              simply hold pieces of two companies in-
                                                                                            stead of one. As happened in Divestiture
The key point, above all, is understanding     Divestiture One                              I, when shareholders who did nothing
how IP connectivity is indeed the univer-                                                   ended up with eight stocks.
sal fuel and solvent. If you have enough       Goldstein: Always a good question.
of it that is, and enough is enough, to                                                     Earlier Goldstein: If there were multiple
solve, to provide opportunity, and the         How did Divestiture I happen? Antitrust,     ISPs offering service to the same people,
more use there is there more supply there      but also a desire to make more money.        wouldn’t they want to do a good job?
is. It’s not supply vs demand but supply       AT&T felt shackled under the 1956 FJ,        It’s not cozy when it’s a multi-player
and demand in tandem.                          so swapped it for MFJ so that they could     market. And frankly if you are right and
                                               get into the computer biz. Of course         IP (or some variant or successor thereto)
Goldstein: And that’s where it comes           had this White House and FCC been in         does become the Universal Solvent, then
together. IP is *inter*network protocol.       charge, AT&T might have been allowed         they’ll be able to provide it, and the “util-
It is designed for multiple providers. You     everything they wanted with no changes,      ity” won’t have to justify a rate increase
posit a single IP “utility.” That is really    and no competitors. A lot of interesting     to state PUCs who want to keep the rate
the only issue where I think your sug-         stuff went into Divestiture, including       down so granny can have her phone.
gestion can’t work. The power to switch        bills in Congress calling for it. (This is
is the power to discriminate. Only a           what Chapter 3 of my book Meltdown           You don’t really want the city and town
competitive market can eliminate that.         is about.) Rep. Tim Wirth, then chair-       governments to be the sole providers,
Otherwise, we get right back where we          man of the House committee, had filed        do you? Municipal ownership is no
started from in, say, 1960, with one Bell      a bill in 1980 or so calling for the BOCs    panacea.
System Utility. The Bells themselves are       to be spun off. Reagan’s DoJ didn’t call
starting to get the idea that IP is worth      off Carter’s antitrust suit as AT&T had      Frankston: Perhaps the hardest meme to
something. They would love to “be”             hoped, so they made their deal. Remem-       get past is the presumption of scarcity. It
the sole utility, and are trying hard to       ber that the original suit was to spin off   seems almost as if it is genetic. Think of
achieve that -- see 04-405, for instance.      Western Electric, not the RBOCs.             how much policy is based on the assump-
Of course as the sole utility, they would                                                   tion that we have a scarcity of IP address-
want to be treated as ISPs, not as carri-      Only private antitrust exists now, with      es. It’s an engineering issue - the scarcity
ers, and not subject to the kind of *strict    fairly hostile courts -- the George Mason    is not due to a shortage of industry.
regulation* (performance metrics, non-         School of Law view which holds much
discrimination) that your model posits.        sway in DC now is that antitrust law is      Goldstein: Yes and no. It depends on
But there are utility regulators now (the      always bad; monopolies are simply part       the financial model. Let’s look at the
NYPSC comes to mind) who have called           of business. Since the Sherman Act is        real world.
for the Bells to become regulated-mo-          still on the books, private suits can be
nopoly ISPs. (Not to put the cablecos          brought without DoJ involvement.             Today, the ILECs provide intra-LATA
out of business; they’d be the duopoly                                                      connectivity under outrageous Special
giving the Bells cover. But duopolies          More interesting is getting Wall Street      Access tariffs. Competition is legal but
tend towards coziness.)                        memetically onto the bandwagon. If           doesn’t exist in small markets. I have
                                               they saw that the RBOCs were worth           a client who is the local ISP in a small
I suggest that the utility boundary be         more split up than intact, they’d demand     town (pop. 8000) that’s about 30 miles
drawn *below* “switching.” Thus                it. Their incentive is the debt structure.   from the Verizon tandem for the LATA.
there would be a regulated utility that        A LoopCo can absorb debt more com-           It’s a small LATA and there’s probably
provided both first-mile (loop) and            fortably than a competitive ServiceCo        only one or two fiber providers going
middle-mile connectivity, with regulated       can. Since Ed and Ivan claim they want       there, AT&T and maybe MCI or Sprint,
performance at a regulated price. They         to “compete,” this would let them, and       but in places like that, the others often
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                                       The COOK Report on Internet July August 2005
rent from AT&T. Now AT&T does have             Goldstein: What’s documentable is the        or capacity-based charging. There is
the fiber there but that’s Scarcity, so they   history of bankrupt companies. It’s          some move towards the latter, even in the
charge a lot for bandwidth on it. And          also public that Carlisle is buying VZ’s     PSTN world, btw.
then Verizon has the fiber to Small Town       Hawaiian Telephone, and that Goldman
USA but they charge a huge amount for          Sachs is a major owner of Madison            Frankston: But why are there those fast
its use. By the way this is a common           River, having assembled it out of a few      lines anyway? Because of unmeasured
issue in rural America, where the LATAs        smaller ILECs. The ILECs have big            service which gave us a taste of the In-
keep the LECs from providing access to         friends on The Street. Listen to that        ternet in the US. In the mid 90’s Cable-
the preposterously-glutted national back-      press favorite, Scott Cleland of Precur-     Cos found that they could make big
bone networks. (Not that the LECs want         sor Group, who can always be counted         bucks on this Internet stuff, so why not.
to do it at a reasonable price.)               on for a good word for his buddies the       The Telcos were already repurposing the
                                               Bells. Everybody else in telecom is, to      failed DSL connections as ISDN V2 --
If we did away with the current stupid         him, a jerk.                                 corporate nternet connections for home
Price Cap system, and viewed connectiv-                                                     workers using VPNs and PPoE. The
ity (not switching) as a Utility, then the     Frankston: While the capacity may not        CableCos saw a chance to make a lot of
cost of the connection would not have to       be truly infinite those who make the as-     money on that Internet stuff because the
be based so much on a bandwidth model          sumption win. This may seem immoral.         Cable business was very competitive.
-- it’s there, and if it’s used for a few      It’s as if the fabled grasshopper who        Remember that Newton was a beta for
OC-48s rather than a few DS1s, they get        frolicked through winter wins because        Continental Cablevision or whatever it
the same revenue. This is hard to do in        those industrious ants are so fat and        was back then.
practice but could be achieved more eas-       delicious. When I wrote VisiCalc people
ily under Rate of Return. With Rate of         were shocked that I could write tight        Goldstein: Actually, Newton came after
Return, the revenue would be held fairly       code because that’s like real work and       Arlington. I was living in Arlington
steady and divided by demand, so the           why bother unless one has an extreme         in 1994 when I rejoined BBN, and our
unit price would fall with demand.             situation like I faced on the Apple ][. I    department was actually managing some
                                               even wrote in assembly language!             of Continental’s beta. We had a cable
Price caps, you see, are a mechanism                                                        modem lab on site. Continental was way
for institutionalized scarcity. ILECs are      If I place a long distance call and leave    ahead of the crowd. They upgraded Ar-
allowed to maintain 1993 rate levels,          the phone off-hook all day I’m consum-       lington to HFC when I was living there,
minus an “X-factor” (a few percent a           ing resources and running up a bill. At      and then upgraded Newton when I was
year) for “productivity” (skimping on          least on the PSTN. If I do the same thing    living here. And just in case I missed
labor). As demand grows, so does rev-          over the Internet I’m consuming abso-        it, one summer a few years later I was
enue and profit. So they’re charging           lutely no resources. The network doesn’t     renting a house for a week in Dennis on
pre-Internet prices for a commodity, de-       even know that the call exists.              Cape Cod and the MediaOne truck rolled
mand for which has gone up about 100                                                        by. The cable TV, which had about three
fold since the Internet went public. The       Goldstein: Well, that’s only true if you     good channels and a few channels of
numbers are scandalous. Even the DC            put silence on the line and use speech in-   snowy reception, went dead. When we
Circuit, little more than Outside Council      terpolation; otherwise the cost is merely    came back that night we had dozens of
to the RBOCs, ordered the FCC to Do            Very Low. Actually the *cost* of a TDM       clear channels. But I digress... I should
Something. Which they might, some              phone call, not price, is phenomenally       note that NYNEX/Bell Titanic seemed
day -- Powell certainly took his sweet         low. IP isn’t significantly cheaper per      to base its early rollout of ADSL based
time.                                          minute, because both are down in the         on MediaOne, putting it wherever cable
                                               noise. ILEC Access Charge tribute is         modems were available, not elsewhere,
Yes, I’m talking in the language of the        the problem. We’re getting SONET             so you had either two choices or none.
so-called Regulatorium, because that’s         muxes with OC-48 and a bunch of DS-3
the only language that will actually get       ports for, oh, about $15,000 apiece. How     Frankston: I’m getting lost in the story
things done. Otherwise, it’ll be SBC and       much is that per minute per 64 kbps call?    so let’s step back a little. Clearly we
Verizon scooping up the bankruptcy as-         When it’s full, just add another lambda...   could provide a lot of connectivity very
sets, or if they happen to fall, scum like     the fiber always has capacity.               cheaply. A T1 was becoming the low end
Goldman Sachs (you may have heard                                                           - not the high end. And this stuff didn’t
of their LEC subsidiary Madison River)         The tricky issue is paying for a common      even begin to exploit the potential of the
or Carlisle Group (George H.W.Bush,            good when there are many subscrib-           technology.
Saudi BinLaden Corp. and friends, buy-         ers with widely different amounts of
ing pieces of Verizon) will take over.         usage. Even if the common good (say,         Remember also that we’ve got gobs of
                                               “fiber”) has no incremental cost, it is      backbone capacity because people didn’t
COOK Report: That is spooky. Is it eas-        hard to recover the same from granny as      realize how much they were laying down
ily documentable?                              from a company that spews out at GigE        and once they were laying down any
                                               rates. So you end up with usage-based        might as well do a lot more. The backhoe
                                                               83
                        COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
costs the same no matter how much you aside from their shareholders it doesn’t of their revenues would have to exceed
lay within reason and that within reason really matter. We just need their facilities the sum total of their expenses (Opex,
was very very large. So we have a lot of people and they had to buy outside com- Depreciation, Amortization, Tax) by an
potential first mile capacity and lots of panies to deal with the fiber stuff. There amount that lands in the target range Rate
capacity for the next 10,000 miles. And will be plenty of people seeking facilities of Return on their Rate Base (remaining
all that with only a vague notion of the contracts from the municipalities.            undepreciated value of plant in service).
value.                                                                                 And the rates for their individual services
                                             Goldstein: Either you condemn the prop- (glass loop, copper loop, DS1, SONET,
Goldstein; Yes, provided that there is erties and assume a permanently-ben- etc.) would be set according to a cost for-
a way to prevent the first mile owners eficient governmental ownership, or you mula, not an imaginary “market” (some-
from gouging, as they are still a natural strictly regulate that which is not fully times called “incremental willingness to
monopoly. And don’t forget that Middle competitive (i.e., no one has Significant pay,” aka “monopoly rents”).
Mile problem. It’s not an issue here in Market Power).
02461 but it sure is an issue in some                                                  The breakup would be mostly on paper,
places where I’ve had clients, like Do- Frankston: Funding the new model. with a lot of technicians’ paychecks
than, Alabama, Rockland, Maine and OK, this is a mindset issue. Eventually getting new labels. Everything would
Leitchfield, Kentucky.                       people will face up to the utility model still Just Work as it did before. But the
                                             though we’ll have to burn through a few LoopCos would have to allow more
Frankston: Before I address your con- muni-cablecos at first. The smart players reasonable collocation, for instance, to
cern there’s another large factor that isn’t may sell a whole package but will keep make their loops more accessible. So if
fully appreciated -- mind boggling sim- their lines of business very distinct.         Bob’s IP Utility needed five rack units
plicity. We’re going to see a rapid con-                                               and 300 watts to run its router for the
version of all control and signaling infra- Goldstein: Rate of Return utilities are predicted customer base in Needham,
structure to IP-based connectivity. You’ll the easiest thing in the world to fund. they could rent it for say $20/RU/month
just plug in a viewing surface where you It’s greed and deregulatory ideology (a plus maybe $.25/watt/month (to cover
want it or place a light switch where tool of greedy managers) that keeps de- power, batteries, and HVAC) and a mod-
you want it. It’s not home automation or regulating things that are not ready to be est setup fee. This is more flexible than
anything like that, it’s more like the re- deregulated.                                current CLEC-in-ILEC-CO collocation
mote control on a TV. There won’t be the                                               arrangements. Dave’s IP Utility could
impediment of special wires for special COOK Report: Would you elaborate? rent 3RU for its router in the same rack,
purposes in special places with special Lets say the governor runs on a platform as could Fred’s ISDN Utility. ;-) And
connectors all done by specialists. Some to put in a regulated rate of return utility we’d all rent bandwidth (fiber, SONET,
will say, yeah, but all this computer stuff and wins. Then what?                       DS1, DS3, whatever we wanted to pay
is too complicated but that’s not at all an                                            for, at regulated rates) back to our own
issue when we can all provide solutions Divestiture Two                                hub sites.
and people can pick and choose.
                                             Goldstein: Basically, Divestiture II Frankston: Unformism. I sure seem
Goldstein: Well, I suppose that “sim- would mean that the ILECs are split hung upon IP packets. Well, not so much
plicity” at the user level is a function of into two companies, with the successor IP per se but the fungible packet -- yeah,
software, and yes, you did manage with ServiceCo keeping the customers (retail it’s that magical. Just like those protons
VisiCalc to make certain common types billing), switches, wireless, LD, and ISP and electrons. What can’t I do with pack-
of programming about ten times simpler operations. The LoopCos would get the ets. At least for exchanging information?
(or more). So sure some of that can be LEC (intra-LATA) outside plant, CO Am I a purist -- compared with most,
done. IF the bandwidth is not held back buildings, and a contract to guarantee yeah - but then the rule is there are no
by monopolies, no matter how benefi- them the ServiceCo’s business for a rules.
cently they are created.                     few years. The ServiceCos would then
                                             be regulated roughly the same way as Goldstein: I am *not* going to get
Historical note: The RBOCs were creat- non-dominant players, modulo a few into the details now, but IP networks
ed with very strict restrictions, designed special issues like tandems and, perhaps, are NOT all the same, not function-
to be the stewards of the natural mo- rural switches. They might be rate- ally identical -- the packet is the same,
nopolies, under rate-of-return regulation. regulated at retail by PUCs, at least until but there will always be management
They slipped out of control, big time. full competition set in, but wouldn’t be decisions about where to put what band-
This is indeed a failure of the regulatory in the “UNE” wholesale business. The width, how many hops, etc. That’s
system, wherein deregulation (sounds LoopCos would on the other hand have why I keep harping on the need for
nice, works badly) caused a monopoly to to file tariffs, or make transparent “Bona competition, since it’s simply not a natu-
create Scarcity.                             Fide Request” deals. They’d be on Rate ral monopoly, and somebody *will* be
                                             of Return regulation, so the sum total unhappy with *any* management deci-
Frankston: But does it really matter -                                                 sion. At least if we keep the monopoly

