A Practical Navigator for the Internet Economy

Building Open Access Internet in Rural America

Understanding the Impact of RIR IPv4 Reassignment Policy
Why it Doesn't Bode Well for the Continuation of an Open Affordable Internet

This issue  begins with a discussion of Mark Cooper's recomended approach to the stimulus legislation.  An open access network based on wireless in rural communities and served where possible by fiber backhaul. The network design is to emphasize local control and local social networking services.

Eight weeks of symposium discussion highlights are included. The major discussion is one involving primarily David Conrad, Fred Goldstein and Tom Vest.  It focuses on the significance of the adoption of IPv4 adress transfer policies that enable assignees of IPv4 address blocks to transfer them to other ISPs rather than return them to the regional Internet registry for re-assignment. These are events that bear very close observation.  Their consequences are likely to be profound and very few people right now are even aware of them.

Needed: A New Communications System

We examine the politics of the broadband portion of the stimulus bill..  Mark Cooper proposes a smallish targeted effort aimed at giving people access to the Internet on open local networks managed by cities and counties.

“We envision a community-wide fiber network linking all local government buildings, schools, and libraries. The service would be anchored by local government. Non-mobile communications flow over the fiber network. Mobile communications flow over the fiber network to a WIFI/WIMAX wireless network.”

In addition to the physical network, Mark also builds in a  role for enhancing community social infrastructure and education. “The stimulus package can be used to create a team -- an "E-Corp" -- to train community members in digital communications and digital skills. They can retrain unemployed workers with digital skills to become local tech support. These activities foster the skills for a more competitive work force.”

Cooper goes to the heart of the issue when he writes:  “The raging debate over how to define broadband for purposes of "special" treatment in the tax code is a dead give away that stimulus spending directed at the big communications corporations can easily turn into corporate welfare. The corporations will use the tax breaks to pay dividends, increase executive pay, or fatten the balance sheet. The way to avoid this trap is to direct funds to local governments and community-based organizations.

This is also the ideal moment to redefine what government can and should do for the people. Providing for the basic means of communications -- paving the streets and building the on-ramps for the information superhighway -- are proper local government functions. The big communications corporations can be hired to dig the trenches the way contractors bid on road and bridge projects, but the people should own the networks and should build the basic communications network that all households need. The private sector can still build its gold plated, hundred megabit network, but it will do so only if people are willing to pay for it. City streets and county roads are open to the least expensive compact car and the most expensive Rolls Royce providing access to basic services for all.”

While Mark’s essay was greeted very favorably discussion centered on whether the last mile should be wireless rather than fiber and how to keep the incumbents from reasserting control.

When asked about the use of wi-fi and wimax, Mark responded: This is a policy process that is unfolding at a ridiculously rapid pace and I must speak a language that the policymakers understand. My goal is to crate an environment in which we can allow the best technologies to meet basic needs to prevail. You've identified lots of possibilities, none of which are contemplated by the incumbent communications companies in a meaningful way. We use the word WIFI/WIMAX as names that policymakers and the public may actually recognize, but they stand for a wireless solution to the basic service for the digital age.

Once the local/middle mile backbone is built and out of the control of the incumbents, the superior last mile technologies will have a much better chance of prevailing. If we can use a community-based approach to basic service and get to 10X10 mbits for mobile and those who don't have a need for or cannot afford a the 100 mbits service, we will have liberated the communications network from the tyranny of the incumbents.

On  the following day (January 15th) Mark wrote: The first draft of the broadband bill is out and it contains only $6.5 billion for rural areas. This is a massive victory, since we have stopped them from spending billions to further entrench the incumbents, especially if we can liberate some of the money for a community-based wireless approach, which is vastly superior in rural areas.

Paul Budde points out that if we can build some advanced networks at the edge it is worth doing because once the incumbents finally realise that they will have to come to the party they - in most situations - will use their own last mile connections at prices that make it impossible for wireless operators to compete. The natural infrastructure monopolies will always make it nearly impossible to compete on infrastructure. But one could argue that if we have forced the incumbents to play the open network/competition game and we do end up with low prices, open networks and competition between services (not infrastructure) that we have reached our goals. In the end infrastructure is a utility and I don't have a real problem to leave that in the hands of the incumbents (once again based on open networks, etc).

Harold Feld closes with an eloquent call to action: “There is a tide in the affairs of men, some shakey guy said.  And also a good deal of inertia, I will add.  Like the Hobbits of the Shire, we lived so well so long most of us forgot that getting justice and changing attitudes is a long fight measured in *years* -- against a well financed opposition with infinite patience and operating on multiple levels.  Small wonder that, as years passed and people were prosperous, that the tide flowed with the incumbents and the few reformers and opponents found it hard going indeed.