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                                        The COOK Report on Internet July August 2005
down on the wire-and-cable level, the           and they are buying those facilities. Even     simple model split at the IP layer. As
management decisions will be much               here the build out and/or operations is        with the software/hardware boundary,
more straightforward, and the impacts           outsourced some of the time.                   market forces should provide stability as
will be *localized*, which is not always                                                       opposed to regulation whose stability is
the case with IP.                               I don’t get the bit about “Telecom must        more like rigor mortis.
                                                respond to every failure” vs. the Internet
If there were one world Internet utility,       building on success. I think the ILECs,        In fact, rather than being a normative
China and Iran would want to run it. If         CLECs, ISPs, Skypes, whatevers, are all        model my argument is that it is a self-
there were one nationalized Internet util-      generally trying to respond to the market      sustaining stable model that doesn’t exist
ity, Senator Stevens would want to run          as they see it. Naturally the ILECs have       primarily because of a regulatory regi-
it. If there were one state Internet utility,   a lot different point of view -- they are      men that has little purpose but to thwart
the ones in Kansas and Alabama would            still coming off decades of living in a        the marketplace.
be more like the one in China than the          very different world. They are also very
one in New Hampshire. The one in Mas-           large, and few organizations of their size     IBM resisted the hardware/software split
sachusetts would be run by a contractor         respond quickly. So the behavior you           until forced to, by antitrust (legal mavens
who would have 90% cost overruns                see might be also explained by a state-        may give a more precise explanation).
while missing key metrics, while the one        ment like: “Big companies survive many         The FCC has taken the opposite tack --
in New Jersey would be run by some guy          mistakes and press onwards. Industries         in the case of IBM it would have seen it’s
named Tony from just outside Newark,            made of lost of smaller companies and          role as protecting IBM’s ability to offer
who knows where Jimmy Hoffa is.                 activities (e.g. The Internet) survive by      software as a service on their hardware.
                                                weeding out their failures and pressing        After all, if IBM wasn’t able to deliver
COOK Report: As Peter Ecclesine says            onwards.”                                      a total package the chaos would result.
all politics and networks are LOCAL                                                            And that’s not entirely untrue -- Apple
issues.                                         Frankston: I think we are close -- it’s        does a slick job of total packaging but
                                                useful to do a quick review for level          Steve Jobs is not, in himself, sufficient to
Frankston: The main question is wheth-          setting.                                       create a vibrant marketplace. Or maybe
er the process is driven by the successes                                                      he is?
or the failures. Telecom must respond to        Some of the issue is terminology - net-
every failure while the Internet only need      work architecture. What is meant by ser-       Forster: I tend to think intermediaries
take advantage of success and create the        vices and facilities? There’s the end-to-      will still be quite important, because I
opportunity for more.                           end paper on David’s site (http://www.         believe that skill specializations will help
                                                reed.com) from 25 years ago. I have            capture economies of scale.
Forster: I think we’re agreeing in many         an essay on connectivity http://www.
parts. To be truthful, I haven’t read all       frankston.com/?name=Connectivity               Coluccio: Agreed, and since a bare mini-
the posts carefully, but my impression is       though I’m afraid to reread it now last I      mum number of physical players is pre-
that you & David tend to believe in a fu-       try to rewrite it. People will want to buy     ferred in order to avoid the kludge effect
ture where most of the communications           services but commodity IP connectivity         from taking hold, it had best be a model
happen with little need for larger scale        plays a role similar to that of money in       that can accommodate the broadest range
intermediaries between the endpoints. I         normalizing a marketplace as compared          of potential needs at the LCD layer.
tend to think intermediaries will still be      with a complex system of bartering.
quite important, because I believe that                                                        Forster: Most customers seem to be
skill specializations will help capture         As to companies -- those that have a .999      more comfortable reducing their risk by
economies of scale. For this portion of         model have a rigid measure of success          renting service rather than buying facili-
the discussion it matters not whether           that can’t track changing configurations.      ties, thereby creating the opportunity for
the intermediary is LoopCo, IPco, mu-           With less compulsive measuring you can         intermediaries to get capital, make a net,
nitel, L3, Wiltel, or a combination of          make tradeoffs. As to small companies          and sell service.
such operators.                                 as units of success/failure -- that’s a very
                                                important point. It’s part of scale in ecol-   Coluccio: During earlier list discussions
Plus, as I mentioned earlier, given the         ogy and evolution.                             we covered the possibilities of certain
murkiness, most customers seem to be                                                           models where end users were called
more comfortable reducing their risk by         The major issue is close to the .999           upon to pay for their own individual
renting service rather than buying facili-      problem -- the Regulatorium locks in a         fiber connections to the feeder plant,
ties, thereby creating the opportunity for      business model that was defined in 1934        from whence it would trail back to a
intermediaries to get capital, make a           (to be arbitrary) and now we attempt to        colo or hub. I’m referring specifically
net, and sell service. Having said that,        keep the model but mapping it to real-         to community condominium fiber builds
we must note that lots (most, I believe)        ity is increasingly untenable. It wasn’t       through residential neighborhoods that
communications costs are within orga-           even a very good model then but now            were brought to our attention by Fran-
nizations (inside wiring, switches, etc.)       it’s pure theater. Better to just have a       çois and Bill St. Arnaud in Canada. I’ve
                                                                 85
                       COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
always seen merit in exploring these          ping in to dig their own trenches in their   homes in Altmere in a few years.
possibilities, even if only with the aca-     front yards, driveways and access roads,
demic goal of uncovering unknowns in          to the point of pick-up on the main feed.    “’TV was going digital so we decided
the process.                                  About six years ago I had some great         to go fully Ethernet,’ said Bakker. ‘We
                                              photo album links that showed this tak-      promised the city we would actively
Forster: I think that’s a great model that    ing place in Sweden somewhere, but I         pursue new services.’ The system is a
will appeal to the larger organizations. In   can’t seem to find it anymore. Reading       star-based single =mode fiber network
general, outside plant ownership seems        some of these accounts brings back the       offering 100 Mbps and 1 Gbps ser-
to track the organization size. A couple      aura that existed ten years ago when, you    vice. VLAN services (not limited to the
years ago the Bank of America bought          may recall, we had Internet Wiring Days      Internet) separate network and service
some dark/dim fiber to different plac-        where volunteers set aside their time on     management, and highly automated pro-
es around the US. That’s way beyond           weekends to punch holes in walls and         visioning and customer care.
most organizations, but the François          lay in Cat-5.
Menard/Bill St. Arnaud proposals make                                                      “’We do not outsource the call center,’
great sense for universities, county-wide     Below I type a brief passage from the        said Bakker. ‘We want to know exactly
school districts, etc.                        March 2005 issue of Broadband Prop-          what our customer wants and needs.’
                                              erties, which is not posted to their Web     UNET started its triple play package in
Maybe the condo fiber is the impetus          site yet. It exemplifies some of what I’ve   2004. Another service: Remote storage
to look further at analogies to real es-      stated above with respect to homeown-        for backup, managed by a separate com-
tate. Over time many alternatives have        ers who’ll pay to have fiber pulled to       pany, at 2 Euros per month. ‘We make
emerged. For individuals we have apart-       their homes. As you read this I’d ask that   money at it,’ says Bakker.
ments, condo, single-family homes, etc.       you keep in mind for contrast purposes
For enterprises we have offices with          the various accounts you may have read       “Bakker says customers are using the
shared common facilities, leases for          concerning Verizon’s FTTP construc-          system symmetrically. ‘We don’t see
floors in larger buildings with or with-      tion efforts, focusing on how contractors    asymmetric use at all,’ he says.
out furnishings, entire buildings, office     have been digging up yards through
parks, etc. We could make analogies with      boring and direct digging techniques as      “Hans Solheim, Manager of Infrastruc-
individual IP service, L2 service, condo      residents looked on:                         ture for the broadband utility in Lyse,
fiber, dim & dark fiber, etc.                                                              Norway, also went Ethernet. He said his
                                              from http://www.broadbandproperties.         customers helped build the system. Lyse
Coluccio: Over time I’ve come to real-        com                                          started offering 4 to 10 Mbps broadband,
ize, with really no great surprise, that                                                   he says, because the company’s core
we always pay for our access, whether         BACK IN EUROPE “Robert Kjellberg             business is establishing infrastructure.
we like it or not through some means          discussed Sweden’s Malarenergi Stad-         We’ve been doing it for 100 years. We
of shifted cost allocation. It could be       snet, an open access metro network in        wanted to buy services but they were not
through: taxation; surcharges on utility      an industrial community about 100 kilo-      available so we built ourselves.
bills; builders’ fees that are embedded in    meters from Stockholm. ‘Building own-
the cost of a new home (this is especially    ers pay for connection to our network,       “He noted that local utilities have an
the case where subdivisions include the       even though they have two other com-         advantage. ‘You need good political con-
costs of building conduit and pulling         petitors already connected, because we       nections to dig up every street in the re-
media back to a head end); or whether         have better services: cheaper and with       gion,’ Solheim said. Lyse’s business case
we elect to make direct payments for          more choices of content.’ Europeans, and     assumes 60 to 70 percent of the areas it
two strands of fiber to the nearest pole,     Scandinavians especially, do not general-    serves.
or even the placement of a micro-duct or      ly consider open access networks a ‘pub-
tube that will be used for blowing fiber      lic subsidy’ in competition with private     “Lyse committed to the project in April
some time in the future.                      investors. Instead, it is infrastructure.    2002, and started serving its first custom-
                                                                                           ers that September. Lyse has sold 20,000
I’ve also surmised that the way in which      [ ... ]                                      contracts and had delivered service to
this issue is viewed and eventually acted                                                  12,000 as of January 2005. Another
upon is keyed by location, hence cultural     “A UNET pilot project that started in        1,200 to 1,500 are added each month.
in many ways. Some parts of the globe,        2004 already connects municipal institu-     A key strategy and an unusual one for a
albeit still a pronounced minority, see       tions, 1,700 homes and 450 businesses.       municipal-owned utility: ‘We told people
paying for their own access costs as a        The households are of different income       that half had to buy in the neighborhood
no brainer, while others (MOST others,        levels and businesses differ widely in       or we would not build. We said, ‘this is
in fact) still can’t see it at all. Also of   size. UNET, a service broker started spe-    your chance, now or never.’’ People also
interest to me is the sometimes almost        cifically to bid on the Altmere project,     helped build the network, digging yards
casual attitude that some inhabitants in      hopes to add as many as 30,000 homes to      to bury fiber; 95 percent of the house-
certain cultures seem to have about chip-     the fiber network this year and all 80,000   holds helped with construction. There
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                                     The COOK Report on Internet July August 2005
was pressure by neighbors.’                  get your prospective LoopCo’s to buy         are in place today? By all means, exist-
                                             the utility model.                           ing qualified copper pairs should be
“Lyse business case assumes 60 percent                                                    exploited if they can deliver super-50
penetration, with 100 percent of those       Coluccio: Thanks, Jere, for that “back-      to 100 Mbps VDSL and ADSL2 speeds,
customers taking Internet, 80 percent        to-the-present” wakeup call with respect     provided they are close enough to the
TV, and 70 percent VoIP voice service.       to making the best use of what he have       customer’s premises or can be extended
The prediction was for a hookup cost per     available today. Agreed, there’s life left   in apartment building riser systems from
customer of 2,000 Euros. Lyse prices its     in copper, to be sure, especially where      basement- or easement- DSLAMs, even
services below the market rate set by pri-   it covers a short distance from a CO or      if the distances require that they be bond-
vate competitors. Targets are being met;     field node to the subscriber’s location.     ed. And where HFC plant is capable of
penetration is at 60 to 70 percent of the                                                 supporting super-G-bit aggregate speeds
areas it serves.”                            HFC holds promise for more bandwidth         through modifications in the spectrum
                                             than most folks have ever thought about,     plan in head-end and optical field nodes,
“At the moment Lyse assumes a 15-year        if the MSOs see fit at some point to         let the customer have at those higher
return on investment. ‘The regulatory        make it available in an unrestricted way.    speeds when they need it.
framework causes us to open access to        Both Telco copper and the MSO’s HFC,
customers in 3-5 years,’ said Solheim.       of course, must work at making their         What will remain missing from Telco
                                             facilities symmetric, or at least improv-    DSL and Cable Co HFC, however, is
Frankston: Is the goal connectivity? If      ing their upstream directions to allow       not so much the bandwidth that we’ve
so, then muni cable is just one means and    users to become producers, in addition       been discussing, but the openness of a
not the end in itself.                       to merely being consumers of, content,       clear channel _when _that _is _what
                                             and allowing them to host their own web      _the _customer _desires _and _needs.
On May 2 Coluccio: I don’t recall any-       servers where they see fit. Wireless is
one stating that any single access ap-       an open-ended arena that improves with       Add to the foregoing: the assurances that
proach was an end in itself. Indeed, my      time, be it by the incumbent, or the ho-     customers want and need that their over-
trailing point while describing the fiber    meowner, or ad-hoc meshing, or a WISP.       lay services such as Vonage and Web-
overbuild in our mythical town stated        Even satellite has its place for various     based IP TV services receive roughly
that a hybrid fiber-wireless architecture    types of solutions.                          equivalent channel conditioning, when
would define the eventual end state, and                                                  compared to the conditioning that simi-
you can read into “wireless” the many        My point concerning hybrid fiber-wire-       lar services provided by the incumbents
options in the PAN/RAN/WLAN/WAN              less was a way of expressing my view of      receive.
that will manifest themselves in many        what should be going into new facility
different ways.                              builds, while strongly suggesting that in    It’s not just the speed of the line - al-
                                             almost every case where copper pairs or      though that helps one heck of a lot - but
Retzer: The ideal solution, in my opin-      HFC would ordinarily be used based on        the quality of connection that is made
ion is multi-modal (cell, HFC, fiber,        current practices, fiber should be used      available for customers’ discretionary
copper, 802.xx) and fully interconnected     in their stead. The economic arguments       uses that will become critical, as well.
at the equivalent of a ‘local’ CO. Prob-     are no longer an issue in this regard,       And from where I sit today, the only
ably a consequence of seeing the world       especially where bandwidth ramps in the      solution that I see that permits such a
through the prism of a regional IX, but      future are concerned.                        combination of attributes is fiber, and
I’ve always felt that emphasis on local                                                   perhaps some future forms of wireless
interconnection is key, assuming you can     But for those metallic facility types that   down the road.




                                                             87
Symposium Discussion May 17- May 19


Video - Examining the Plans of the LECs
Versus the Entrepreneurs Highlights
The Terms of Debate                          “ First and foremost, do we really want        new ad campaign, highlighting a recent
Are Still Very Muddy
                                             local governments controlling the media        Congressional Budget Office (CBO) Re-
                                             and access to content? Proponents of           port on Universal Service Fund (USF).
                                             municipal networks run from the label          The coalition warns that the proposed
Coluccio: The May 2005 issue of Broad-       “socialism” like they’d been bee-stung,        per number tax, or flat $1-$2 per line
band Properties Magazine puts the spot-      yet that’s the correct term for what these     fee, would increase phone fees by over
light on municipal networks from many        networks represent. And if they can suc-       1000%.
different perspectives. Note that Jim        cessfully seize control of telecommuni-
Baller’s paper, “Ten Myths About Mu-         cations networks, how long before mu-          The Keep USF Fair Coalition advo-
nicipal Broadband,” is among the papers      nicipalities begin to cast their eyes on       cates keeping the USF current methodol-
covered below. Well Done, Jim!               control of the gas stations, grocery stores,   ogy and proposes a mechanism to offset
                                             newspapers, television stations and other      any unforeseen shortfalls.” http://www.
Goldstein: Wow. What a range of ar-          private enterprises? “                         keepusffair.org/
ticles. On the one hand, you have
Jim’s debunking of the myths. Properly       You’d think the editors would have taken       Goldstein: Astrotrurf Alert! Remem-
signed.                                      the time to determine who or what USIIA        ber Dave McClure’s USIIA? Same idea.
                                             even is, or to dismiss such McCarthyite        This astroturf front, Keep USF Fair, is
But then you have: Editor’s Note: The        histrionics and do so before Sam Simon         pure Sam Simon (Issue Dynamics). At
Battle Over Public Broadband By Dave         runs through his stable of fronts.             the top of its membership list is APT, an
McClure, President, US Intenet Indus-                                                       astroturf “group” that he created, owns,
try Association - The mud has been           Coluccio: Is there anyone here con-            and runs. The other names (Gray Pan-
flung back and forth for about five years    versant in current matters concerning          thers, LULAC, etc.) are his usual roster
now. Monopolists versus socialists - this    the USF and what’s been going on in            of astroturf. They may be real groups, or
month, we make an extra-special effort       Washington, DC? If so, would you care          may once have been real groups, but they
to get all the arguments out on one large    to opine on this release?                      are not normally involved with telecom,
table.                                                                                      and they lend their names to Sam in ex-
                                             May 17, 2005 Backers of Universal              change for Verizon Foundation funding
http://www.broadbandproperties.com/          Service Fund Lobby the FCC                     or other bennies.
2005issues/may05issues/Dave_Mc-
Clure_The_Case_Against_Public_               “The Keep USF Fair Coalition said that         Now USF is a mess, and there’s pressure
Broad...                                     more than 120,677 individuals have ex-         on Martin to Do Something. The tax
                                             pressed their support for its “Fair Share      rate is now over 11%, more than double
All the myths right there being exploited,   Plan” aimed at “ensuring a sustainable         what it was when Gore was VP. The LD
comparing municipal broadband to the         and sufficient Universal Service Fund          revenues that are taxed are declining.
PTTs of old. And who’s the author? Dave      while minimizing the adverse impact on         VoIP providers don’t pay in, giving them
McClure, Verizon Flack Extraordinaire!       low-volume, low income consumers.”             a price advantage. (Can you spell “death
Yet another astroturfer, who created an                                                     spiral”?) One option is to charge a fixed
“Internet” trade body to represent the       "The FCC is expected to take up the            monthly amount per line, so that non-
ILECs who want to monopolize public          issue of the USF at its open meeting on        subsidized lines would kick in more to
access to what is now a free Internet but    May 19.                                        pay for subsidized lines. This is like the
which they want to turn into a “broad-                                                      move away from high usage-based Ac-
band” walled garden.                         More than 275,000 Americans have sent          cess charges and towards a larger fixed
                                             letters to the Hill and the FCC since the      EUCL charge, to cover the interstate
Now he’s yelling “Commie!”:                  start of the campaign. In addition, 90,000     share of the fixed cost of lines.
                                             consumer members have joined such
“ Then, of course, there are the policy      notable organizations such as Consumer         Obviously this proposal is upsetting some
issues, because bad policy, whatever its     Action, LULAC, Gray Panthers, Black            of Sam’s ILEC clients. Some people
intentions, will eventually come back to     Leadership Forum, National Association         think that the goal of telecom regulation
haunt us in the worst possible ways. And     of the Deaf and others to the Keep USF         should be to minimize the fixed monthly
there are some involved here that won’t      Fair Coalition.                                cost of a residential line, no matter what
easily go away.                                                                             the collateral damage. They’re the non-
                                             The Keep USF Fair Coalition launched a         telco recruits.
                                                                                                                       Cont'd p. 90
                                                     88
                                    The COOK Report on Internet July August 2005

Broadband Properties Contents and Article Summary
In this Issue:                                                    for_Muni_Broadband...

President’s Letter: Read Them Now, See Them In Dallas By          Opinion: The Case Against Public Broadband By Dave Mc-
Scott DeGarmo, President & CEO Muni broadband is hot.             Clure, US Internet Industry Association The president of
You’ll read all sides of the muni controversy in this issue and   USIIA makes some good points for private industry here.
then meet the experts at the upcoming Broadband Properties        Avoid them at your peril. http://www.broadbandproperties.
Summit, September 12 - 14 in Dallas. http://www.broadband-        com/2005issues/may05issues/Carl_Kandutsch_The_Case_
properties.com/2005issues/may05issues/May_President_s_            for_Muni_Broadband...
Letter.pdf
                                                                  ILEC role: Fort Wayne Connects with Verizon By Graham
Editor’s Note: The Battle Over Public Broadband By Dave           Richard, Fort Wayne, Indiana Fort Wayne’s mayor shows how
McClure, President, US Internet Industry Association The          his community has leveraged Verizon’s investment to meet
mud has been flung back and forth for about five years            its goals. http://www.broadbandproperties.com/2005issues/
now. Monopolists versus socialists - this month, we make          may05issues/Graham_Richard_Fort_Wayne_Connects.pdf
an extra-special effort to get all the arguments out on one
large table. http://www.broadbandproperties.com/2005issues/       Business: Get Your Community Ready for Business By An-
may05issues/Dave_McClure_The_Case_AGainst_Public_                 drew Michael Cohill, Design Nine Broadband is necessary
Broad...                                                          but not sufficient. Cohill, who ran the nation’s first truly
                                                                  broadband community (Blacksburg, VA), tells all. http://
Provider Prospective: The Best Route for Newcomers By             www.broadbandproperties.com/2005issues/may05issues/
Bryan Rader, MediaWorks So you want to be in broadband?           Michael_Cohill_Get_Your_Community_Ready.pd...
Limit your operating area, be profitable on all systems, and
build consistency into the business from the start. http://www.   Suppliers: Broadband Is Best for Business, Too By Pat
broadbandproperties.com/2005issues/may05issues/Bryan_             Gelsinger, Intel Let the towns decide. An Intel senior
Rader_The_Best_Route_for_Newcomers.p...                           VP reminds us that when public entities build, they buy
                                                                  from private corporations. http://www.broadbandproperties.
Poll: Phone Beats Cable in Vote for Converged Services            com/2005issues/may05issues/Pat_Gelsinger_Broadband_Is_
BBP Staff Report A poll suggests cable providers have to          Best_for_Busine...
prove they’ve improved service; most consumers trust tel-
cos more. http://www.broadbandproperties.com/2005issues/          Open Access: The Open Service Provider Network Concept
may05issues/Poll_Phone_Beats_Cable_in_Vote.pdf                    By Ben Gould, DynamicCity A primer on what it really
                                                                  means to have open-access networks. http://www.broadband-
FOCUS ON MUNICIPAL BROADBAND                                      properties.com/2005issues/may05issues/Ben_Gould_The_
                                                                  Open_Service_Provider.pdf
Gazetteer: A Mayor’s Guide to Broadband By Sandy Teger
and Dave Waks, Broadband Home Central A plain-English             Open Access: The Iowa Approach By Mark Daley, Opportu-
guide to the six leading broadband technologies. http://www.      nity Iowa An activist group fights restrictions on municipal
broadbandproperties.com/2005issues/may05issues/Sandy_             broadband by mobilizing Iowa’s towns. http://www.broad-
Teger_and_Dave_Waks_A_Mayor_s_Guide....                           bandproperties.com/2005issues/may05issues/Mark_Daley_
                                                                  The_Iowa_Approach.pdf
Opinion: Ten Myths About Municipal Broadband By Jim
Baller,The Baller Herbst Law Group The attorney for many          Open Access: It’s the Law in Loma Linda By Steven S. Ross,
groups fighting incumbent-inspired state restrictions on          Editor-in-Chief In-home broadband networks and devel-
muni systems, Baller makes a forceful case for public             oper-built outside plant are mandatory for new construction
broadband. http://www.broadbandproperties.com/2005issues/         in this California city. An interview with Loma Linda’s IS
may05issues/Jim_Baller_Ten_Myths.pdf                              director. http://www.broadbandproperties.com/2005issues/
                                                                  may05issues/Steven_Ross_It_s_the_Law_In_Loma_Linda.
The Law: The Case for Municipal Broadband By Carl Kan-            pdf
dutsch, Ph.D., J.D. Our regular columnist, a student of history
as well as the law, says the idea of municipalities providing     Open Access: The Story of Windom, Minnesota By John
infrastructure is hardly a new one. Kandutsch, a former FCC       Gumpel, Primal Solutions How a town of 5,000 with only
attorney, also points to an interesting loophole in the key       about 2,000 households is making broadband work.
decision allowing states to restrict municipalities. Jump to      http://www.broadbandproperties.com/2005issues/
page 22 to see the details. http://www.broadbandproperties.       may05issues/John_Gumpel_The_Story_of_Windom_
com/2005issues/may05issues/Carl_Kandutsch_The_Case_               MN.pdf

                                                            89
                       COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
                                               one. And how sweet it is, indeed. With        systems and acquiring, along the way,
Coluccio: Thanks, Fred. Astroturf was          thanks to Dave Burstein who writes the        the skills needed to create a working
the term I was searching for, by the way,      DSL Prime weekly newsletter http://           system that trumps a dozen small tel-
and your assessment falls pretty much          dslprime.com/ :                               cos’ much publicized video trials. They
where I’d thought it would. Your death                                                       deliver more to their users, at a better
spiral point was well taken, and me            “Bronx Beats Babbio to                        price, than many companies with ten
                                               Broadband Video"
thinks that due to regulatory lag there                                                      times the resources.”
probably will not be a solution - if in fact
one is actually called for in the same way                                                   “A subway ride away from Verizon head-
                                               "UrbanDSL channels fiber to the base-         quarters, Urban is proving IPTV can be
that it was in the past - in time to avert
                                               ment where Verizon fears to tread”            done. Of course running five million
a crash.
                                                                                             Verizon lines is a different challenge
                                               [Coluccio: Regarding the previous sen-        than 5,000, but Verizon can no longer say
All this continuing talk about EUCL
                                               tence, above, my guess is that Dave           serving the Bronx is impossible.“
charge (End User Common Line), access
                                               picked up on VZ CEO Seidenberg’s
charges, USF and the use of rate ele-
ments of years gone by seem a bit anach-       statement regarding cellular phones when      [End quote from DSL Prime.]
ronistic to me, if not outright nonesense,     addressing a group recently. He stated
since “lines,” per se, no longer exist in      that cell phones were not supposed to         Coluccio: Coming off the same newslet-
my world as they still do elsewhere, per-      work in basements or in all spots around      ter I quoted earlier concerning the Bronx
haps, in rural areas, say. Even there they     the city, leaving some bad tastes with        Story, Dave Burstein in a couple of suc-
are rapidly being aggregated onto carrier      some. Next!]                                  cinct paragraphs below makes a point
systems or one form or another.                                                              concerning open networks that we’ve
                                               “Stuart Reid and Douglas Frazier are          been driving at here for four or five
I’ve got entire 6,000 desk campuses            delivering video over fiber to the base-      years, and probably longer, if one counts
where we can’t even get a copper line          ment with VDSL while Verizon hasn’t           the discussions on this topic that were
pulled into a MPOE (Minimum point              even gotten serious about trials in the       conducted on the Last Mile Technolo-
of Entry) because the buildings were           city. Pacesetters Reid and Frazier were       gies thread. He is calling for Verizon to
erected on parcels that were previously        also among the first to offer VOIP, re-       open up its FTTP platforms to other
                                               selling Vonage under the original deal        service providers in a manner similar to
rail yards or vacant fields, and no one
                                               many couldn’t understand three years          UTOPIA’s intentions in Utah, and in a
is pulling new copper there anymore.
                                               ago. They’ve even secured a municipal         manner similar to how many of the fiber
In a recent undertaking in order to have
                                               franchise, something the Bells, among         optic ‘infrastructure’ custodians of the
a limited number installed the ILEC
                                               the world’s best lobbyists, say can’t be      Netherlands and Scandinavia have been
wanted over a quarter of a million dollars
                                               done.”                                        doing all along.
for a three-year contract to bring in 200
dry pairs.
                                               “Forget burned out buildings, street          Along with others here in this forum,
                                               gangs, and streets unsafe for masters of      I’ve touched upon this potentiality in
Lines, to me, tens of thousands of lines,
                                               the universe. Some brutal poverty re-         the past through the use of some slightly
in fact, mean nothing more than a series
                                               mains, but today’s Bronx also provides        different verbiage, although coming at
of interleaved bit streams and Ethernet
                                               rich business opportunities. “Everyone        it from a sometimes radically different
flows within the core of a fiber. And the
                                               in the neighborhood tries to find a way       perspective, calling for the establishment
ingress/egress of user data flows don’t
                                               to get their kids a computer and the inter-   of a neutral LoopCo that would serve as a
resemble anything like they did in the
                                               net,” Frazier says of his customers.”         passive undercarriage for all higher layer
past, where associations with “LINES”
have any real meaning. Should the same                                                       service providers for a given venue, or
                                               “Urban’s IPTV is entrepreneurship at          service territory.
formulas apply to those virtual containers
                                               the most demanding. They’ve led the
I just mentioned today as once applied to
                                               crews trenching the fiber, trained people     But I’m not so sure anymore that I’d
individual copper pairs of the past?
                                               from the neighborhood to do the in-           want to settle for the limitations imposed
                                               stalls, and searched the country for used     by the RBOCs’ present FTTP architec-
Even here, however, the ILECs get to le-
verage the bit rates of those data streams,    equipment to keep the price low. Their        tures. This is because the latter are, after
as when they count “DS-0 equivalents”          NOC, a stone’s throw from Verizon’s           all, still ‘a’symmetric in nature, they
when assessing the weight of their T1s         central office, is crowded with racks of      already include Layer 2 constructs of a
and T3s, etc., in demonstrating total          Next Level, Tut, and other respected          choice I’m not sure should be imposed
rented “line” numbers in their quarterly       gear. Frazier and Reid manage Urban           on others, and to a large extent - espe-
statements.                                    themselves, making sales calls train-         cially in territories outside of Verizon’s,
                                               ing staff and troubleshooting 3 a.m.          i.e., in SBC, BLS and Qwest service
I am splicing in one of those stories that     emergencies. They’ve worked together          areas - they are still dependent on copper
touches home for me, in more ways than         for twenty years, building urban cable        for last 1000 meter delivery.

                                                                  90
                                     The COOK Report on Internet July August 2005
                                             data. I want to keep the customer on my       why the loop and the services have to
What occurs to me in no small way,           network.” His greatest opponent, Com-         be separated.
however, and this has nothing to do          cast’s Brian Roberts, says if the price and
with the architectural qualifications or     details are right he’ll consider it.”         Frankston: He can’t get his cut from the
lack thereof I’ve listed above, is that                                                    content for VoIP or eCommerce (though
Dave’s suggestion may prove prescient        Frankston: As usual, I’d go further. You      ATT once foolishly fantasized such).
at some point for other reasons, maybe       should ask Ivan why there is any need         Not for the VALUE of the video. Just the
a few years out, having nothing to do        to open up the network to other provid-       transport which is pretty trivial.
with egalitarianism or breakaway think-      ers -- isn’t it open anyway. Given the
ing on the part of the incumbents, but       15 to 30mbps why can’t I just by video        Forster: Video is not a transport busi-
out of pure need. If the RBOCs can-          streams directly from sources such as         ness. It’s a content business which hap-
not meet their penetration and revenue       HBO rather than having to have a third        pens to need a transport. It’s quite pos-
goals from their current spate of FTTP       party in the middle?                          sible to make money on video, using the
buildouts in time to obtain some much                                                      content aggregation model, even when
needed financial relief that they’ve been    Verizon Fiber As a                            transport is free and readily available.
                                             Walled Garden
betting they’ll see, they may have no                                                      Even though there’s lots of content, it’s
choice but to open their gates, anyway.                                                    not free to produce and people will pay
                                             Goldstein: You’re assuming that there is      for it. Between those two points is the
What Dave did not go into in his latest                                                    possibility to make a profit. Heretofore
                                             sufficient bandwidth available between
newsletter, but I’m sure must be cooking                                                   ILEC infrastructure was not suitable for
                                             Verizon and HBO, *and* that Verizon
on some burner in the back of his mind,                                                    video transport. The question is the busi-
                                             would permit you to stream video across
is the position in which the other SPs                                                     ness model around the investment re-
                                             that link. Both are huge leaps of faith.
will inevitably find themselves, when                                                      quired for the upgrade.
Web-based IPTV delivery over consum-
er level broadband channels encroaches       Frankston: You can ask him about the
                                             economics -- other than DRM issues            With broadcast TV; transport is not quite
on their revenues, as well. What do you                                                    readily available but almost (spectrum)
think?                                       what does a company like HBO gain by
                                             giving him a cut of the profits to pay for    and not quite free but almost (transmitter
                                             his transport when they can sell through      costs); transport is not the issue. There’s
Here’s what Burstein has to say:                                                           a huge business, including significant in-
                                             a third party broker which doesn’t have
                                             the overhead?                                 frastructure (studios, satellites for distri-
--begin dslprime snip:                                                                     bution to affiliates, local stations person-
                                             Goldstein: Ivan owns the fiber. He in-        nel, transmitters, etc.), all put together to
“Terry Denson, Verizon’s video guy, has                                                    deliver a free service! What could be bet-
an impossible job. His boss, Ivan Seiden-    tends to demand his cut. It’s his fiber,
                                             so he feels he can do whatever he wants       ter! And they generally make a profit!!
berg, is promising “From Day One, we’ll
offer ... a new customer experience.”        with it. He doesn’t buy into your “open”
                                             world. In truth, the bandwidth require-       In broadcast TV and radio, consumers
Denson will be lucky to catch up with                                                      pay for all the content and infrastructure
                                             ments for fully-streamed-on-demand
state of the art cable networks, which                                                     by tolerating advertisements. Another
                                             video would be unacceptable. If there
offer thousands of free VOD choices,                                                       alternative is pay TV and radio, both
                                             were a good multicast algorithm and the
500 channels, 24-hour local news, inter-                                                   of which are enabled by the content
action, and a multi-room DVRs.”              popular channels could only appear once
                                             on any given piece of (shared/backbone)       protection systems. In the streaming do-
                                             fiber or switch, then it could work, but if   main these content protection seem to be
“Join Future of TV at Columbia’s                                                           somewhat accepted (modulo continual
IPTV.2 conference May 23rd. We’ll be         every TV were taking shows on demand,
                                             it would kill the system post haste.          low-level battles with the satellite hack-
on a panel with Denson and will suggest                                                    ers) but the analog in the file transfer
there’s only one way for Verizon to truly                                                  domain is disparagingly referred to as
outclass cable. Open the network and let     But then remember, Ivan doesn’t be-
                                             lieve in the Internet. He believes in         “Digital Restriction Management”. OK,
Comcast, DirecTV, Echostar, and Time                                                       it’s more complicated because the silly
                                             Broadband. That’s not like taking TV
Warner offer competing packages over                                                       music people put their content into distri-
                                             and making it work like the Internet
Verizon fiber.”                                                                            bution in the clear, and the movie people
                                             model, as you posit. It’s taking the In-
                                             ternet and making it work like the cable      used a very weak system. When the bits
“Madness, you say? As things stand                                                         are delivered over networks rather than
                                             model. They select the content, they get
video will be a loss leader at U.S. telcos                                                 plastic disk, various two-way authen-
                                             a cut of the e-commerce revenues (like
for years. FTV asked Seidenberg wheth-                                                     tication systems become available (e.g
er he’d consider opening his network.        HSN/QVC), and you get to pick the
                                             channel.                                      Apple Fairplay), where convenience at a
“We’re building FIOS to get cable out                                                      reasonable price and marketing begin to
of the home,” was his reply. “My profit                                                    muscle aside the less convenient and not
                                             That’s what the fight is about. That’s
comes from telephone and high speed
                                                              91
                       COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
so marketable free systems.                                                                    On the matter of Roberts’ 200 Mb/s
                                               I feel no need to save his posterior in the     claim, yes, he’ll charge for it, of course.
Frankston: Multicasting is a non-issue         long run, nor do I believe the really dumb      But I hesitate to comment further about
with 15 to 30 mbps per connection.             idea that “fiber is so expensive that we        this without knowing a little more about
The question is purely about how much          could never afford multiple competitive         what he’s talking about.
capacity is available from the backbone        muni-broadband infrastructures” that’s
-- and that’s about pricing not cost since     just the old idea of essential monopoly         Would you happen to know what part of
we’ve got a dark empty backbone lan-           based on technology. The only rule that         cable’s spectrum this 200 Mb/s is sup-
guishing because of a problematic pric-        should be in place is that government           posed to take place? Is it being proposed
ing model.                                     cannot make exclusive deals with com-           as a new downstream data rate for Cable
                                               munications infrastructure providers.           Modem, as we know it? Or, is it a part
Forster: Well, that sounds like the ac-                                                        of cable’s digital TV spectrum being
tive optics and packet handling equip-         Coluccio: [To Jim Forster] Pricing for          used for ordinary and on-demand digi-
ment cost is not a function of delivered       video content, as you suggest, needn’t be       tal tv that he’s referring to. Any further
bits per second . Last time I checked it       pegged to costs, but in an arena where a        comments from me or others on this list
was. Saying that there’s lots of capacity      product is being squeezed five different        would be contingent on knowing this.
languishing in fibers is pretty equivalent     ways, literally, and the number of ways
to saying there’s lots of unused capacity      just keeps increasing, I think it would         Frankston: The question for the Roberts’
languishing in the RF spectrum. Both are       benefit a SP if it did. And I once would        (Comcast) and Ivan (Verizon) is how will
true, but I would have to spend a lot of       have agreed with your point about the           they deal with a market that only allows
money to utilize both the RF spectrum          SP that breaks even on video, if they are       them to charge for the transport itself
and the dark fiber. There is far more          enjoying profits from the remaining two         without subsidies and with no way to
equipment cost in the access end; lack of      or three ‘plays,’ but I’ve recently had to      differentiate themselves nor capture the
multicast would add (SWAG) 25-75% to           reconsider this point.                          traffic.
the transport cost. But since you seem to
think it’s readily available, languishing      What I see as possibly changing the             Reed: Bob thinks that Verizon should be
unused in the fiber then to you, 1.5x * 0      calculus - and therefore, my use of the         forced to open up its network above the
is still 0. We’re making money by selling      qualifier “once would have,” above - is if      transport layer. I personally think that
the stuff, so we think it’s not 0. Should      users begin exercising choices and split-       Verizon can do as it damn well pleases
we be reported to the SEC? :-)                 ting their sources for each of their ser-       *as long as it gets no special favors from
                                               vices. The situation is highly chaotic, as      the government*.
Frankston: Ivan has claimed that he can        I see it, with disruptors killing off other
be a provider of pure unfettered connec-       disruptors daily. For example, where I          I very much favor letting competition
tivity and that he will not discriminate. If   might have chucked my POTS line in              do its work where possible. Verizon cur-
that’s true then he cannot demand his cut.     favor of a Vonage or Lingo six months           rently enjoys a special franchise with
My goal with the question is to make him       ago, I may now say goodbye to Vonage            many laws blocking competitive entrants,
say it on the record and comment on the        if I elect to use Skype full time, instead. I   based on the outmoded theory that capi-
implications.                                  think my point on this is clear. The same       talism is “inefficient” and “wasteful” so
                                               set of dynamics will inevitably evolve for      the government should pick a winner and
Forster: That’s fair enough, modulo that       video, in my opinion, if the trajectories       exclude the presumed losers who would
CEO-Speak to the press starts with a           I am sensing for content delivery hold          compete by providing service based on
pretty low content rate at the source and      true, as well.                                  “inferior” lower cost technology.
then degrades.
                                               I believe that some level of fragmenta-         Just as Massachusetts new car dealers
Reed: I personally am quite happy that         tion of service bundles will ensue as a         enjoy special “franchise laws” that sup-
Ivan is building out a PON. That’s under       result of this over time, thus breaking         posedly protect the consumers from what
provisioning by a huge amount. Comcast         the current model on which the SPs have         they call “fly-by-night” competitors who
and RCN, for example, have much less           expended so much capital. If or when            would cut prices to gain market share,
under provisioned platforms.                   this should happen, each of the service         Massachusetts and most states protect
                                               “plays” shown on the monthly bill must          “the phone company” from competition
*Assuming* that local governments              reflect their individual component billing      that would cut their margins.
don’t start blocking new fiber builds at       in a rational, self-sustaining manner, lest
the behest of Ivan’s lobbyists and captive     the SP be left holding the bag if their only    The problem is that the phone company
legislators, Ivan is merely replicating the    remaining high-take services are merely         does not keep up its end of the bargain.
under provisioning that prevented his          breaking even. Thoughts on this point
being able to expand capacity to support       from you others would be welcome.               Coluccio: I wouldn’t call this a problem
ISDN and DSL in New England.                                                                   as much as I’d identify it as a factor that


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                                      The COOK Report on Internet July August 2005
will serve to define a Darwinian end.         among those who create the value, and            not be able to “hold them up” for a larger
                                              the last mile carrier (Verizon) deserves         piece of the profit pool than the most
Reed: Instead of keeping quality high         no more than a piece of the profit pool.         efficient provider would be able to get.
and prices low (as it might if there were a                                                    Since Verizon is hardly efficient nor is it
serious competitive threat that could take    Coluccio: To the first part, healthy com-        investing in innovation that creates end
share and cherry pick the best custom-        petition would suggest that a service            user value, I wouldn’t be surprised if it
ers), the phone company raises prices,        provider should be free to provide any           couldn’t make a profit under those terms.
pays off politicians, and lets the quality    form of transport that they choose that is       If so, let it die.
suck to the level that consumers start        consistent with its business model. The
to complain beyond the level that cam-        market may not like the fact that reach          Coluccio: My current thinking is based
paign contributions and other bribes can      and the authenticity of content is not true      on the prospect of some very hard times
sweeten. You would too, if you got such       end to end, so it goes to another pro-           ahead for the RBOCs, because this last
a sweet deal, and all you needed to do        vider that meets - or is more conducive          ditch FTTP attempt just may not make
is structure your accounting system so        to meeting - those end to end expecta-           the grade, for many of the reasons we’ve
that it allocates costs to each line served   tions. But just as Jim was correct earlier       discussed upstream. And if it doesn’t,
that represent what it would take to pro-     in asserting that the market, and not I          you can rest assured that their wireless
vide that level of service with today’s       alone, will decide if a method of content        assets, which are still robust enough
technology and efficient processes, and       delivery is desirable (in that former case,      to keep them going, will be spun off in
low G&A - e.g. CEO salaries and perks.        because a movie could be delivered in            advance in the name of shareholder
Competition is a much more effective          45 seconds), whereas I complained about          interest, before anything shows signs of
pressure for cost reduction and innova-       the inadequate upstream provisioning,            falling apart on the ground.
tion than “rate hearings”.                    so, too, the market proper may not give
                                              a hoot about end to end to the extent that       As a means of averting such an out-
The sandbagging that phone companies          you do. So again, given a field of two or        come, the RBOCs might change their
do in tariff hearings is just appalling.      three providers, Darwin steps in to do the       tune about opening up their pipes. Or,
                                              ultimate form of mediation.                      they might even ALSO compete at the
Coluccio: And yet they seem to be seek-                                                        higher layers of the stack while riding
ing to lose the common carriage label in      Reed: The best way to determine what             over others’ wires at some point, like
favor of information service provider, or,    value Verizon creates is to have competi-        AT&T almost did over UTOPIA’s until
variously, to Internet Service Provider. If   tion at that level (bit transport) and let the   it was acquired.
they were to succeed in becoming ISPs,        prices settle to that of the most efficient
wouldn’t they at the same time lose the       provider.                                        This last prospect is not as far fetched as
privileges ascribed in your last statement,                                                    it seems, imo, because they are going to
above? I’m not fully grasping the logic       Coluccio: Agreed, but this would dictate         be very stressed to get a small percentage
behind their strategy there, so if you or     that a comparably efficient alternative          of their customers homes passed with
Fred or someone else could jump in and        Layer 1 infrastructure were available in         FTTP over the next several years, while
clarify this strategy, I’d appreciate it.     the same serving area, wouldn’t it?              FTTH networks are being installed by
                                                                                               independents and municipalities with
Reed: [Returning to arguments about           Reed: The RIAA or MPAA or ABC or                 increasing numbers, monthly.
transport,] the transport should not get to   CBS or my mother on Mother’s Day
eat into the value of the end-to-end ser-     should get the profit from the value they
vice. The profit pool needs to be divided     create for me, and the transport should




                                                                93
Interview, Discussion, and Article Highlights
             Click on blue page numbers below to go to those pages - no live URLs in this section


Telecom Transformation                        erate as a large entity and they are now
                                              going to be an even larger one. In this       Hussain: Yes, I am saying that this
The Hussain Interview                         sense becoming larger should play to          edge-based hosting applies to all busi-
                                              their strength.                               ness use. It’s not just large enterprises.
p. 13 Considering that the network is re-
                                                                                            Let’s just say any entity - taking it away
ally the only asset they [the LECS] have,
                                              p. 14 If you say that the acquisitions are    from the analogy of content providers
it is likely reasonable for them to want to
                                              taking place because the ILECs need to        so you can see how broadly I think this
protect this asset in the most aggressive
                                              survive and they know how to operate at       might apply.
manner possible. Whether it is regarded
                                              levels of scale that are very large, what
as fair or unfair, the rationalization they
                                              you create is an environment below            p. 16 Now there is a very significant re-
are making is easy enough to perceive.
                                              that level of scale that is very open to      maining piece that you have been asking
                                              competition - because the consolidated        and that is how does the traffic get from
If this is the case, you must ask what is
                                              ILEC-IXCs would be very large they are        the edge host to the end network? That
taking place that forces them to pick up
                                              not probably able to enter that smaller       is the piece that I would like to describe
a line of business that is comparable in
                                              market space competitively relative to        in more detail. From my point of view
respect to their local voice business -
                                              other service providers such as re-po-        my answer to this question is that small,
namely the long distance business. This
                                              sitioned CLECs, and Integrated Access         medium and large enterprises, local gov-
is an area that is competitive in a way
                                              service providers delivering metro and        ernment entities and content providers
that their local access services are not.
                                              local area broadband.                         are able to determine and gain access to
But it is also subject to the same price
                                                                                            transport quite competitively between
erosion that they see in their last-mile
                                              p. 15 The importance of the network in-       wherever they are located and the point
business.
                                              frastructure piece in the middle (the Tier    of access to the last mile no matter
                                              1 IP backbone) has hugely changed and         whether they are regional or metro.
pp. 13-14 . I would therefore conclude
                                              has become far less important than the
that the general value for the ILEC that
                                              local infrastructure. This national level     If they are metro, they will choose
does exist at the end of these acquisi-
                                              infrastructure that would be between          from among the competitive metro or
tions is that the larger size of the com-
                                              the hosting center for the content and        fiber networks. Now bear in mind that
bined base of the two companies (the
                                              the last mile that used to be the Internet    I am looking at macro patterns. I am
ILEC + IXC) is enough to trigger a sub-
                                              Service Provider, ISP. The ISP used to        generalizing and you can get a myriad
stantial restructuring of the combined
                                              say that it was a fully routed network        of specific situations that might not fit
entity for the better. While all this can
                                              that could take one’s traffic and deliver     the generalization. Between the very
also be viewed as leading to the lay off
                                              it anywhere on the planet.                    large-scale players and those that can
of thousands of people and the cut back
                                                                                            operate effectively at this metro, local,
of capital expenditures by some huge
amounts, one can equally say that this        Welcome to the “Flip”                         and regional tier there is clear, open
                                                                                            competitive space because the very large
is an over-simplification and that there
                                              It used to be that all traffic really had     players don’t want to be bothered with
are tremendous opportunities of scale
                                              to pass from the originator up this hi-       business that doesn’t have sufficient
that will enable savings and efficiencies
                                              erarchy to the Tier 1backbone and then        scale for them.
that might allow the emergence of a new
generation of “super carrier.”                down again to some other location on
                                              the edge of the network. These circum-        COOK Report: So you are saying that
                                              stances have now flipped to make the          the efficiency of scale for the large scale
I think that the idea of these economies
                                              originator of the content that matters to a   ILEC or cable operator is in enabling
of scale is a very strong motivator and
                                              broadband-connected user to be deliver-       the large scale infrastructure that enables
that it is more significant than any as-
                                              able by the owner of that content from a      users numbering in the tens and eventu-
sessment of the intrinsic value of the
                                              point as near as possible to that end user    ally hundred of millions to plug into the
target company itself.
                                              as is feasible for them to get to.            broadband grid? Providing the generic
                                                                                            grid is the large-scale business model
COOK Report: And if the technology
                                              COOK Report: So you are saying that           with the economy of scale? Yes?
transformation is ongoing, they have got
to engage in cost savings wherever they       it is edge-based hosting centers that will
                                              serve as a means of access for content        p. 17 COOK Report: What I think I
can possibly grasp them?
                                              over the ILEC controlled last mile in this    hear you saying now is that, what is im-
                                              newly turned upside down world?               portant is an Internet of micro-markets
Hussain: Right. They know how to op-
                                                                                            rather than everyone trying to deliver the
                                     The COOK Report on Internet July August 2005

whole world?                                 That everyone should have some reason-
                                             ably well-defined and cost-substantiated      Both of these RBOCs have inherited the
Hussain: Let me respond slightly differ-     access to some high speed Ethernet in-        malignant parts of the old AT&T culture:
ently. My message is that over the course    frastructure?                                 the rigid military-like hierarchy, the poor
of the past five years in particular, the                                                  internal communications, the inability
global IP backbone business has become       Hussain: You got it.                          to deal with “customers” instead of
commoditized and the circumstances                                                         “ratepayers”, the lawyer-driven market-
where downstream service providers           Interview Discussion:                         ing. They can’t survive in a competitive
had to have a commercial relationship                                                      world.
to their upstream has dissipated. They       Fred Goldstein: Farooq suggests that
have found all sorts of work-arounds         bigness makes the deal work. I don’t          p. 20 Structural separation (outside plant
that have been so well described in the      see it -- HP certainly didn’t prosper by      vs. service-co) is the right answer; regu-
COOK Report over the years.                  eating Compaq, which was far healthier        lated common carriage and unbundling
                                             than AT&T. SBC presumably sees value          is the best thing short of that. Deregulate
The other thing that has taken place is      in AT&T’s existing enterprise and gov-        a monopoly and you get abuse. Deregu-
that if an upstream Tier 1 ISP wants to      ernment contracts, though if I were still     late a duopoly and you get a slight cap
charge too much, your traffic can still      a telecom manager I’d be sure to be           on the level of abuse, but it’s still not a
get to where it needs to go by many          checking my “change of ownership”             real free market.
other strategies that you can apply. And     clauses, and looking for alternatives.
moreover that you can do this with very      AT&T’s network itself is rather quirky;       p. 20-21 Coluccio: For clarity, since
little loss of network performance.          it doesn’t have huge bandwidth, but it        the term isn’t used as much as it once
                                             does go to a lot of places that no other      was, by the divesting of CAPs, you are
p. 19 COOK Report: If you are going          IXC reaches. It is essentially a mo-          referring to the Competitive Access Pro-
to have a wholesale market for Ethernet      nopoly wholesaler of PSTN connectiv-          viders that were acquired by the IXCs
and if discussion is needed to establish     ity to rural America. That monopoly is        prior to this round of mergers, e.g., TCG,
a framework for this Ethernet market to      no doubt attractive to SBC. AT&T’s top        MFS, Brooke and the lot, correct? Such
play itself out in, who sets the rules? If   and bottom lines, though, are shrinking,      was a major contention of mine when
there is to be a wholesale market, then      so it’s hard to justify the acquisition on    Farooq polled me about the mergers
how does access to that market play out?     shareholder value grounds.                    back in February, and I’ve reiterated it
Who defines it and sets the terms and                                                      here, since. So I agree.
conditions?                                  More realistically, the primary motiva-
                                             tion for the deal is CEO ego, what I          Goldstein: Yes. I use the term now ge-
Hussain: That is why I said the simpler      sometimes call “P.D.’s”. Ed wants to          nerically to refer to any non-ILEC that
you can keep it the better. We have the      be the biggest rooster on the farm, and       owns business-grade (vs. just cable)
public Internet infrastructure over which    Ivan’s the slightly bigger cock right         local distribution facilities. Note that an
we cannot deliver anything valuable          now. (Of course they have different hen-      MSO can become a CAP if it wants to,
so we’ll just leave it like that. We will    houses and no spurs.) And that explains       but they often don’t facilities in business
always need to buy connection to that        VZ’s willingness to enter into a bidding      areas. Virtually all CAPs are CLECs;
infrastructure and that’s fine. Those who    war (which is usually a bad idea) for         only a small percentage of CLECs are
have the large infrastructure on which       MCI. Everything I said about SBC and          CAPs.
serious commercial traffic depends will      AT&T is also true about MCI, save the
have to figure out an inter-carrier charg-   rural network. Ivan’s less swaggering         Coluccio:The implications of not divest-
ing regime.                                  than Ed, but he’s still just the leader of    ing those properties are hard to imagine
                                             Ray Smith’s old junta (the “SLORC”).          at this point, if you consider the need
The issue then is what is the best way to    MCI’s bigger asset is UUNET, the top          for route diversity and redundancy, not
allow the development of new services        IBSP. VZ’s attitude towards the Inter-        to mention pricing leverage for com-
without having to define applications by     net has always been negative. ILECs           mercial entities, even if only in a limited
some technical or regulatory cubby hole.     and their toadies in Washington (Pow-         number of, albeit largest, locales.
Under such a regime people would have        ell being their recently-deposed leader)
to categorize new services based on          don’t even talk about “Internet”, they        Goldstein: Agreed! The FCC is open to
what is beneficial to them commercially      talk about “broadband”, which implies         Comments on the mergers, and I should
rather than on what the services really      a walled-garden approach to content.          hope that a LOT of comments require
are. So instead of going down that road,     Watch that shift; once there is no com-       that the in-region CAP facilities be spun
why not simply say we will toughen up        petition from real ISPs, then they hope       off. I don’t mind if VZ and SBC keep
and make sure anti-trust rules work?         to milk “broadband” like a WAP on             some strands for their own use, but they
                                             steroids. I think it’s futile, but it could   should not be allowed to control the
COOK Report: So where is the focus?          be painful.                                   MCI Metro, Brooks, MFS, TCG, and

                                                             95
                       COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
other CAP facilities that got rolled up by     proved to be working in the other direc-       on day one they can offer more PoPs and
MCIW and AT&T.                                 tion, with end users driving new services      have a lower price per minute for the use
                                               from their own edge platforms, where           of their PoPs than AT&T because they
Coluccio: If history is any lesson, one        transport providers have little if any busi-   have been able to inherit the scale of the
has to conclude that if the Fortune 100s       ness meddling. And increasingly, it is the     layer below them. A colossus like AT&T
are doing something cutting edge in the        services I’ve just mentioned that are no       which is trapped in vertical integration is
transport space today, and it works to their   longer dependent on the merging entities       also deprived of being able to reach the
satisfaction, then it’s not long before the    that we’ve been discussing, as services        effective economies of scale to be found
F500s and the F1000s, etc., all the way        become the province of the end users’          in any one layer.
down to the SoHo user follow suit. This        own choices and designs.
has been the trend ever since the first                                                       pp. 23-24 Now in your headline that “the
customer-owned modems and T1 multi-            Tom Evslin Interview                           telephone is becoming software” you are
plexers were used by enterprises, and it                                                      illustrating an important point. We were
follows to this day where lambdas and          p. 22 I think there is a good reason for       having some degradation in our VoIP ser-
traffic management algorithms constitute       this shedding because I don’t think verti-     vice. It had to do with some experimental
the new model of the day. Consider that        cal integration works except in the case       stuff that we were doing with our local
today’s FTTH deployments are using             where a monopoly has been granted. I           WISP and stuff that was not the WISP’s
WDM all the way to the home, even if           can tell you that, having lived inside the     fault. After some frustration I went out to
it is only a three-wavelength scheme at        vertically integrated AT&T, the problem        the local Circuit City and brought home
this time.                                     is that in most of the layers, you never       a new LinkSys adaptor for my Vonage
                                               see the real customers. The reason for         service. What I found was not only did
Goldstein: Not necessarily, if essential       this is that your customers are not the        it work, which I expected, but that it also
facilities do not become available. Termi-     real end-users but rather the people in the    solved all the quality problems that I had
nal equipment and computing equipment          adjacent layers.                               been experiencing. In the software of
have continually come down in price,                                                          this later adaptor there was much better
opening up their availability to smaller                                                      jitter buffer management. It turned out
and smaller users. But raw transmission        Why the Horizontal                             that there was a software solution to what
pipe costs do not come down much -- it         Model Wins                                     was initially a network problem. What
costs a lot to lay fiber into the ground                                                      this tells me as well is that, even in the
or even hang it on a crowded pole. In a        It is a surface to volume problem really.      case where the telco or cable co may be
utility model, the increasing bandwidth        The vertically integrated company has          standing in the way of quality for VoIP
capacity (caused by cheaper electronics)       way too much volume and way too little         service, there are likely to be alternative
would lower the per-bit cost of a shared       surface area. And surface is where you         software solutions.
fiber. But in a monopoly model, the pipe       touch the customers. Instead of spending
owner takes advantage of its natural           your time thinking about what people           I didn’t have to replace the software.
monopoly to create scarcity on that last       really pay money for, you argue about          Instead I just bought a new piece of com-
mile. VZ isn’t going to allow you to play      transfer pricing which is a totally unpro-     moditized hardware with new software
lambda on your FiOS. They do not tariff        ductive activity. Your capital budget is       inside and found out that it works better.
dark fiber. The FCC has just discontin-        set not by market forces but by what po-       I take this as proof of your assertion that
ued the availability of unbundled dark         litically powerful adjacent layers need.       the phone is becoming software because
fiber loops, too, so CLECs cannot take                                                        my problem had a software solution to
the spare ILEC fiber in the ground and         Similarly your access to supply is re-         it.
allow their customers to light it. Only        stricted.
CAP fiber can be treated as you wish,                                                         p. 24 COOK Report: People were guess-
and nobody’s pulling very much of that!        When I started AT&T WorldNet, we               ing that the LECs were doing it to gain
(I do have clients pulling fiber, but it’s     began with a bunch of AT&T PoPs that           the IXC’s enterprise customers but there
hardly widespread.)                            came from EasyLink. It was nice having         is an irony afloat here for this will in-
                                               them there to start with. But meanwhile,       crease the uncertainty that the largest
That’s my main problem with Farooq’s           out in the real world, we had PoPs being       enterprise customers have to deal with.
model too. He’s too sanguine about fi-         set up by UUNET which was function-            Their network upgrade plans may go
ber’s being available to most customers.       ing as a horizontal company special-           out the window because of concerns
I don’t see it happening under the current     izing in setting up PoPs. Working with         over things like who owns the fiber?
regulatory regime. The megamergers             UUNET, AOL got out of having to run            Where do my strands really go? What
make it even harder.                           its own PoPs and just sold services. Soon      will be taken offline when the process
                                               UUNET has more PoPs than AT&T be-              completes? And so on. One irony here is
Coluccio: From the application perspec-        cause it had all these different companies     that if the enterprise is large enough to
tive, ironically, leadership and stimula-      selling at the retail level. And a new re-     consider rolling its own infrastructure,
tion for new “service” products have           tailer comes along, like an Earthlink, and     this added uncertainty may be enough to
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                                     The COOK Report on Internet July August 2005
get it to take the plunge.                   half to two-thirds of all enterprise long        And others, who may just now be wak-
                                             haul (and many metro) carrier service            ing up to smell the roses for the first time
Evslin: It certainly is a possibility that   acquisition strategies go out the window,        after getting smacked upside the head,
many larger companies deal with a net-       for starters. In short, it’s difficult to play   may do as you suggested. They may
work manager whom they may pay to            one against the other when they are now,         elect to be more proactive in achieving
roll a network for them. I don’t think       in some instances, one and the same. Is          their own destinies and decide to as-
that many non-carrier companies want         it a slam dunk with Justice? Don’t know.         sume more radical approaches. Includ-
to physically own fiber. But they are        Each of the IXCs, by virtue of their TCG         ing asset-based networking where they
certainly going to look at the feasibil-     and MFS metro (and even long haul)               roll their own or partner with new play-
ity of virtual networks of some kind.        fiber properties, present overlaps with          ers to achieve current- and next- genera-
I think it is more a question of human       the RBOCs in the larger, hence more im-          tion convergence objectives.
integration.                                 portant from their perspectives, markets
                                             that they serve.                                 p. 26 Coluccio: When I refer to telco
Let’s say you are the IT manager who                                                          below, I’m referring to the mega-merger
has been dealing for quite a while with      What does this do to 1) the availability         RBOC.
the same AT&T salesman. You know             of a competitive marketplace, and 2)
him and trust him. When you have             customers’ need for alternative loop/            I’ve come to realize that, after several
had service glitches, he has been able       metro provision in order to meet diversi-        years on this list dancing around the
to help you out. A year down the pike        ty and redundancy criteria? If they have         subject of revenue generation vs. the
in the newly merged organization you         to divest or otherwise spin some of these        constant dollarwise devaluation of net-
may find that your trusted AT&T sales-       networks out of their fabric, do they            work services, I’ve never fully obtained
man has lost in the political wars and       retain the customers who are attached to         a sense of how service providers at all
suddenly you are dealing with this guy       those networks? Consider, many of the            layers of the stack would generate rev-
from SBC who doesn’t know anything.          BWNG, Wiltel, L(3) and the myriad of             enues going into an all Internet future.
That would at least make you reconsider      reseller long hauls depend on those two          Yeah, there are the obvious default paths
where you are going to buy your com-         metro carriers, just as much as AT&T             that are being taken, but not explana-
munications from. Nominally you were         and MCI do.                                      tions of how those bucks would be made
considering that all the time because                                                         after the ravaging effects of convergence
of price, but this gives you additional      Digging deeper into the mesh of politi-          have been fully felt, as we rapidly ap-
reasons.                                     cal and relationship-based arrangements          proach this all-Internet future.
                                             around the globe, including the peering
With something mission critical, if you      and transit relationships on the Internet        And that is exactly where we’re headed,
have a stable relationship, you are going    that exist, not to mention the in-country        sans many of the incremental features
to be reluctant to disturb it. If all of     backhauls from cable landing stations,           that were invoked in core network intel-
a sudden you go from someone who             can be a daunting experience.                    ligence boxes, which, arguably merited
knows you well to someone who does                                                            corresponding incremental subscription
not and is not able to respond quickly       Ditto for the submarine- (especially) and        charges to the customer for every dip
and decisively to your problems, you are     some of the satellite- consortium agree-         into the IN database. And if we, on this
going to find yourself looking for a new     ments. I’m suggesting that the latter will       list, with the backgrounds that we pos-
supplier. Even if your salesman survives     present a potential barrier due to vetoes        ses - and relatively immune from the
he may have a new boss so the next time      by the Europeans. At best, it’s going to         consequences of our own academic as-
you tell him I really need extra help in     be a very long time before those orga-           sumptions and hypotheses - can’t begin
prompt provisioning of these new cir-        nizations are reorganized to reflect the         to enumerate how SPs would generate
cuits, he doesn’t follow though because      new ownerships.                                  revenues going into the future, then it’s
his new boss can’t or simply doesn’t get                                                      hard for me to imagine what the head-
him the needed support.                      Getting back to one of my original               lights must be like that the traditional
                                             points, though, it’s conceivable to me to        carriers must be staring at, today.
p. 25 Editor’s Comment: If the acqui-        have a number of scenarios where en-
sitions became a tipping point to propel     terprise strategies that went into mixing        The RBOCs have already sent out clear
more and more enterprises into building      and matching long hauls with metros in           signals that the platforms that they con-
their own networks, it seems that the        order to meet diversity and redundancy           sider to be their most promising money
whole rationale of the buy-outs would        criteria, (in addition to satisfying pric-       makers in the future will be based on
evaporate.                                   ing objectives), could be voided. This           IP constructs, primarily based on Mi-
                                             relegates the customer to staying with           crosoft’s Media software and IPTV for
Here is how Frank Coluccio summed            what they have, despite losing the type          now, where video is concerned. It would
up some of his thoughts on February 17:      of leverage they had before.                     follow, then, that they are opening them-
The mergers? Très complex. Roughly a                                                          selves up, either knowingly or not, to in-


                                                              97
                      COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
creased competition, not only from their      same dynamic is eating its way into the        Sprint's Open Platform
competitors in the MSO and municipal          enterprise, as well, which it clearly has
camps, but from the very end users they       been and will continue to do. The scene        Failure
plan to serve, as well, since end users can   is not as bleak in the enterprise during the
                                                                                             pp. 28-29 Unfortunately, if there were
now go to the content source directly via     intermediate term, imo, because there are
                                                                                             ever a plan within Sprint that was based
the Web.                                      a great many extant conditions that will
                                                                                             on any insights into the Stupid Network,
                                              not change overnight, and because of
                                                                                             I never saw it. I was in the Product Plan-
While the MSOs can compete with them          the greater variances that exist from one
                                                                                             ning and Strategy Group where, by all
at Layers 1 and sometimes 2 (physi-           industry sector to the next, each demand-
                                                                                             accounts, it should have appeared.
cal media HFC vs. FTTP), the greater          ing of a differently tuned set of vertical
battles will be fought and won or lost at     services. Combined, these two factors
                                                                                             COOK Report: And yet paradoxically,
the higher layers in the stack, where the     still support a window of opportunity
                                                                                             perhaps some people had some clue
actual services that users want and need      for the telcos who have in part managed
                                                                                             because you did have the PCS group
will be provisioned and supported.            these applications, up until now, but with
                                                                                             centered around a wireless open applica-
                                              those same applications now being trans-
                                                                                             tion platform?
One service sector that we’ve not spoken      formed into Web-based services, the
much about prior to now, which has also       telcos by and large either don’t have the
                                                                                             Geddes: There were some people who
been good to the RBOCs, has been the          webbing nor the philosophical resolve,
                                                                                             wanted to go in that direction but their
wireless sector. I failed to mention this     yet, to take that business on, much less
                                                                                             desire to do so was frightening to guys in
in an earlier message, when I stated that     promote its arrival.
                                                                                             the network division because there you
last mile bundled services (triple plays)
                                                                                             had people who thought their whole job
were their last vestiges of hope for          So naturally, the upper layer services
                                                                                             in life was to vertically integrate their
making a decent profit. Just how profit-      once again will be sourced to those who
                                                                                             layers with those above and below and
able are these cellular and PCS wireless      can handle them, leaving that much
                                                                                             to create endless SIP proxies and plans
services to the RBOCs, really? Now,           less revenue producing potential for the
                                                                                             for IMS services,
and into the future? Have the wireless        telcos in the enterprise sector, too. What
pricing and feature wars ended yet? And       we’re going to see happening here over
                                                                                             COOK Report: So their point of view
how will VZ and Cingular attempt to           time (or continue to happen, if you’ve
                                                                                             was to be able to slice here and dice
leverage their 3G offerings in the future     been observing up until now), in my
                                                                                             there, and charge a few cent for these
as a substitute for their landline (FTTP/     opinion, will be a form of default layer-
                                                                                             packets over here and a few more for
DSL) alternatives?                            ing taking place, where even in the ab-
                                                                                             those over there?
                                              sence of regulatory actions or mandates,
I’m already reading about users who’ve        enterprises, like users in the consumer
                                                                                             Geddes: Yes. Part of our naïveté was the
been highly satisfied with their 2 to 3       and SMB spaces, will elect to roll their
                                                                                             technical approach, that was not to build
Mb/s download speeds using Verizon’s          own applications (such as many of them
                                                                                             a network that was as stupid as it could
EV-DO, to the point where a couple of         already have), relegating the traditional
                                                                                             have been. Why? Because we had to deal
them are thinking of disconnecting their      landline carriers to transport services,
                                                                                             with the tyranny of the installed base.
landline access. Is this an important         only. And in order to make up for the lost
                                                                                             We ended up proposing a smart edge
question to be asking when discussing         application revenues the landline carriers
                                                                                             network - very similar to the OPES stan-
these mega-mergers? If so, how?               will be pressured into raising their pric-
                                                                                             dard (Open Pluggable Edge Services). It
                                              ing of transport services as a matter of
                                                                                             was focused on some smart edge proxies
No mention of 21st Century wireless           survival.
                                                                                             that would deal with identity and bill-
would be complete without also stating
                                                                                             ing and some other issues. For example,
that it, too, is undergoing convergence
                                                                                             you could pop up authorization screens
at the IP layer and now beginning to          p. 27 Andrew Odlyzko: Concerning the
                                                                                             to release customer data or to bill the
support many of the same multimedia           value of AT&T and MCI to their acquir-
                                                                                             customer some extra money. It did not
features that HFC and FTTP/DSL do,            ers: It’s all in their enterprise customers.
                                                                                             require the application provider to install
as well. Which, I think, brings this last     What I think would have made sense
                                                                                             lots of Sprint-specific logic in its appli-
message full circle, leaving out only         was to combine AT&T, MCI, and Sprint
                                                                                             cation. All the provider would have to do
enterprise considerations, which I’ll say     to create a service providers for large
                                                                                             was to say which URLs they wanted to
one or two words about..                      businesses, one that could offer an alter-
                                                                                             bill for, or which URLs they wanted to
                                              native to the ILECs, and which would
                                                                                             have customer profile information added
If applications are moving closer to the      have eliminated the cutthroat competi-
                                                                                             in the HTTP request headers.
consumer’s edge, with software now            tion among these IXCs that has weak-
being mounted as clients on end users’        ened them to the point of non-viability.
                                                                                             p. 30 COOK Report: It sounds as though
appliances transforming telephones into
                                                                                             you are saying that there is no real focus
computers, I have to conclude that the
                                                                                             to what Sprint has evolved into. Wireless

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                                        The COOK Report on Internet July August 2005

here, some local over there, seasoned           strategy that overlap a bit but have         nicipal owned utilities to sell electricity
with some fiber and undersea cables and         a series of very good business model         but not telecom services? ... In truth,
enterprise customers?                           archetypes. You can have product arche-      publicly owned enterprises are not trying
                                                types for example and be uniquely good       to squeeze out private competitors, it’s
Geddes: Yes. No real viable focus. Sprint       at making product features. Or at sales,     the other way around. The Legislature
reorganized to be “customer centric.”           or at financing. The telecom archetype       is being asked to solve a problem that
This was executed when Gary Foresee             centers, to a considerable degree, around    does not exist. ... It would be wrong for
came in replacing Esrey as President            distribution. What you are always aim-       the Legislature to handicap those com-
in early 2004. The local parts of Sprint        ing for is a network with more nodes of      munities in order to serve the ambitions
got divided up. The consumer part was           access that reach more other nodes of        of the telecom giants.” . . .
left alone and the business parts were          access. That will win the game.
rolled back into Sprint Business It be-                                                      Forming a Framework
came a very vertical organization with a        Symposium Discussion                         for Muni Networks
horizontal network and IT group spread
across the otherwise vertical silos.            p. 34 Editor’s Introduction: Through-        p. 39 Coluccio: I want to air a few com-
                                                out the United States the Telco Cable        ments and general observations I’ve
In the world of the stupid network, you         Co Oligopoly is on the warpath against
have horizontally layered business units.                                                    made in the area of municipal networks
                                                the economic future of countless local       over the past ten to fifteen years.
Rights of way. Connectivity and then            communities. In state-after-state the
the application platform, including bill-       Oligopoly’s lobbyists run screaming to
ing systems. And finally the customers                                                       The most important initial point to make
                                                the legislature demanding that state gov-    is that most of today’s municipal net-
and customer relationship. If you are not       ernment protect the interests of share-
organized around these things, it is very                                                    work architectures tend to emulate the
                                                holders buy preventing municipalities        networks of the incumbent providers
hard to deal with the Paradox of the Best       from establishing community owned and
Network. It you are “customer-centric”                                                       that previously, or currently, serve them.
                                                operated broadband networks – falsely        These are the very same networks that
with a deeply vertical organization, you        claiming that these efforts are wasting
are going to be spending all your time                                                       many municipalities strive to compete
                                                tax payer money to do something that         with or wish to replace. The propensity
looking for the “golden” application            the Oligopoly wants to do if only the
that replaces PSTN voice. The problem                                                        that this has to flummox the faculties
                                                price is right and it is granted enough      of one’s brain is not readily apparent
is what you are looking for does not            time.
exist. What you wind up with is a lot of                                                     because it has been the predisposition of
niches that you must fill and a huge $900                                                    municipalities to look to the telephone
                                                The Baller Mail List                         companies and to the cable operators for
million dollar campus in the middle of
Kansas that your business can no longer                                                      guidance and as examples to emulate all
                                                Jim Baller has lately been making a          along.
support.                                        national reputation for himself as the at-
                                                torney that many community efforts hire      Going forward, I’ll demonstrate why
COOK Report: So where’s it all headed?          to fight for their interests and against
Do you think it will devolve eventually                                                      the foregoing statements are true, and
                                                those of the Oligopoly. He puts out a        in the process describe how and why
down to infrastructure like pipelines and       small mail list made up of URLs and
sewers? The mystery is how one gets                                                          the services that incumbents’ networks
                                                a sentence or two copied from the in-        deliver today are inherently limited by
there? Are we looking at multiple bank-         formation to which the URL points.
ruptcies with local governments running                                                      not only their terms of use policies, but
                                                The subject matter of the list maybe be      more importantly, by the intrinsic chan-
the fabric that is left?                        defined as the broadband productivity        nel shaping and capacity handling limi-
                                                infrastructure wars in the US, Europe        tations that are physically-irreducible
Geddes: I don’t completely agree with           and Asia. Coverage broadly reflects
everything that Bob Frankston is saying                                                      consequences of their basic designs, as
                                                technology law and policy. He will           well. Copying the incumbents’ networks
in the list discussion. There, he is sug-       subscribe readers to his list (the best
gesting that it is all going to be a utility.                                                and technology choices, therefore, does
                                                resource of this type that I have seen)      not seem to me to be a sound strategy,
I think that the locus of innovation needs      who email him with their requests at
to shift from trying to meter the value of                                                   regardless of what business model a mu-
                                                jim@baller.com. The following edito-         nicipality may choose to use This would
packets in search of the “golden” packet,       rial and URL is from his list of May5.       hold true even if in the extreme case
to innovative means of financing infra-         In this case the Lakeland Florida Ledger
structure and networks.                                                                      everyone agreed that all future networks
                                                really “gets it.”                            would be publicly funded.
Michel Roberts has written a book called        Lakeland, FL Ledger editorial: “The
“Strategy Pure and Simple II.” He has                                                        My goal here is to objectively show why
                                                question is, why is legislation necessary    and to state what I see as some of the is-
written a series of books on business           at all? Why is it deemed proper for mu-      sues being faced by municipal IT depart-

                                                                99
                      COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
ments and managers today, along with          signed and built with all of the isolating     exploit an “untold number” of new ap-
the principal architectural options that      characteristics and security safeguards        plications and their supporting business
they should be considering when plan-         afforded to any other enterprise intranet.     models going forward. And there will be
ning their networks. My intention is not      A Muninet, on the other hand, has the          no telling what the impact of those new
to add fuel to an already-polarized issue     potential of reaching out and touching,        and untold applications and business
that very often reaches fever pitch levels    and being touched by, every residential        models will be until the upstream direc-
during debate. Although, I fully realize      and business end point that falls within       tion is unleashed, but all indications of
that some of the facts that I present here    its footprint, and often includes gateways     results from abroad that I’ve seen from
might very well have that effect.             for access to both the PSTN and the            operators whose networks are symmetri-
                                              Internet, just as any other full-services      cal have been surprisingly successful, to
p. 40 It is probably also a good idea at      incumbent provider.                            say the least.
this time to state that the information
presented below is not intended as a          Service Offerings                              Some overseas operators of symmet-
be-all-and-end-all “solution” for munici-                                                    ric systems are reporting that the com-
palities to follow. Rather, it is a view of   Fall Victim to                                 bined level of traffic being generated by
existing conditions in what has been re-      the Incumbent’s                                their power users consisting of SoHos,
garded heretofore as the network’s “last      Asymmetric Network                             P2P’ers, gamers, residential Web hosts,
mile,” with the intent that readers begin                                                    and offsite storage services has been
thinking instead in terms of the “first
                                              “Cookie Cutter”                                higher in its upstream than its down-
mile.” In the end it is left to the munici-   Operations                                     stream requirements, which even I found
pality to decide which of these approach-                                                    surprising. In one town the operator
es it will choose. In some instances they     p. 43 Nota Bene: During the remainder          noted how a new off site storage busi-
may elect to enter the competitive fray       of this paper I will make repeated refer-      ness was blossoming, made possible
as a third leg using some or all of the       ence to the transmission attribute of a        only because of symmetrical transmis-
precepts outlined herein. Or the munici-      channel known as symmetry, or asym-            sion on its system. I should note at this
pality may elect from one of many other       metry, as the case may be. It may help         point that I shall refrain from making
options it has before it, including part-     readers to keep in mind that it is not my      citations for each of the anecdotes I men-
nering arrangements with entities with        intent to assert that any of the transmis-     tion during this discussion when I deem
whom they would otherwise compete.            sion media mentioned, whether copper           them to represent generic occurrences,
It’s the municipality’s prerogative to        UTP, or Coax, or Air or even Fiber, are        but I invite your readers to seek them out
decide which option best suits its needs,     innately predisposed to asymmetrical           individually. Many of my references to
once it has done a complete assessment        properties. Indeed, each of these media        recent developments in Asia and Europe
of its constituents’ needs and considered     types is capable of supporting the trans-      happen to stem from case studies that
all of the alternatives.                      mission of information equally in both         were revealed in the March 2005 issue
                                              directions. What I propose to demon-           of Broadband Properties Magazine, for
                                              strate, however, is how the quality of
I-Nets and Muninets                           asymmetry has been shaped by each of
                                                                                             example, and because they remain fresh
                                                                                             in my mind I’m mentioning them here,
                                              the sectors corresponding to these media       but they are not unique.
Most municipal networks fall under two        types, including that of fiber, for the rea-
general headings: Institutional Networks      sons that I go on to enumerate.                Incidentally, the March 2005 Issue BPM
(I-Nets) and Muninets, which are terms                                                       that I just mentioned should be required
I’ve taken some license to use here           Invariably, such cloning has resulted in       reading for anyone contemplating enter-
solely for the sake of establishing con-      creating “LAST” mile networks that are         ing the first mile broadband space at
vention.                                      designed to deliver far more bandwidth         this time, be it a Muninet or otherwise,
                                              handling capabilities in the downstream        especially because of its treatment of the
The Institutional Network, or I-Net,          direction, hence, far more content being       business models of Asian and European
should probably best be thought of as         sent toward end users, than the end user       infrastructure companies.
the municipality’s “intranet”.                is able to send in the opposite (upstream)     http://www.broadbandproperties.com/
                                              direction toward the network and to            2005issues/mar05issues/march2005.htm
p. 41 Staying with the terms and defini-      other users or sites. While this form of
tions I’ve suggested to this point, there     lopsided delivery profile may have suf-        This transmission channel attribute, i.e.,
are important distinctions between what       ficed for Web surfing, downloading and         the heavy skewing of the channel in its
I’ve called an I-Net and a Muninet            streaming media applications up until          downstream direction, is called ASYM-
that must be observed and respected. I-       now, it will not suffice for the types         METRY, and its implications are enor-
Nets serve the municipality in a manner       of two-way traffic that end users will         mous, if not almost entirely restrictive
similar to a corporation’s intranet, gated    increasingly be demanding in “FIRST”           in terms of the performance that users
off by routers, firewalls, and other IP       mile networks in order to unleash and          experience when sending large files to
services Therefore, I-Nets should be de-

                                                                 100
                                        The COOK Report on Internet July August 2005

their upstreams, and the types of appli-        RBOCs announced that they are now            of IP, and where few present-day resi-
cations they are precluded from using           viewing Ethernet in the First Mile more      dential assets exist in the customer loca-
entirely due to the extreme uploading           favorably than before. I’m sure this         tion that require backward compatibility.
times required. To illustrate this point        came at the expense of much horror and       This is especially true where the newer
from another point of view, asymmetry,          chagrin to the many who’ve waited for        broadband CPE devices are designed
along with the incumbents’ Acceptable           over ten years to see their ATM-based        to handle a multitude of interface types
Use Policies and Terms Of Service, pro-         broadband to come into its own over          through media- and protocol- conver-
vides a level of assurance to ILECs and         fiber. Ethernet as it turns out is being     sion techniques.
MSOs that end users will forever remain         viewed as a replacement for their previ-
consumers of content and not the pro-           ous asynchronous transfer mode-based         p. 46 Before getting to how this might
ducers of it, where the term “producer”         passive optical network (ATM-based           be achieved, let me first answer a couple
connotes one who sends large amounts            PON, or APON) platforms that were            of questions, because someone is sure to
of data of any type or purpose toward           based on the early-Nineties full service     ask them if I don’t: “Where is the prob-
the Internet, whether it’s for peer-to-         area network (FSAN) framework.               lem you’re trying to solve?” And, “If it
peer file transfers, performing large data                                                   ain’t broke, then why fix it?”
backups to offsite storage sites, video-        It was only today (May 26) that the fol-
conferencing, hosting residential web           lowing article appeared on Light Read-       Six months ago I would have made a
sites, SoHo software compiling and data         ing’s Web page: “RBOCs Are Gawking           statement that went something like this:
base replication, or for whatever other         at GPON.”                                    “If the incumbents are doing a good
reason an end user would have to send           http://www.lightreading.com/document.        enough job serving their respective areas
large data files bi-directionally.              asp?doc_id=74353                             within a municipality’s service area,
                                                                                             then there’s probably no good reason
 p. 45 . . . municipalities, especially those   Also telling, and a direct cause and in-     for the municipality to get involved.”
that are only now starting from scratch         spiration of the RBOCs’ new keenness         Likewise, I not too long ago stated to
to plan the buildout of their territories,      on Ethernet in the story I just cited, is    a colleague, “With the RBOCs present
or those that find themselves performing        the recent decision on their part to move    push to install FTTP maybe things are
major upgrades, rehabs or overbuilds of         to an IP format for the delivery of pro-     finally looking up, at least where the
earlier networks, are no longer bound           gram video and VoD, although Verizon         first mile is concerned. After all, the net
to follow the paths of the incumbents           has taken a phased approach to this by       effect of installing all of that fiber in the
when laying down new infrastructure             first introducing analog video over a        field can’t be all that bad, right?”
and deciding on an architecture. Instead,       third wavelength in its PON architec-
municipalities now have the option to           ture, while awaiting the shakeout of its     Well, while both of these measures serve
use a model very similar to that of en-         chosen IP TV platform before deploying       to mitigate to some extent what I now re-
terprise LANs and MANs, whose lon-              it (or so state the reports that I’ve read   alize is actually a very small piece of the
ger distance capabilities have now been         on this issue).                              total picture, they are proving to be too
made possible in the first mile due to the                                                   little, and too late. Incumbents may well
distance transparency that is afforded by       As encouraging as all this may sound, I      have the ability to move off their present
the neutralizing properties of glass and        want to point out that all of the RBOCs      positions if they ever choose to do so,
air. This is, in fact, the approach that        FTTP platforms continue to employ            but they won’t unless they are faced with
has been used by a growing number of            asymmetrical bandwidth profiling,            some real, substantive competition.
point-to-point FTTH networks in the             largely due to their continued use of
Netherlands, Scandinavia, Hong Kong,            DSL in the last several thousand feet        I don’t like pointing to ITU international
Japan, and in the iPROVO and UTOPIA             in their FTTN and FTTC deployments;          broadband rankings to prove my point,
undertakings in Utah, as well.                  through the use of asymmetrical PON          but I will. I needn’t say that before the
                                                technologies in their fiber-direct-to-the-   number of projected homes passed by
Some of these technical points have not         home builds; and, in a more subtle way,      both incumbents’ next generation plat-
been lost on the ILECs, I should add,           through the terms of use for consumers       forms begins to make a difference, it
since they, too, have recently been re-         that are still very restricting.             will be many years out into the future,
evaluating their own FSAN-based archi-                                                       but it’s true.
tectures. Granted, some of the reasons          Aside from their need to escape from
for this may be to meet objectives that         asymmetry, there are other reasons why       It may not be necessary to discuss the
don’t always meet the naked eye, but            Muninets will no longer find it com-         tenuous financial footing of some of the
the point is that they have begun to shift      pelling to use traditional methods and       incumbents, despite the positive images
their views on how they will negotiate          technologies when installing new infra-      they portray through their press releases,
their Internet Protocol futures.                structure and services, especially now       while spending heavily on what many
                                                that voice has come off circuit switch       consider to be a hunch and a bet, but I
For example, recently some of the               platforms and is now under the control       have to.

                                                                101
                      COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
                                              for that period of time, or should have        Hence, a newly created LoopCo has the
I wouldn’t repeat the new criteria by         been put in a waiting position in the          potential of becoming the least common
which broadband quality will be as-           first place. Don’t you think so? What          denominator at Layer 1 over which all
sessed by users, as well as the manner in     is even more preposterous is to suggest        service providers proceed to compete for
which incumbents respond to the need          that the economic well being of a nation       end user business. The point is that noth-
for unfettered end-to-end connectivity,       and all its citizens should depend en-         ing is written in stone and it would be
but I promised David Reed and Bob             tirely on the capabilities of a few private    left to the management of the Muninet
Frankston that I would.                       corporations like the RBOCs. What is           to devise a plan and a business model
                                              especially bizarre to me is that the gov-      suitable for the particular needs of the
Some may think that it’s still too early      ernment has provided the protections to        municipality.
to begin discussing a hybrid first-mile       the ILECs that preclude other providers
access environment encompassing both          from helping them meet national objec-         While the LoopCos of today limit their
wireline and wireless access methods on       tives. Now, how’s that for twisted logic,      market to the rental of fibers only, in
a municipality-wide basis, but it is not.     eh? Although when we remind ourselves          the future they will also manage and sell
                                              that national political leaders have been      wavelengths, which will serve to miti-
Some would disagree that Moore’s Law          incapable of discussing national objec-        gate issues over the need for multiple
caused changes to occur in the Internet       tives because of avowed beliefs that           fibers to end points due to incompatibili-
an order of magnitude faster than the de-     only the market, in the most narrow of         ties between differing service providers
preciation cycles of telco plant and their    definitions, can decide, while thoroughly      serving the same premises. I’ll touch on
underlying 25-year bond maturity dates,       ignoring the fact that markets depend on       this again later on, but for the moment
leaving incumbents far too top heavy in       the economic viability of the nation’s         consider that even today in the FTTH de-
both obsolescing plant and staff to deal      local communities, our current predica-        ployments taking place around the coun-
with the rigors of 21st Century competi-      ment may be seen as inevitable.                try where PONs are being used, there are
tion, but what is, is.                                                                       already three wavelengths being serviced
                                              The calculus of the last mile problem has      by the same, single fiber.
And it may not seem important that an         been screwed to a fare-thee-well for a
untold number of cottage industries may       while now. It’s time that it gets fixed, but   Symposium Discussion
still remain locked down in a wait state      it won’t get fixed by stakeholders fol-
for the day when end users can send and       lowing the same belief system, and their
receive high speed data in both direc-        providers following the same blueprints        MCI-Verizon: A Happy
tions equally, but that has been proven to    and roadmaps that they have up until           Ending, But for Whom?
be the case repeatedly elsewhere around       now. Which is to say, following the di-
the world, so it must be true.                rection of Washington and the quarterly          p. 50 COOK Report on April 9: My
                                              expectations of Wall Street alone simply       personal observation of David Isenberg’s
p. 48 tims in these arguments, there are      won’t cut it. So, where do municipalities      F2C meeting is that the ideology of the
only participants. And do you know            go from here?                                  90s is dead. Long live the Stupid Net-
what? It’s a little bit late for recrimina-                                                  work! My interest is in continuing to
                                                                                             describe the economic, policy and tech-
tions and finger pointing at this stage of    Muninet as LoopCo?                             nology impact of the on-going telecom
the game. What we have today is what
we have. So, if we leave alone the fact       p. 49 The best, and probably the most          revolution and in doing so to prod and
that the larger incumbents along with         common, way to illustrate this model           mediate a diverse collection of view-
their regulatory and politician partners      is by envisaging the splitting up of an        points. The revolution very definitely
had a major hand in the matter and they       ILEC, where its outside plant compo-           isn’t over. But the world is not going to
demonstrated very poor abilities in nego-     nent, including all of it copper and fiber     look much like we thought it would in
tiating disruptive change, consider that      loops, field nodes and rights of way,          the summer of 1997 when David wrote
they are in some perverse ways actually       become the property of a structurally-         his paper. Ultimately it would be nice if
correct when they now say that it’s not       separated or divested operating entity         it did look like that. Nevertheless, what
their fault, and that it will take them       that we’ll generically call “LoopCo.”          will happen remains to be seen.
years to fully catch up to the rest of the    Once LoopCo is created, the remainder
world, assuming they ever will. And                                                          p. 52 Coluccio One shouldn’t have to
                                              of the ILEC continues to provide switch-
that they can’t work any harder or any        ing, content, directory services, its usual    wonder for too long why the RBOCs are
faster or any more economically than          PSTN functions, in short, and in fact any      placing so much capital in their last mile
they already have been in order to make       other service that it so chooses, except       initiatives today, hoping to at some point
things right.                                 for loop services to the customer, and it      achieve ARPUs that are high enough to
                                              continues to operate under its original        offset the continuing erosion of revenues
It’s nothing short of preposterous to         name.                                          that I cited above. Add to those their
think that the US should have to wait                                                        diminishing copper line rentals and the


                                                                 102
                                      The COOK Report on Internet July August 2005

shifts taking place to cellular wireless      wireless offering that is divorced from        limited to its “bit hauling” role, is
and VoIP.                                     the incumbents entirely. Such operations       emerging as the most important factor
                                              would allow end users to do for a lower        responsible for transforming the land-
Again, consider the price that bankrupt       price many of the things that the duopoly      scape today, bar none. Carriers at all
MSO Adephia commands ($18 Billion)            would prohibit, and with the approach of       strata need to realize that the “specific
and then compare with those of AT&T           IPTV would enable their customers to           expectations” that users once had of
(~$16 Billion) and MCI (~$7 Billion).         have cut rate video services, as well.         them are no longer valid. The carriers
                                                                                             need to come to terms with the fact that
http://www.siliconinvestor.com/read-          David Reed: Just as a side comment, the        they are no longer the critical links in
msg.aspx?msgid=21211156                       “stupid” network was a term invented           the value chain for the delivery of ac-
                                              to describe the opposite of AIN - a tele-      tual upper layer “services” as they once
I’ve only focused up to this point on         phony centric idea that the best network       were, and might have been today. And
today’s common uses of broadband. I           was the one carefully designed by “the         this holds true for both consumer and
have not covered what I think could be        [monopoly] phone company” to deploy            enterprise customers who increasingly
at stake if bandwidth symmetry were           all the services that any user might want,     have built their own services (applica-
introduced into last mile broadband of-       provided by central servers owned and          tion libraries) at the edge and apply them
ferings. If and when the RBOCs and            operated by the phone company.                 either across the Internet or across “any
MSOs modify their AUPs/TOSs and                ...                                           old” dedicated pipe or form of radiated
allow symmetry on their pipes for con-                                                       energy, where they are available at com-
sumers, entirely new possibilities begin      The trick is NOT to build infrastructure       modity prices, that gets them to where
to emerge. Howeveer, those new op-            that is incredibly optimized for one           they need and want to go.
portunities appear threatening to the in-     target application (“smart” infrastruc-
cumbents who fear that loop symmetry          ture), but to build infrastructure that can    Historically, common carriers were top-
would only serve to further cannibal-         survive many generations of innovation         heavy with vertical “services” and ad-
ize their key revenue services. And of        (now that innovation cycles in commu-          hered to market principles that were
course, they would be right in thinking       nications are < 3 years).                      grounded in bandwidth scarcity. This
this way, because that is exactly what                                                       regime has been turned on its head
is going to happen. And this is the main      p. 53 I personally think the issue of “stu-    today, although not fully. We are wit-
reasons why SPs’ have decided to hold         pid vs. smart” is pretty much moot and         nessing the ILECs making last-ditch
back on making symmetry available,            not worth reviving. The new challenge          efforts to repackage and add to the types
notwithstanding the other physical fac-       is driven by the growth of techniques          of services they offer in the form of ser-
tors affecting the transmission limita-       for nomadic and viral connectivity. Pur-       vice bundles, and the are ignoring - or
tions of the telcos’ twisted pairs and the    veyors of fixed-in-a-box services (cable       working around the facts outlined above
cable operators’ coaxial spectrum plans       modems, POTS handsets, Set top boxes           - almost entirely.
that hinder symmetry, as the situations       plugged into satellite or cable) bind ser-
on their networks stand, today. Can the       vices to an immovable device. But as we        It’s only when their larger assets are
RBOCs correct those earlier shortcom-         see from the notes on Neilsen’s “people        threatened with the prospect of being
ings? Of course they could. Especially        meters” that track what a person sees as       stranded that an incumbent will resort to
since their new platforms are for the         he walks around (NYT this weekend),            offering new transport services in order
most part fiber-based. Even where cop-        services are not provided to boxes, but        to cut losses. Witness today’s release
per is used for the last several hundred      to people. The businesses that get this        by Verizon, where they are following
feet, remedies exist. But they won’t, for     will be riding on a wave of growth, and        Qwest’s lead of last year by making
all the reasons I’ve cited above.             those that create services that are bound      their copper loops available to users in
                                              to places and devices will miss that           the form of what is called “Naked DSL,”
This ensures a regime where the last          growth.                                        i.e., DSL without the need to also sub-
mile user can be entertained but not                                                         scribe to an underlying POTS channel.
conduct useful business. If the LEC/Ca-       The Internet debates about plant in the        P, 58 Internet access is very often com-
bleCo duopoly can enforce this regime,        ground are tired, if they aren’t based in      pared to other commodities like gas,
it can turn the last mile into quite a cash   a discussion that includes their role in       electricity and water, but this is not quite
cow that may offset declining enter-          this nomadic, viral future. The maga-          comparable: As the deregulation in these
prise revenues. Nevertheless this new         zine Wired has a column that contrasts         areas show, you have here two issues:
business model could be disrupted by          Wired vs. Tired ideas. The problem is          the network (infrastructure) cost and the
PacketFront or WorldWidePackets kinds         that “Wired *is itself* Tired” - the wires     consumption of the resource delivered
of operations that offered customers 30       are irrelevant and the terminals are too.      (the content).
megabits per second bandwidth, upt to         (Credit me with that if you use it... :-) ).
a Gigabit in some instances, for a more                                                      On the Internet you have the equivalent
compelling monthly fee. Or by a future        Coluccio: pp. 56-57 Broadband, when            in network (infrastructure) cost that is

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                       COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
paid with the access, the payment of           fear that they will be cannibalizing them-    This is why the earlier discussions that
content is in another layer and is peer-to-    selves with each additional strand that       focused on the guarantees associated
peer. So you may pay content for video         they sell and don’t light. But in many        with transmission quality from incum-
and music delivered by a content pro-          large metros, especially deep within NFL      bent providers, regardless of who is pro-
vider, but you will NOT pay for point-to-      and AAA city business districts, dark can     viding the upper layer applications and
point, person-to-person video or audio         still be had.                                 content, I deemed to be so important.
communication (e.g. VoIP), because the
network resources are already paid by          LECs Betting Their                            In short, and to repeat myself one more
the end-users.                                                                               time, there is a need for comparably
                                               Future on Bundled                             equivalent performance expectations
And there are only two centralized re-         Residential Services                          and compliance on last mile facilities
sources necessary for doing this: 1. Di-                                                     transmission quality, including that of
rectory (Routing) services so that one         p. 61 Coluccio:To review what I’ve stat-      upstream transit to the core, being as-
user may find the other (basically rout-       ed before, and to echo in part what Tom       sured to end users, regardless of what ap-
ing tables to find IP-addresses and DNS        Evslin stated, the RBOCs are placing          plication is being launched or by whom.
including ENUM to find URIs and the            all their bets on their futures of bundled    Absent this assurance, as someone else
connected-to identities) 2. Trusted third-     services to residential and SMB/SME           pointed out (I think it was Fred), the
parties to provide certified Identities        customers, since these areas represent        incumbents will be able to stave off total
(this includes certificates, SIM-cards,        the last vestiges of operations where ap-     cannibalization of their service delivery
RFIDs, etc).                                   preciable profit margins still exist. But     aspirations a while longer, maybe a lot
                                               unbeknownst to them, I believe (and if        longer, if things get out of hand and there
Skype is a very good example for this          they are aware of it, all I can say is that   is no means of monitoring the situation
type of communication: if Skype (or            they’re on one hell of a denial trip), it’s   and safeguarding customer interests. Am
SIP P2P) opens up for standardization,         a dwindling bounty that they are seek-        I making any sense?
so anybody could run his own (trusted)         ing, as newer, disruptive technologies
client (this will be necessary finally         that are under the control of end users       We’re now looking at the potential of
for enterprises to use this type of com-       continue to take hold and displace the        RBOCs and MSOs alike to be delivering
munication) and adds the possibility to        vertical constructs that they are putting     terabits per second of capacity to neigh-
used trusted identities, this is all what is   in place.                                     borhoods and industrial parks. Through
needed.                                                                                      extension, these can and will continue to
                                               In almost all of their planned offerings,     be expanded to larger commercial prop-
Anybody may use this type of com-              the RBOCs are actually implementing           erties, university campuses and munici-
munication, access to the Internet by          many of the same technologies and mo-         pal government networks, as well.
any means (DSL, Cable, FTTH, WiFI,             dalities for sale to the public, in their
WiMAX, 3G-UMTS, etc. provided) All             quest to compete with the MSOs, that          I think that it’s safe to assume that the
current “service providers” including the      end users have already begun deploying        amount of “discretionary” bandwidth
mobile operators are reduced to Internet       on their own, with VoIP and TV over IP        - i.e., bandwidth that can be used by con-
Access Providers, if they like it or not.      being the most pronounced of those at         sumers and SMEs for browsing, overlay
                                               this time.                                    voice and video, whatever - that will
p. 59 Coluccio: What I’m seeing is a                                                         be let to consumers will continue to be
marked increase in the interest of fiber       As the state of the art of Web-based dis-     throttled down and otherwise de-priori-
companies to light fibers today, whereas,      tribution techniques and its supporting       tized through de facto means so that this
in the past, they were happy enough to be      middleware gains maturity, the depen-         bandwidth does not interfere or deter
able to sell you dark alone. Some won’t        dence that end users now have on the          users from using the incumbents’ own
overtly come right out and say: “No, you       RBOCs for common overlay services             vertical services.
can’t have any more dark.” At the same         will go away, especially as the enablers
time they spend a goodly amount of their       for them to do it themselves become           Whether it’s the telco or the cable opera-
time selling you on lit, for now they          more widespread. And the principal en-        tor at this point, I don’t think it makes a
realize, like their RBOC cousins, that         abler at this point is the increased level    difference. So why do we still have the
once their markets have been saturated         of bandwidth that the RBOC’s FTTP and         distinction between common carrier and
with their own dark routes they are actu-      advanced VDSL offerings are making            information services provider? Even if
ally cutting themselves short, or out en-      available that was not available before.      the incumbents are not compelled to re-
tirely in some cases, of ongoing revenue       Likewise, as the RBOC super-carriers          structure along accounting and organiza-
streams (or higher revenue streams).           increase the amount of bandwidth avail-       tional lines, why can’t they be mandated
                                               able to end users, so too will the cable      along the lines of service assurance to
Stated another way, I have sensed that         operators.                                    provide layered services with COMPA-
some previous barons of dark fiber now                                                       RABLY EQUIVALENT performance?

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                                     The COOK Report on Internet July August 2005

And there I go again, wandering off into     pipe. Telcos are here now via their ISP        the FCC and Congress to remove what
transmission matters. But seriously, I do    subsidiaries, and want to make this their      little regulation they are still subject
believe that it’s germane to the merger      exclusive offering by eliminating the          to (like common carriage), and they
issue, because, unfortunately, the new       next option down. Cable modems are             are trying instead to force themselves
super-carriers’ success in the most prof-    here.                                          up the ladder closer to “content”, it’s
itable part of their new makeup (the last                                                   pretty hard to expect them to open up
mile) will, in large part, be dependent on   - Common carrier. This is what telcos          raw pipe. Yet due to natural monopoly
their frustrating end users from rolling     are required to offer now. The pipe is         effects, it’s very hard for a third party
their own Web-based and end-point ap-        lit, at a given speed, but the payload of      to make money doing it in competition
plication alternatives.                      the packet (if a packetized service like       with them.
                                             Frame Relay or ATM) is entirely off
p. 65 Coluccio: It was only about 18         limits. This lets them extract a value-of-     The only obvious answer that comes to
months ago, in fact, that Seidenberg         service premium or cannibalization-sub-        mind is structural separation. If the Bells
of Verizon stated in rather unequivo-        stitute tax for speed. Hence ILEC tariffs      were broken up above the pipe layer,
cal terms at the time that his company       like the VZ one I cited last week, where       then alternative common carriers, infor-
would not seek to buy an IXC to satisfy      SONET prices are not based on cost but         mation aggregators and content provid-
its long haul opportunities. Since wave-     upon their ability to substitute for toll      ers could innovatively make use of fiber,
lengths could be obtained on the rela-       calls and many loaded copper voice-fre-        which would be owned by a neutral pipe
tively ridiculous side of cheap, he asked,   quency wires.                                  owner (LoopCo). That is likely to require
why bother taking on the additional                                                         some heavy-duty antitrust action though,
baggage of a legacy long haul carrier?       - Raw pipe (fiber, copper). This is what       at least for the duration of the current
And the crowd ooh-ed and aah-ed, while       a fiber “carrier’s carrier” offers, and also   administration, whose “propertarian”
chanting: “He ‘gets’ it.”                    includes loop unbundling. Raw fiber            impulse is to view unbundling below the
                                             availability seems to be drying up in          content layer as needlessly burdensome
Costs? Those would be dependent on           some places. Until recently (I don’t           on their campaign contributors.
volume and term. Some fiber-based long       think this is a coincidence), ILECs were
hauls today like L(3), Wiltel and Broad-     required to make “spare” fibers avail-         Until then, there is simply no available
wing I’m sure would provide you with         able to CLECs as the Dark Fiber Loop           fiber going to end users. There’s plenty
some very attractive deals in order to       UNE. The FCC ended that with the               now between carrier hotels, but so what?
take down or offset some of their inven-     Remand TRO, announced in December              There is not even any common carriage
tory surpluses. But attractive doesn’t       and effective in March, though technical       (not counting dial-up) available where
mean cheap.                                  still under appeal. Since ILECs don’t          I live, though two cable companies do
                                             have to give dark fiber any more, their        provide reasonably unfettered ISP ser-
Connectivity                                 competitors (CAPs) have less incentive         vice.
                                             to do so.
Frameworks                                                                                  Coluccio: Your observations, in my
                                             Note that as we move down that ladder,         opinion, are spot on with respect to the
p. 66 – 67 Goldstein: Connectivity can
                                             the value extracted by the facility owner      frameworks of common carriers and
come at different layers, which I’ll sug-
                                             goes down, but the utility to the custom-      tariffed- or even individual case basd-
gested for this discussion can be broken     er goes up. Innovation that Bob speaks         scenarios involving the resale of fiber
down thusly, as viewed from the pipe         up really only happens when there’s a          facilities. Provided, that is, that your
owner’s perspective:                         decent-sized raw pipe to work with. It         conclusions remain limited to the frame-
                                             can happen with common carriage if the         work of incumbents and competitive
- Content. This is the highest layer,
                                             price is set at a cost-based level, vs. a      carriers, as noted. My experiences on the
where the network owner actually con-
                                             “value of service” level, but the current      enterprise side, in contrast, bring me to a
trols end user access to content and
                                             rules (again, this is about to open for        different set of circumstances that tell a
leverages it. Think “pay per view” or
                                             Comments at the FCC under the pending          slightly different account.
the traditional CATV broadcast model.
                                             Special Access docket) allow the ILECs
This is what mobile operators like to do                                                    p. 68 Goldstein: Except that it’s the
                                             to adjust prices within caps that are
with WAP (and we see how that flopped)
                                             based on 1993 reported costs, before the       other way around. The Deregulatorium
and still are allowed to do with their IP
                                             Internet drastically increased demand. (I      must die, or the owners of the physi-
operations, using Layer 7 filters and the
                                             say “reported costs” because as Bruce          cal facilities will move up the ladder to
like.
                                             Kushnick has pointed out, the Bell’s           exclusively sell the Content layer, what
                                             books were wildly inflated at the time,        they call “Broadband”, like Sprint PCS’
- Information service provider, or ag-
                                             causing the baseline to be too high.)          new feature of Fox News all day every
gregator. This is where an ISP comes in,
                                                                                            day on your phone. Monopolies will
offering broad access to other providers’
                                             So at a time when the Bells are pushing        misbehave if allowed. Regulation is the
content, but not a raw bit or even packet

                                                              105
                      COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
only way to keep them in line.                (some masquerading as news) and mass-         “Expanding city Wi-Fi net proves no day
                                              market formulaic entertainment, appro-        at the beach” http://www.nwfusion.com/
The “regulatorium” fails when it is con-      priately DRMed.                               news/2005/041805widernet.html
trolled by the industries that it regulates
without concern for the public interest.      p. 69 Coluccio: I sometimes feel like         pp. 70-71 David Reed: I don’t think any
Powell was working for the Bells. His         the odd man out here for precisely the        of us has a monopoly on being right, nor
chief strategist, for instance, was married   reasons you stated, Fred, given the usual     do any of us have a monopoly on being
to BellSouth’s VP-Regulatory. The Mas-        context of discussion that takes place        wrong. With Fred, I’ve been focusing on
sachusetts DTE functions as Verizon’s         here. Most often it is not about enterprise   how “conventional wisdom” focused on
outside law firm. But true deregulation       WAN issues, focused instead on the            the conflicts of the day (such as ILEC
simply lets the incumbents cut the links      end-to- end principle as it relates to the    v CLEC around UNE-P) is founded on
to the surviving competitors and rape         individual user.                              sand being washed away by the tide of
their monopoly ratepayers.                                                                  technological and usage and social and
                                              To view networking in an all-inclusive        application changes.
Frank, I’m not sure exactly what points       manner, however, enterprises certainly
you’re trying to make. The Verizon DSL        are a major part of the “rest of us,” which   I would summarize my point of view as
issue is complex. First, they’ve made         is something that Gordon has on numer-        being focused on a sense that the com-
it harder for CLECs to get unbundled          ous occasions asked me to address.            munications services are undergoing a
loops. Line sharing is gone, which makes                                                    phase change - analogous to gases con-
residential price-sensitive competition       Broadband                                     densing into liquids or crystals. If you
difficult, especially in more rural areas.                                                  focus on individual atoms, you miss the
Loop unbundling itself can Go Away            Technologies Impact                           phenomenon altogether - it’s a collective
once a house is passed by FiOS -- they        Both Enterprise and                           change.
aren’t compelled to make the now-spare        Last Mile Networks
copper available, though for now they                                                       The Internet is, above all, not a “service”
might. That leaves their DSL Special Ac-      “Broadband,” whether we consider it a         provided by a cable provider or a Telco,
cess Service, and they’ve petitioned to       Trojan horse by larger carriers, or the       but the “uber-network” that enables fun-
Do Away with that. And if they replace        legitimate capacious pipe we all want         gibility among all possible transports.
your POTS line with VoIP, even modems         it to be, is now playing a crucial role in    This changes the game from “What
may no longer work. So for the Mass           the diffusion of many larger enterprises’     services do I offer?” to “How can I help
Market, there is a huge crisis looming.       network flows as seen by the millions of      move bits from here to there in support
                                              so-hos and telecommuters today using          of whatever big picture social applica-
The cases you cite, where dark fiber          VPNs via cable modem and DSL for              tions the populace decides it wants?”
becomes available, occur for large insti-     three or four days out of the work week.
tutional or enterprise users whose budget     I wouldn’t go as far as saying that there     The idea of “commoditization” is just
is in the six figures or higher. Sure, for    is a major movement behind the con-           plain wrong. That implies that there is a
$100k a lateral can be strung across          vergence of residential networking and        “standard commodity” called a packet.
a city street (though sometimes it’s a        enterprise networking, although, to some      But that “standard commodity” is not the
lot costlier), or a pole route can be run     degree, there is.                             unit of value - the value isn’t the packet,
across a suburb. But what works for an                                                      but the context it supports. The packet
“Enterprise” is off-limits to The Rest of     I would say, however, that the underly-       is meaningless (and thus valueless) be-
Us. Even a large CAP only lights a few        ing technologies that support residential     cause it gains all of its meaning from the
thousand buildings. So we’re really talk-     networks and those of enterprises appear      context, which is not in the network. The
ing about entirely different issues.          to be aligning rather quickly, with the       network creates value not by “discon-
                                              LCDs in both delivery schemes being           nection” (scarcity) but by “connection”
I see a very real scenario in which smart     Ethernet and IP.                              (options to relate).
American net users will become like
Chinese or Saudi ones, who have to            Earlier this evening I emailed an ar-         This is a phase shift - the complexity
resort to encryption and secret tunneling     ticle URL to Gordon that I’ll share here,     of connectivity we are able to sustain
protocols in order to get past content        as well. I wrote: “I would encourage          among end-devices means that the net-
controls to secret network portals. It        you to read this week’s article in Net-       work is not separable from every product
won’t be done by the government but by        work World that talks about the political     and service on the planet. I cannot sell a
the “Broadband” (Ding Dong the Inter-         squabbles that sometimes ensue when           product today if I don’t have a web-based
net is Dead, chant the Bells) providers       local officials can’t agree on the next       help desk for it. Preferably one that con-
who will sell selected Content. The other     phase of implementation of a simple wi-       nects to the product itself. I cannot sell
98% of the public will see Approved           fi network.                                   a service if it somehow doesn’t relate
Content, a combination of propaganda                                                        to the Internet in its fundamental stuff

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                                      The COOK Report on Internet July August 2005

(even lumber and coal are intimately tied     changes are not episodic in nature as         more than once.
to the Internet through logistics today).     much as they are time varying and con-
                                              tinuous, requiring one to use a camera to     Frankston: There is indeed irony when
Those who view the communications             snap a picture of what’s taking place at      a company whose sole competence is
industry as standing “outside” and sepa-      any given point in time.                      billing is incompetent. But then why
rate from commerce and culture are the                                                      can’t Telcos call-centers know the num-
last to see this. (The) communications        So What Kind of                               ber I’m calling from and pass the infor-
(industry) is now like intercourse (trade)                                                  mation around. It’s a sign of late state
- it’s something you do, not something        Access Does LoopCo                            ossification as companies can’t even
you buy. And like intercourse/trade,          Sell?                                         keep up with their own technology.
there are specialists for some aspects,
but everybody has to do a little bit of it,   p. 74-75 Earlier Coluccio: Let’s devote       I wonder why you have an entity be-
and it all fits together into a big system.   a little time talking about this, because     tween me and the network? Why can’t I
                                              I think it’s important that we come to        just get my IP connectivity directly from
A universal representation of informa-        some kind of understanding over this be-      the municipality like I do water?
tion, plus the ability through cheap com-     yond that which currently exists. We can
putation to transform any form of infor-      use UTOPIA as a conversation piece,           Goldstein: If you, Bob, personally want-
mation into any other form, has made          or the hopefully soon to be Opportunity       ed to buy raw wholesale service, I don’t
the boundaries go soft, so that instead       Iowa. How many different variations           see why you couldn’t, but you’re not the
of a collection of individual particles       (brands) of Ethernet provision do we          average consumer. The skillset needed
(a gas), communications is now every-         want on those systems before you start        to run routers is totally different from
where entangled, like a liquid or solid.      to entertain who can come in at L3, and       the skillset needed to run fiber. (Note
                                              then the content folks, above?                the different meanings of “run”.) I’d call
We may hark back to cameras that only                                                       up the IBEW for one of them, the IEEE
could produce slides and paper prints,        More than one Ethernet provider choice?       for the other.
phones that could only send sounds to         What happens, then, is that you wind up
other phones, TV that could not be re-        dividing your potential user population       The capital structure of outside plant
corded or re-edited, first class mail that    along the lines of WorldWidePackets vs.       (long life, capital-intensive) is differ-
could only be carried by the post office,     OSI vs. Allied Telysn vs. whomever. Be-       ent from the capital structure of ISPs
etc. We can even try to pass laws that        fore you know it mixing and matching          (short life, technology-intensive). That’s
keep certain behaviors in their “custom-      upper service provisions with the raw         one reason why the ILEC shareholders
ary roles” and keep new startups from         pipe provider becomes a boolean affair.       would benefit by a breakup along these
cherrypicking customers away from the                                                       lines.
old standard ways of communicating.           It’s only been recently that this issue has
Some will even argue that the “good           stuck its head up in my face (up until        Frankston: Electricity I buy directly but
old ways” of communicating were more          now I was in denial over this ;), so I’m      because it is a strange regulatory beast, I
humane and comfortable than the new           looking for opinions and views from           do pay for capacity at some source.
fangled ways that make executives like        those on this list who are experts on mat-
Seidenberg fear their own customers’          ters like this, including Tom Hertz from      I’m just looking for simplicity -- for
requests enough to treat them with ex-        FiberUtilities of Iowa, since he is one of    V1.00 an RJ-45 with IP over Ethernet is
treme disrespect.                             the individuals to whom I just referred,      a useful start as long as it really is just
                                              above.                                        raw IP.
But ultimately, the businesses that will
win are the ones that question the con-       Of course, the scenario I painted above       Goldstein: “Raw IP” is as easy to provi-
ventional wisdom, try to get the big          is based on the prospect whereby a            sion as “raw sushi”. It may look easy
picture, and learn to operate through the     citywide or countywide municipal fiber        to you but it’s not easy to most of the
phase change.                                 buildout is installed with the intent that    people who actually run it. Conversely,
                                              multiple transport providers compete          I wouldn’t want most router gurus to be
Coluccio: Thanks, David, for bringing         with one another at Layer 2. And pos-         climbing poles, digging trenches, or wir-
those concepts into a coherent state-         sibly Layer 3 and above, as well.             ing main distribution frames.
ment.
                                              Such happens to be the case in some           Odlyzko: I agree completely. One thing
I think that your phase change concept        cities overseas, and I believe that this      we should not forget is that as members
is something the list may want to collec-     is what’s been contemplated, at least in      of this discussion group, we are not
tively pursue. It certainly appears worthy    part, in the locales I mentioned above.       representative of the population as a
of the type of theme that Gordon’s been       It’s a common notion about open access        whole. The “walled garden” approach
seeking to exploit for his thesis. Phase      fiber networks that I’ve heard expressed      is anathema to most of us, but it is quite

                                                              107
                      COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
appealing to many people. Note that half     discussion purposes would certainly be        over time out to the edge.
a dozen years ago AOL, with its “walled      supportive of IP. Although, left to the
garden,” had about half of all US resi-      discretion of the market and the service      Geddes: What if I want to check the
dential accounts, in spite of charging       providers who would rent the glass from       freshness of the food in my fridge by
higher prices than the competition. If       LoopCo, proprietary systems, even those       sending InstaSequencedTM genome
AOL had not gotten seduced by the            mimicking the telcos’ legacy constructs,      samples of my chicken dinner across
“content” deal with Time Warner, they        could and probably would also play a          the Net for evaluation, and CPU-inten-
might have been able to build that into      part, as well.                                sive slow old gigabit IP from IPCo just
something enduring. (In retrospect, they                                                   doesn’t hack it? Or I just want IPv6 and
did the right thing for their sharehold-     I say this because there is no easy way       you’re only offering IPv4?
ers, even if for the wrong reasons. Their    to break with the past, and this becomes
astronomical stock market valuation was      doubly obvious when one takes a closer        - What if your IPCo just isn’t delivering
not sustainable in their sphere, no matter   look at all usage domains within a com-       the bandwidth I need -- not locally, but
how well they managed their “walled          munity, and not simply those of residen-      with my upstream international partners?
garden,” so grabbing the considerably        tial end users and SoHos and telecom-         What do I do then? (Example: Hong
less overpriced Time Warner, they got        muters. All one needs do is walk into the     Kong, very fast on-net, merely fast off-
their shareholders a good deal.)             main telephone closet of an enterprise        net).
                                             and perform a line inventory and they’ll
IPCo Versus LoopCo                           know exactly what I mean. Yes, most           - What if IPCo has great local coverage,
                                             of those battery and ground, loop-start,      but nothing else. On the other hand,
p. 78 Geddes: I’ve been watching the         ISDN, Frame Relay, T1 and dedicated           hypothetical Nozirev Inc. has this great
debate unfold and have changed my            private line circuits can be replaced by      nationwide wireless network I want to
mind several times. Some persuasive          IP alternatives, and probably fit nicely at   use, and they’re bundling in DSL for just
rhetoric and logic for this easily muddled   some point under the umbrella of EFM          a few bucks more. Why would I bother
mind.                                        (Ethernet in the first mile) GbE.             buying from IPCo?

To help me understand the differences        p. 79 Geddes: IPCo questions: What            - In the UK we used to have state-owned
and advantages of each approach, I’d         are the foregone opportunities of mov-        gas and electricity provision. In most
like answers to the following:               ing up to IP? What if I want switched         places these are now not only private,
                                             lightpaths to send quantum-encrypted          but the market is forcibly divided into
IPCo questions: What are the foregone        photons? (http://news.bbc.co.uk/1/hi/sci/     layers: unregulated retail, regulated dis-
opportunities of moving up to IP? What       tech/4496893.stm)                             tribution/wholesale and semi-regulated
if I want switched lightpaths to send                                                      “source” (i.e. power generation, gas ex-
quantum-encrypted photons? (http://          Coluccio: That’s a spot on question, and      traction, LPG transport). What dissat-
news.bbc.co.uk/1/hi/sci/tech/4496893.        one that occurred to me about midway          isfaction drove people away from mo-
stm)                                         through this discussion, not to mention       nopoly vertical integration of utilities?
                                             many times before, as well. The idea of
Coluccio: Martin, I hardly think your        returning to a switched optical path/link     Coluccio: While the questions you asked
mind is muddled ;) The discussion of         paradigm is nothing new. It is being          are timely, and coincidentally along the
the past several days has been one of an     employed already, in fact, although not       same lines that I’ve asked about the
exploratory nature on my part, and not       by using Toshiba’s quantum encryp-            current proposal before Congress in the
a prescription for moving forward with       tion techniques, but through the use of       U.S. to privatize certain aspects of what
anything resembling a real network.          IP (and other protocols) over lambda          the National Weather Service does, I
                                             techniques.                                   don’t see where anyone has actually
My main question centered on, for lack                                                     proposed an IP monopoly, per se. Are
of a better term, a community fiber          Where individual end users are con-           you referring, instead, to the apparent
optic condominium network, or simply         cerned, like you sending a file to me,        hegemony that IP has achieved as a pro-
a “condo” build, and how many compet-        such an approach doesn’t really scale         tocol of choice? If anything, one prob-
ing service providers at various levels of   very well beyond the smallest of in-          ably couldn’t find a more decentralized,
the stack it could support. I didn’t even    tramural environments - yet. But it is        diffuse model of ownership than those
touch on any of the economic implica-        being done as we speak in backbone net-       who run IP networks for a living. If your
tions of a multiple-provider environ-        works, both in the Internet’s core and in     question concerning IP being (paraphras-
ment, since my focus was on the logistic     collapsed campus and riser backbones,         ing) “the lowest possible layer that a
and administrative issues, only.             through the use of IP over lambda tech-       network must run at” means it’s the least
                                             niques. And as we’ve seen happen time         common denominator, then I’d answer
I would remind everyone that the hy-         and again, technologies that cut their        that it increasingly is. Save for the hold-
pothetical overbuild that I presented for    teeth in the center often find their way      outs I began to list above. Yes. It’s fast

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                                     The COOK Report on Internet July August 2005

becoming the LCD. If you meant some-         would make it possible for end users,          Divestiture One
thing else, please elaborate.                themselves, to pick and choose what
                                             suits their need. Such was the potential       Goldstein: Always a good question.
Geddes: What innovative care, bundling,      I described offered by SP B, and even
pricing, distribution, technology, loyalty   there we’re still only referring to satisfy-   How did Divestiture I happen? Anti-
or other approaches are we foreclosing       ing residential requirements.                  trust, but also a desire to make more
by having a monopoly IP supplier?                                                           money. AT&T felt shackled under the
                                             p. 82: Goldstein: And that’s where it          1956 FJ, so swapped it for MFJ so that
Coluccio: I believe I broached this point    comes together. IP is *inter*network           they could get into the computer biz. Of
yesterday. If LoopCo supports a single       protocol. It is designed for multiple          course had this White House and FCC
transport provider, the odds for ending      providers. You posit a single IP “utility.”    been in charge, AT&T might have been
up with a stagnant network environ-          That is really the only issue where I think    allowed everything they wanted with no
ment are heightened considerably, in         your suggestion can’t work. The power          changes, and no competitors. A lot of
my opinion. Likewise, if only a single       to switch is the power to discriminate.        interesting stuff went into Divestiture,
ISP were permitted to operate, then the      Only a competitive market can eliminate        including bills in Congress calling for
same would hold true. I stated the latter    that. Otherwise, we get right back where       it. (This is what Chapter 3 of my book
concerning the ISP for completeness, de-     we started from in, say, 1960, with one        Meltdown is about.) Rep. Tim Wirth,
spite my feeling that it would be a highly   Bell System Utility. The Bells them-           then chairman of the House committee,
unlikely occurrence.                         selves are starting to get the idea that IP    had filed a bill in 1980 or so calling for
                                             is worth something. They would love            the BOCs to be spun off. Reagan’s DoJ
Geddes: - Do you agree you’ve got to         to “be” the sole utility, and are trying       didn’t call off Carter’s antitrust suit as
make your case that IP is the *lowest*       hard to achieve that -- see 04-405, for        AT&T had hoped, so they made their
possible layer the utility can run at, not   instance. Of course as the sole utility,       deal. Remember that the original suit
the highest?                                 they would want to be treated as ISPs,         was to spin off Western Electric, not the
                                             not as carriers, and not subject to the        RBOCs.
Questions for both                           kind of *strict regulation* (performance
                                             metrics, nondiscrimination) that your
IPCo and LoopCo: Are                         model posits. But there are utility regu-
                                                                                            Only private antitrust exists now, with
                                                                                            fairly hostile courts -- the George Mason
LoopCo and IPCo mutu-                        lators now (the NYPSC comes to mind)           School of Law view which holds much
ally exclusive?                              who have called for the Bells to become        sway in DC now is that antitrust law is
                                             regulated-monopoly ISPs. (Not to put           always bad; monopolies are simply part
Coluccio: If we come to terms that           the cablecos out of business; they’d be        of business. Since the Sherman Act is
LoopCo is merely a sheet of glass, then      the duopoly giving the Bells cover. But        still on the books, private suits can be
no. It’s agnostic.                           duopolies tend towards coziness.)              brought without DoJ involvement.

Geddes: Why can’t a muni create both,        I suggest that the utility boundary be         More interesting is getting Wall Street
with IPCo just being a lower bound on        drawn *below* “switching.” Thus there          memetically onto the bandwagon. If
price and service for pure Internet ac-      would be a regulated utility that provided     they saw that the RBOCs were worth
cess?                                        both first-mile (loop) and middle-mile         more split up than intact, they’d demand
                                             connectivity, with regulated performance       it. Their incentive is the debt structure.
Coluccio: One can’t generalize about         at a regulated price. They could provide       A LoopCo can absorb debt more com-
municipal networks as easily as that.        multiplexing (DSLAM, SONET, WDM,               fortably than a competitive ServiceCo
Some muni nets that exist today are en-      DLC, PON, etc.) but not switching (IP,         can. Since Ed and Ivan claim they want
tirely HFC-based and they presently treat    PSTN, SS7) or anything above that.             to “compete,” this would let them, and
IP as an also carry. Some are wireless,      This way, existing ISPs could continue         they wouldn’t be saddled with the debt.
where IP is the favored regime. Fewer        to provide IP connectivity, and they’d be      Cingular and VZW would stay with the
still are popping up that are fiber based,   guaranteed the bottleneck facility that        ServiceCos, perhaps minus some debt.
and those are the ones I’ve been ques-       the Trinko case says just might not be         Yes, a gift, but worthwhile to Make
tioning here, since it wasn’t adequately     covered under antitrust at all.                the Deal. If Wall St. thinks that VZ
defined in these terms yet. In principle,                                                   and SBC are in any risk of Chapter 11,
however, where I was going with it was       COOK Report: Now this is beginning to          they’d demand action. Too much equity
to be supportive of whatever a qualified     make sense to me. But who is going to          is on the line.
service provider could market and sell to    be the king that waves the magic wand
a waiting community of subscribers. But      to create this?                                Or it (LoopCo) could be ordered by
this is a marketplace consideration, and                                                    regulators, as the Pennsylvania PUC
not something that hinges on technology                                                     *almost* did a couple of years ago. It
alone. Conceivably a transport provider                                                     would not be confiscation; the share-

                                                              109
                       COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
holders would simply hold pieces of two         quite important, because I believe that      individual copper pairs of the past?
companies instead of one. As happened           skill specializations will help capture
in Divestiture I, when shareholders who         economies of scale. For this portion of      Even here, however, the ILECs get to le-
did nothing ended up with eight stocks.         the discussion it matters not whether the    verage the bit rates of those data streams,
                                                intermediary is LoopCo, IPco, munitel,       as when they count “DS-0 equivalents”
p. 84-85 Goldstein: I am *not* going to         L3, Wiltel, or a combination of such         when assessing the weight of their T1s
get into the details now, but IP networks       operators.                                   and T3s, etc., in demonstrating total
are NOT all the same, not function-                                                          rented “line” numbers in their quarterly
ally identical -- the packet is the same,       Plus, as I mentioned earlier, given the      statements.
but there will always be management             murkiness, most customers seem to be
decisions about where to put what band-         more comfortable reducing their risk by      I am splicing in one of those stories that
width, how many hops, etc. That’s why           renting service rather than buying facili-   touches home for me, in more ways than
I keep harping on the need for com-             ties, thereby creating the opportunity for   one. And how sweet it is, indeed. With
petition, since it’s simply not a natural       intermediaries to get capital, make a        thanks to Dave Burstein who writes the
monopoly, and somebody *will* be un-            net, and sell service. Having said that,     DSL Prime weekly newsletter http://
happy with *any* management decision.           we must note that lots (most, I believe)     dslprime.com/ :
At least if we keep the monopoly down           communications costs are within orga-
on the wire-and-cable level, the man-           nizations (inside wiring, switches, etc.)    “Bronx Beats Babbio to
agement decisions will be much more             and they are buying those facilities. Even
straightforward, and the impacts will be        here the build out and/or operations is      Broadband Video”
*localized*, which is not always the case       outsourced some of the time.
                                                                                             “UrbanDSL channels fiber to the base-
with IP.
                                                p. 90 Coluccio: All this continuing talk     ment where Verizon fears to tread”
If there were one world Internet utility,       about EUCL charge (End User Com-
                                                                                             [Coluccio: Regarding the previous sen-
China and Iran would want to run it. If         mon Line), access charges, USF and the
                                                                                             tence, above, my guess is that Dave
there were one nationalized Internet util-      use of rate elements of years gone by
ity, Senator Stevens would want to run          seem a bit anachronistic to me, if not       picked up on VZ CEO Seidenberg’s
it. If there were one state Internet utility,   outright nonesense, since “lines,” per se,   statement regarding cellular phones
the ones in Kansas and Alabama would            no longer exist in my world as they still    when addressing a group recently. He
be more like the one in China than the          do elsewhere, perhaps, in rural areas,       stated that cell phones were not sup-
                                                                                             posed to work in basements or in all
one in New Hampshire. The one in Mas-           say. Even there they are rapidly being
sachusetts would be run by a contractor                                                      spots around the city, leaving some bad
                                                aggregated onto carrier systems or one
who would have 90% cost overruns                                                             tastes with some. Next!]
                                                form or another.
while missing key metrics, while the one
in New Jersey would be run by some guy                                                       “Stuart Reid and Douglas Frazier are
                                                I’ve got entire 6,000 desk campuses
named Tony from just outside Newark,                                                         delivering video over fiber to the base-
                                                where we can’t even get a copper line
                                                                                             ment with VDSL while Verizon hasn’t
who knows where Jimmy Hoffa is.                 pulled into a MPOE (Minimum point
                                                                                             even gotten serious about trials in the
                                                of Entry) because the buildings were
COOK Report: As Peter Ecclesine says                                                         city. Pacesetters Reid and Frazier were
                                                erected on parcels that were previously
all politics and networks are LOCAL                                                          also among the first to offer VOIP, re-
                                                rail yards or vacant fields, and no one
issues.                                                                                      selling Vonage under the original deal
                                                is pulling new copper there anymore.
                                                                                             many couldn’t understand three years
                                                In a recent undertaking in order to have
Frankston: The main question is wheth-                                                       ago. They’ve even secured a municipal
                                                a limited number installed the ILEC
er the process is driven by the successes                                                    franchise, something the Bells, among
                                                wanted over a quarter of a million dol-
or the failures. Telecom must respond           lars for a three-year contract to bring in   the world’s best lobbyists, say can’t be
                                                                                             done.”
to every failure while the Internet only        200 dry pairs.
need take advantage of success and cre-
ate the opportunity for more.                   Lines, to me, tens of thousands of lines,    “Forget burned out buildings, street
                                                in fact, mean nothing more than a series     gangs, and streets unsafe for masters
Forster: I think we’re agreeing in many         of interleaved bit streams and Ethernet      of the universe. Some brutal poverty
parts. To be truthful, I haven’t read all       flows within the core of a fiber. And the    remains, but today’s Bronx also provides
the posts carefully, but my impression is       ingress/egress of user data flows don’t      rich business opportunities. “Everyone
that you & David tend to believe in a fu-       resemble anything like they did in the       in the neighborhood tries to find a way
ture where most of the communications           past, where associations with “LINES”        to get their kids a computer and the inter-
happen with little need for larger scale                                                     net,” Frazier says of his customers.”
                                                have any real meaning. Should the same
intermediaries between the endpoints. I         formulas apply to those virtual containers
                                                                                             “Urban’s IPTV is entrepreneurship at
tend to think intermediaries will still be      I just mentioned today as once applied to
                                                                                             the most demanding. They’ve led the

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                                      The COOK Report on Internet July August 2005

crews trenching the fiber, trained people     UTOPIA’s intentions in Utah, and in a          their current spate of FTTP buildouts
from the neighborhood to do the in-           manner similar to how many of the fiber        in time to obtain some much needed
stalls, and searched the country for used     optic ‘infrastructure’ custodians of the       financial relief that they’ve been betting
equipment to keep the price low. Their        Netherlands and Scandinavia have been          they’ll see, they may have no choice but
NOC, a stone’s throw from Verizon’s           doing all along.                               to open their gates, anyway.
central office, is crowded with racks
of Next Level, Tut, and other respected       Along with others here in this forum,          p. 93 Coluccio: My current thinking is
gear. Frazier and Reid manage Urban           I’ve touched upon this potentiality in         based on the prospect of some very hard
themselves, making sales calls training       the past through the use of some slightly      times ahead for the RBOCs, because
staff and troubleshooting 3 a.m. emer-        different verbiage, although coming at it      this last ditch FTTP attempt just may not
gencies. They’ve worked together for          from a sometimes radically different per-      make the grade, for many of the reasons
twenty years, building urban cable sys-       spective, calling for the establishment of     we’ve discussed upstream. And if it
tems and acquiring, along the way, the        a neutral LoopCo that would serve as a         doesn’t, you can rest assured that their
skills needed to create a working system      passive undercarriage for all higher layer     wireless assets, which are still robust
that trumps a dozen small telcos’ much        service providers for a given venue, or        enough to keep them going, will be spun
publicized video trials. They deliver         service territory.                             off in advance in the name of sharehold-
more to their users, at a better price,                                                      er interest, before anything shows signs
than many companies with ten times the        But I’m not so sure anymore that I’d           of falling apart on the ground.
resources.”                                   want to settle for the limitations imposed
                                              by the RBOCs’ present FTTP architec-           As a means of averting such an outcome,
“A subway ride away from Verizon              tures. This is because the latter are, after   the RBOCs might change their tune
headquarters, Urban is proving IPTV           all, still ‘a’symmetric in nature, they        about opening up their pipes. Or, they
can be done. Of course running five mil-      already include Layer 2 constructs of a        might even ALSO compete at the higher
lion Verizon lines is a different challenge   choice I’m not sure should be imposed          layers of the stack while riding over
than 5,000, but Verizon can no longer         on others, and to a large extent - espe-       others’ wires at some point, like AT&T
say serving the Bronx is impossible.“         cially in territories outside of Verizon’s,    almost did over UTOPIA’s until it was
                                              i.e., in SBC, BLS and Qwest service            acquired.
[End quote from DSL Prime.]                   areas - they are still dependent on copper
                                              for last 1000 meter delivery.                  This last prospect is not as far fetched as
Coluccio: Coming off the same newslet-                                                       it seems, imo, because they are going to
ter I quoted earlier concerning the Bronx     What occurs to me in no small way,             be very stressed to get a small percent-
Story, Dave Burstein in a couple of suc-      however, and this has nothing to do with       age of their customers homes passed
cinct paragraphs below makes a point          the architectural qualifications or lack       with FTTP over the next several years,
concerning open networks that we’ve           thereof I’ve listed above, is that Dave’s      while FTTH networks are being installed
been driving at here for four or five         suggestion may prove prescient at some         by independents and municipalities with
years, and probably longer, if one counts     point for other reasons, maybe a few           increasing numbers, monthly.
the discussions on this topic that were       years out, having nothing to do with
conducted on the Last Mile Technolo-          egalitarianism or breakaway thinking
gies thread. He is calling for Verizon to     on the part of the incumbents, but out
open up its FTTP platforms to other           of pure need. If the RBOCs cannot meet
service providers in a manner similar to      their penetration and revenue goals from




                                                               111
                      COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
                         Introduction and Executive Summary

Whither the Phone Companies?
With Consolidation Unlikely to Produce Major
Benefits, We Look at Construction of Local
Infrastructure
What is the Future                            AT&T. However, since the very largest        service like voice can bring in is fall-
“Phone Company”?
                                              local phone companies have a large em-       ing. The Question becomes how can the
                                              bedded base of customers, SBC and Ve-        telco generate new revenue? They have
                                              rizon have enough stable and recurring       always seen themselves as content car-
This July August issue of the COOK Re-        revenue to acquire the IXCs. But when        riers. First of voice and, it looks like in
port examines the changing industry per-      voice is no longer profitable, one has to    the future, as carriers of video. As they
spectives that derive from falling voice      ask why these LECS would pay addition-       continue to pursue the selling of content,
revenues for the telcos and increased in-     al billions to acquire companies whose       we suspect that in clinging to this well
terest in local infrastructure building on    major line of business was long distance     ingrained business model, the decision
the part of those who feel they are not       voice. Farooq offers the hypothesis that     makers at the LECs are failing to grasp
being well served. It also looks at the       the Verizon and SBC believe that there       how changes in technology capability
industry consolidation that will give us      are economies of scale to be found in        and prices are changing their customers
mega LECs made up of SBC and AT&T             cutting expenses by combining networks       environment.
and of Verizon and MCI. Trailing in their     and scaling back equipment and staff.
price setting wake of the mega compa-                                                      Namely that the increases in the capa-
nies will be Qwest and Bell South.            He then adds “The ILECs have to be ask-      bility of digital processing, storage, and
                                              ing themselves what they have to offer       transport means that ownership of the
We ask how the acquisitions will benefit      their customers that no one else does.       formerly expensive physical equipment
the acquiring local companies? Our in-        Ultimately, they have only one thing in      that the telco’s once required to run their
terviewees, with the exception of Farooq      their favor. They offer their customers a    networks is increasingly within the reach
Hussain, see little benefit. Since consoli-   network connection.” “Considering that       not only of enterprises but also of small
dation seems unlikely to solve problems,      the network is really the only asset they    businesses and individual households.
we search for solutions in what seems to      have, it is likely reasonable for them to    There is a shift beginning where more
be the only alternative – that of defining,   want to protect this asset in the most ag-   and more people will be interested for
and sometimes building, one’s own in-         gressive manner possible. Whether it is      varied reasons in simply building infra-
frastructure                                  regarded as fair or unfair, the rational-    structure for themselves or for their com-
                                              ization they are making is easy enough       munities.
Understanding the                             to perceive.” We present several points
Changing Value                                of view that question what benefits this     This issue started out with an exami-
Equation                                      pursuit of economy of scale in a declin-
                                              ing industry will bring about.
                                                                                           nation of the rationale behind the LEC
                                                                                           acquisition of AT&T and MCI. It finds
                                                                                           that the chances are that the industry
Telecom is a necessary part of the econ-
                                              Whatever the outcome, so much infra-         consolidation entailed by these moves
omy. No one doubts that. It has great
                                              structure is out there that we can be as-    will solve serious problems is small.
value. The question becomes where
                                              sured that the MegaLECs won’t go away        Why? Because the consolidation does
do you find it and how do you put it to
                                              anytime soon. The most critical question     not address the underpinning changes in
work? For more than a century the pub-
                                              likely is how will they morph? What will     the technology. These changes are push-
lic telephone networks of the world have
                                              the “phone company” of the future look       ing enhanced productivity into networks
been designed with special hardware
                                              like?                                        that are geared primarily as highways to
that has one major purpose: carriage of
                                                                                           transport bits whereas their users decide
analogue voice. The maturation of the
Internet has changed all that. Voice has
                                              In Search of a                               what vehicles they will use for transport-
become data and the revenues it gener-        Replacement for Voice                        ing the bits. The telcos and MSOs don’t
ates have shrunk to the point where they      Revenue                                      want to allow the users to choose. For us-
                                                                                           ers at the edge the greatest benefits to be
can no longer support independent Inter-
                                                                                           obtained will be their ability to use basic
eXchange Carriers like Sprint, MCI and        The amount of revenue that a given telco

                                                                 112
                                     The COOK Report on Internet July August 2005

network transport in ways that benefit       fault layering taking place, where even
them rather than having top play by the      in the absence of regulatory actions or       The LECs have inherited a way of look-
telco’s rules.                               mandates, enterprises, like users in the      ing at the world that becomes almost an
                                             consumer and SMB spaces, will elect           inherited part of their basic DNA. This
The move from central control will be        to roll their own applications (such as       is what the Nethead - Bellhead polem-
bumpy. There are still centralized infra-    many of them already have), relegating        ics were all about. The latter monikers of
structures like national numbering plans     the traditional landline carriers to trans-   Nethead and Bellhead served as labels to
and long distance lit fiber and undersea     port services, only. And in order to make     divide into camps where the assumption
cables that will demand maintenance          up for the lost application revenues the      that was one of them was not interested
and eventual replacement.                    landline carriers will be pressured into      in learning from the other. Was this as-
                                             raising their pricing of transport services   sumption true? Who knows? It could
Meanwhile the best laid plans of every-      as a matter of survival.”                     also be argued as – who cares? The driv-
one remain in limbo. Telcos are looking                                                    ers of the corporate path of behavior are
at the world from a point of view where      Considering the LEC                           many and complex from the perceived
                                             Point of View on
their rational for existence is not going                                                  mandates of showing profits every
to disappear anytime soon. They are                                                        quarter to pleasing ones boss to sheer
planning video and triple play bundles       Municipal Networks                            survival. As an executive of BellSouth
to replace bleeding voice revenues. As I                                                   confided to me at Supercom a year ago
point out a few paragraphs farther down,     In parallel with these events the realiza-    when she said their President told them
whether they can attain their newrole is     tion that you can build your own, or at       not to worry – they would do whatever it
uncertain.                                   least hold major decision-making pow-         took to survive.
                                             ers over one’s own infrastructure, is
The telcos are looking at Video based        gaining strength. In what started out as      The layers of complexity as they push
on IP platforms using Microsoft’s IPTV       an interview, Frank Coluccio begins to        forward are sufficient that it may be
software. While they have all announced      explain the technological and internal        argued that even their CEOs and their
plans to invest in video platforms, they     organizational parameters that munici-        top circles may not fully understand the
are opening themselves to competition        palities face as they consider building or    ramifications of what they are doing.
from the MSOs and to end users who           expanding their own networks. I believe       Certainly in working with Frank Coluc-
can use the web as a video source not to     that readers will find Frank’s article on     cio over the past month and traveling
mention such p2p platforms as bit tor-       pages 39-49 of this issue to be the most      the road from interview to final draft I
rent.                                        important piece that I have published         have with fascination watched him navi-
                                             in some time. It is Part 1 of a two-part      gate the layers of complexity and like
Wireless has been profitable for the tel-    “handbook”. Herewith are a few of the         a master mason build an edifice that is
cos – so far but future profitability is     ideas presented. But first let me offer       unlike anything I have ever seen crafted
uncertain for reasons of cannibalization     some scene setting context.                   before.
of wireline services. But one might ask:                                                   Therefore let’s step back and argue
What if high speed wireless becomes          Observing the vigor and pervasiveness
                                                                                           things differently. Let’s say that whether
so good users begin to disconnect their      of the LEC’s attacks on the muni-net-
                                                                                           the LEC is to blame is likely not even
landlines?                                   work movement, it is sometimes diffi-
                                                                                           the right question to use. Rather let’s say
                                             cult to be charitable. But if we are to try
                                                                                           that the objective for all of us must be to
How will the telco handle clients like       to educate, charitable we should be. No
                                                                                           understand this complexity well enough
Skype that reside on the user’s machine      one can be certain what the LEC or the
                                                                                           to know what we want to build and why.
and in the enterprise where enterprise       Cable Operator is ‘thinking’ – likely not
                                                                                           And then let’s just go out and do it. What
based servers or end user machines can       even they fully understand, themselves.
                                                                                           Frank is contributing is a level of under-
perform functions that in the past would     The men and women that run them are
                                                                                           standing that should permit municipali-
have generated revenues for the telco? If    navigating in forests of unprecedented
                                                                                           ties and other entrants in the first mile
new upper layer services are sourced to      complexity in the context of very rapid
                                                                                           access space to make properly informed
entities other than telcos, this will con-   change. Consequently it may not be sur-
                                                                                           choices and move forward. When that is
tinue to suck revenues out of what they      prising that they are most at home in per-
                                                                                           done, assigning blame to the incumbent
need for general operation.                  petuating a service set and infrastructure
                                                                                           service providers looses most of its at-
                                             that is accepted by most of their custom-
                                                                                           tractiveness.
Is the following scenario portrayed in       ers who are unaware that other alterna-
                                             tives exist. Those of us who understand
                                                                                           A Framework for
the words of Frank Coluccio inevitable?
“What we’re going to see happening           the alternative possibilities should resist
here over time (or continue to happen,       the temptation to club them over the head     Municipal Networks
if you’ve been observing up until now),      for ‘obstructionism.’ Instead I’d like to
in my opinion, will be a form of de-         offer the following point of view.            Here are some of Frank’s key conclu-

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                      COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA
sions:
                                              Frank concludes: “It’s a little bit late for   Where we go from here is that each
1. Municipalities –have looked at the         recriminations and finger pointing at this     municipality must pull itself up by the
architectures of the LEC and the MSO          stage of the game. What we have today          bootstraps. We should all understand
and “tend to emulate the networks of          is what we have. So, if we leave alone         that it is not the last mile that implies
the incumbent providers that previously,      the fact that the larger incumbents along      the beneficence of the centralized MSO
or currently, serve them. These are the       with their regulatory and politician part-     or telco extending its reach down to the
very same networks that many munici-          ners had a major hand in the matter and        customer but rather it’s the first file as
palities strive to compete with or wish to    they demonstrated very poor abilities in       the customers begin to take respons-
replace.” Increasingly, municipals and        negotiating disruptive change, consider        ibility for connecting themselves to the
others have been seeking to deploy de-        that they are in some perverse ways ac-        rest of the world. The municipality must
signs that escape this approach, which is     tually correct when they now say that          also understand that there is no one right
the direction that Frank takes us on.         it’s not their fault, and that it will take    way wrong way in deciding how to go
                                              them years to fully catch up to the rest of    about this process. Each municipality
2. Those investigating local infrastruc-      the world, assuming they ever will. And        is different. Each one possesses a dif-
ture must also understand the range of        that they can’t work any harder or any         ferent environment, constituency and
possible buildout opportunities that are      faster or any more economically than           has consequently differing local needs.
possible. These range from I-nets for         they already have been in order to make        Each one needs however to educate it-
local government to larger Muninets,          things right.                                  self and take charge of its own fate. For
to MDU nets, and NAN nets and wi-fi                                                          the complex reasons laid out herein no
nets.                                         It’s nothing short of preposterous to          white knight is going to ride in and save
                                              think that the US should have to wait          the day. Eventually the old infrastructure
3. In understanding the difference be-        for that period of time, or should have        will be replaced. The need is not to have
tween following the incumbent’s technol-      been put in a waiting position in the first    to wait 25 years. Our economic competi-
ogy model and the model made possible         place. Don’t you think so? What is even        tiveness won’t last that long.
by newer Ethernet technology, one must        more preposterous is to suggest that the
understand the significance of symmetry       economic well being of a nation and all        The technology, although rapidly chang-
versus asymmetry in transport technol-        its citizens should depend entirely on         ing, is known. However, the processes of
ogy. When one realizes that asymmetry         the capabilities of a few private corpo-       how to analyze and implement it are not
originates as a part of the basic technol-    rations like the RBOCs. What is espe-          well known. While Frank’s knowledge
ogy nature of the telco- and MSO- based       cially bizarre to me is that the govern-       gained from 35 plus years experience in
designs, it is easier not to feel conspired   ment has provided the protections to           the field of building telecom networks
against by the incumbent.                     the ILECs that preclude other providers        is encyclopedic and that the number of
                                              from helping them meet national objec-         online fora he writes in and lists he reads
4. One needs also to understand the con-      tives. Now, how’s that for twisted logic,      are very extensive, I take pride in hav-
sequences of network architectures that       eh? Although when we remind ourselves          ing gathered together a diverse group of
are asymmetric in their restriction of        that national political leaders have been      some of the best minds in the industry
upstream bandwidth. Since these tend to       incapable of discussing national objec-        – a group with particular strength in the
preclude useful economic activity on the      tives because of avowed beliefs that           muni field and one which became the
part of their users, this is one reason why   only the market, in the most narrow of         catalyst for the expression and contin-
it may be best not to copy telco architec-    definitions, can decide, while thorough-       ued testing of these ideas.
ture in one’s local network efforts.          ly ignoring the fact that markets depend
                                              on the economic viability of the nation’s      Having said all that, we gather some pre-
5. It will be quite important for commu-      local communities, our current predica-        liminary conclusions here with the open-
nities to understand the capabilities of      ment may be seen as inevitable.                ing chapter of Frank’s depiction of the
the RBOC FTTP commitments, as com-                                                           range of possibilities and his analysis of
munities make judgments about what            The calculus of the last mile problem has      how to think about and plan for building
the benefits of RBOC FTTP architec-           been screwed to a fare-thee- well for a        local infrastructure. This issue begins a
tures will offer.                             while now. It’s time that it gets fixed, but   process of describing something that I
                                              it won’t get fixed by stakeholders fol-        feel confident has not been well thought
6. Another part of the problem with reli-     lowing the same belief system, and their       out before. After some considerable ex-
ance on the LEC is that it is in a position   providers following the same blueprints        amination of Philadelphia’s process, I
to make the rules for its needs – needs       and roadmaps that they have up until           would suggest that it could be improved
that are not always congruent with those      now. Which is to say, following the di-        by the more thorough and methodical
of its customers. Control over network        rection of Washington and the quarterly        approach with its attention to gover-
use, bandwidth caps and pricing lever-        expectations of Wall Street alone simply       nance that Frank is beginning to lay out.
age reside in centers of power far away       won’t cut it. So, where do municipalities
from end user communities.                    go from here? “                                This issue presents part one of Frank’s
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                                        The COOK Report on Internet July August 2005

  framework. The next issue in about 30        to fully understand the social and eco-       through hire, along with the other assets
  days (dated Sept – published about July      nomic ICT considerations affecting their      needed to form the basis of sound deci-
  1) will present Part 2. Here in Frank’s      stakeholders both today and into the fu-      sion making.
  words is his plan: My outline for Part 2     ture.
  contains a section on the fiscal and tech-                                                 These points, now that we’re discussing
  nological responsibilities of the “loopco    Drivers and inhibitors are discussed,         them, happen to be at the heart of my
  authority”, including its need to own        placing the onus on the individual mu-        thesis, i.e., the need to establish “gover-
  internally, or rent through outsourcing,     nicipality to acquire the necessary hu-       nance,” which is the term that appears in
  the knowledge that would be necessary        man resources either organically or           the main headline of this series.




Some Good News From                            ceived a copy of his application.             3. Ghandruk, Lumle and Tolka village of
Nepal - Mahabir Pun's                          Some Highlights
                                                                                             Kaski district.
                                                                                             - Connect four high schools of Myagdi
Network Wins World                             Describe your Organization: (maximum          district to the network for live teleteach-
Bank Grant                                     50 words)                                     ing. A teacher from one location will
                                                                                             teach live to the students in different
I applaud Mahabir Pun who since March          Himanchal Higher Secondary School is          schools.
2002 has done amazing things in the            a community school that was started           - Set up local communication centers
Maoist controlled regions of the An-           in 1993 by upgrading the government-          with e-mail and PC phone services in the
napurna range.                                 supported middle school. Its goal is to       11 villages for communication purpose
                                               provide quality formal education along        and set up three-cyber café in three tour-
He is building one of the most substan-        with practical vocational trainings and       ist towns.
tial largely wi-fi based networking proj-      to produce income locally through pro-        - Set up a local web server in Nangi to
ects in the Himalayas if not in Asia as a      grams such as Yak/duck/fish/cattle farm-      provide different services such as dis-
whole. The project’s two websites are          ing, camping grounds, and handicraft          tance education, local e-commerce, and
really worth exploring. I encourage read-      making, and papermaking.                      bulletin board.
ers who are interested to contact Mahabir                                                    - Set up telemedicine centers in three vil-
and support his work.                          Describe your partner’s role: (maximum-       lages’ health clinics and connect them to
                                               50)                                           Om Nursing Home in Pokhara for medi-
http://www.nepalwireless.net                                                                 cal advices through audio-video confer-
http://www.himanchal.org                       ICASIT has been an active partner in the      encing in emergency situation.
                                               development of technology and, most
On May 31 I received email from Ma-            significantly, in development and sup-        Provide short-term basic computer train-
habir saying: Hello Gordon,                    port of training programs that will en-       ing from two weeks to a month for the
                                               hance the effectiveness of the technol-       villagers, health workers and school-
"I just wanted to tell that our project,       ogy. It has been a major participant in the   teachers including some basic hardware
Nepal Wireless Networking Project, got         development of the current telemedicine       maintenance training.
a $20,000 World Bank Grant for the             project in Myagdi district Nepal.
improvement and extension of the wire-                                                       What is the problem(s)/issue(s) your proj-
less network that we have set up in our        This is the second phase of Nepal Wire-       ect is addressing? What are the causes of
region. Right now we have connected            less Networking Project run and main-         the problem? (maximum 300 words)
seven villages using Wi-fi technology.         tained by Himanchal Higher Secondary
Our next plan is to extend the network         School. The first phase was completed         The problems that this project is going to
to seven more villages. We are also plan-      in 2003. We will accomplish three goals       address are as follows;
ning to use the wireless network for live      from this project.                            - The lack of communication infrastruc-
tele-teaching, telemedicine, and local                                                       ture in rural areas
e-commerce purpose. For that we are            - Connect 14 villages through a wi-fi         - The inaccessibility of information tech-
doing several experiments here."               (802.11b) wireless network and then con-      nology in the rural areas
                                               nect them to the nearest ISP in Pokhara       - The lack of qualified teachers in rural
"Right now I am in Kathmandu to sign           for Internet connection. The villages and     public schools
an agreement with them. We will be able        tourist towns that will be connected are;     - The difficulties in selling/buying local
to do a lots of things with this grant. Also   1. Nangi, Paudwar, Sikha, Tikot, Ghara,       products in rural areas,
we will be able to make money for mak-         Ghorepani, Tatopani of Myagdi district,       - The lack of health services in the rural
ing the project sustainable."                  2. Ratomata, Salija, Okhareni villages of     areas from the professional medical doc-
                                               Parbat district                               tors.
I asked for more information and re-
                                                               115
                       COOK Network Consultants, 431 Greenway Ave. Ewing, NJ 08618 USA


    The COOK Report on Internet                                                            Subscription Rates
                                                                                           For definitive information please see http://www.
    COOK Network Consultants                                                               cookreport.com/subscriptions.shtml
    431 Greenway Ave                                                                       Gordon Cook, President
    Ewing. NJ 08618, USA                                                                   COOK Network Consultants
                                                                                           431 Greenway Ave
                                                                                           Ewing, NJ 08618, USA
                                                                                           Telephone & fax (609) 882-2572
The main cause of the problem is that         are from the people who have taken           Internet: cook@cookreport.com
there exists almost no telephone service      basic health training. In this scenario,
in the rural areas. The main reason is the    the village health workers will commu-       How to use interactive features of this
apathy of the telecommunication com-          nicate with the doctors at Om Nursing        PDF. Click here with Adobe hand
pany’s to bring the service in the remote     Hospital in Pokhara through audio-video      tool. http://www.cookreport.com/fea-
villages because of the threat from the       conferencing in order to provide medical     tures.shtml
Maoist rebels and less economic gains.        assistances to the patients living in the
                                              villages.
What is your idea, and how does it ad-                                                     by replacing the existing wi-fi radios
dress the problem(s)/issue(s) described        It will help to address the problem of      with standard and license free wi-fi
above in terms of making basic services       selling/buying local products for the        equipment that are more durable and
work for the conflict affected areas?         villagers through bulletin boards. Until     easy to maintain. Our choices for now
(maximum 500 words)                           now a villager has to go around the vil-     are Deliberant, Senao, and smartBridges
                                              lages and ask every person individually      etc.
Our idea is to create a wireless computer     if he or she needs to buy a goat, a buf-     - Extend the network to eight more
network between 14 mountain villages          falo or an ox. With the wireless network     villages of Myagdi, Kaski and Parbat
of Myagdi, Kaski, and Parbat district that    setup, people can post their messages        district, using the existing relay stations
are affected by the conflict from getting     in the bulletin board if they have some-     and establish communication centers in
basic services for their lives. The basic     thing to sell or check the bulletin board    14 villages with at least two computers
services that this project will address are   to find something they want to buy.          with e-mail, Internet, PC phone and a
education, healthcare, communication                                                       printer.
and local commerce. The followings are        How will you implement your idea?            - Put a powerful UPS system in each
the ways that this project will address the   Describe in detail each of the activities/   communication center in order to make
problems mentioned above in terms of          steps that your project will undertake to    the communication centers run for lon-
making basic services work in conflict-       meet its objective(s). (maximum 500          ger hours even if the power from the
affected areas.                               words). Please provide a corresponding       main grid line goes off.
                                              timeline in a separate sheet.                - Expand power sources by putting two
 It will address the problem of the com-                                                   more solar panels and put safety equip-
munication between the villages by set-       Before telling as how we will implement      ment to protect the radios from lighten-
ting up local communication centers with      our idea, we would like to tell that we      ing at the relay stations. This is important
e-mail, web based bulletin board and PC       have already set up a prototype wire-        for the network to run for 24 hours.
phone services in the eleven villages and     less network in six villages of Myagdi       - Set up a classroom with computers and
cyber café in three tourist towns in the      district, and connected the network to an    other audiovisual equipment in each of
Annapurna region.                             ISP in Pokhara. We started the testing to    the four high schools for tele-teaching
It will address the problem of the short-     connect two villages from February to        program.
age of qualified teachers in the rural        March of 2002 and set up the prototype       - Set up a room for tele-medicine pur-
areas through tele-teaching and web           network in September 2003 with the           poses in each of village health clinic of
based learning program. A teacher from        help of several volunteers. The network      three villages and in Om Nursing Hospi-
one location will teach live to the stu-      is operational now despite some prob-        tal in Pokhara.
dents sitting in different classrooms of      lems. Information on our work to date        - Provide short-term training for the
different schools. We will put reference      is available at http://www.nepalwireless.    villagers, village health workers and
materials for the students and teachers in    net.                                         teachers on how to use the new technol-
the local web server, which will be avail-                                                 ogy and the network for communication,
able on- line.                                The next steps that our project will un-     health, and local e-commerce purposes.
  It will address the lack of health care     dertake to implement our idea and meet       We will also provide basic hardware
service in three villages through tele-       its objectives are as follows:               maintenance training for them.
medicine program. The only health care                                                     The corresponding time line is attached
services that are available in the villages   - Make the existing network more stable      with this proposal.


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