But that tide is turning and the Shire is rousing.  There is an interest and an energy directed at the management of policy not seen in far too long.  It is for the most part still unformed -- more an allergic reaction to the last 30 years of free market triumphalism than an organized movement.  But it is a real current looking for direction, and it lies with us whether we shall ride it and shape it or whether we shall allow others to but rocks and shoals in its path.”

Discussion: November 18 - January 18

Who Should Provide Infrastructure? p. 20

Herman Wagter: in the Netherlands the physical network is being separated from production, sales, consumption and so on. The physical transmission network is a public utility, the rest is left to the market. The same view is actively supported by the EC. We do not privatize our road network because there is a massive level of innovation in our cars, what we can do with it and so on.

Fibers are conduits for light. The best fiber does....nothing (but guide the light). Only when you start pushing light through the fibers, modulate the light, and convert it into information it becomes a telecommunications network. You can innovate as much as you want in pushing and modulating light, it does not affect the fiber at all.

The fiber is a utility.

Cecil: Functionality is neither minutes nor capacity. It is technology agnostic. Rather it is simply what people do with available resources. And, as you point out, more rational use and allocation of resources makes for better functionality. Lots of functionality rocks; fighting over minutes, pipes, subsidies, universal service for this silo or that silo, by contrast, sucks enormous amounts of air.

Fiber Unbundling in Holland  p. 23

van der Berg: OPTA will regulate the offer done by Reggefiber and KPN as it would with a copper network. So there are protections against price squeeze, discriminatory pricing and excessive prices. Nothing on delaying tactics, which is a bit of a pity as I would think that KPN's All-IP plans have already sown Fear Uncertainty and Doubt in the investors community and this plan just ups the ante.
From the official announcement: KPN will continue its investments in FttH as announced earlier in 2008. However, KPN does not yet have the intention to roll out FttH on a large scale in the Netherlands. KPN and Reggefiber will assess all plans based on timing and location, considering whether new investments can be justified commercially and taking into account the regulatory framework. KPN will proceed with its current FttH pilots in five Dutch cities.

Vincent Dekker’s analysis: So unless KPN is putting out a statement that they will definitely not proceed with or decide to any roll out anywhere else before June 2009 (which they won't put out) I don't think they are putting the brakes on anything. They just want to make it look like that.

In the meanwhile, their joint venture with Reggefiber (Glashart) is signing up new fiber customers by the thousands in more then 50 cities and villages all across the country.See my map of The Netherlands here:

BIT Torrent Switches to UDP   p. 26

Bittorrent declares war on VoIP, gamers http://www.theregister.co.uk/2008/12/01/richard_bennett_utorrent_udp/

Fred Goldstein: what Torrent is now doing is bypassing the flow dynamics of the Internet and simply blasting away, like a DDoS attack, towards the destination. It won't slow down when TCP applications do. So loss rates at the NAPs in particular will rise. It's thus a social disease, not one confined to its users.

Harold Feld; The critical thing from a public policy perspective is that certain responses in an unregulated market are highly probable. If one subscribes to the theory that the result from the unregulated market (to the extent such a beastie actually exists) is inherently the best result because Coase promised that the market will always reach the most efficient result, then fine. But if you actually want certain outcomes, then one needs to accept that "the market" will not provide them without regulation.  snip

If you actually want a result, like a functional internet that conforms to today's existing expectations on openness, then you need to ask yourself how that will happen. You also need to ask what your error correction will be when it turns out you made the wrong choice, because I stone cold guarantee that any system involving human beings using imperfect information to predict a dynamic future will include wrong choices. And for all you Libertarians out there, failure to take action for fear of making the wrong choice in an imperfect world is as much a choice in this context as the decision to impose a rule or enforce one. This whole "do no harm stuff" is simply code for "take no responsibility and pray it all works out" (with Plan B usually being "no matter what actually happened or what we previously predicted earlier, convince everyone it really _did_ all work out").

Effective public policy must be sufficiently robust to survive irresponsible actors. Irresponsible actors are an utterly predictable set of actors in a field of stakeholders this large. Blaming the actors for being irresponsible is as much a waste of time as blaming incumbents with market power for exercising market power absent regulation preventing it.

Ripe Approves
Private Market for IPv4 numbers    pp. 30

Note to readers:  please start with the summary article on pages 15-18 above. (to be found on Cook's Cooperative Edge Blog)

RIPE adopts reallocation on December 16 2008.  Consensus has been reached, and the proposal described in 2007-08, "Enabling Methods for Reallocation of IPv4 Resources" has been accepted by the RIPE community.

The related RIPE policy document is now updated, published and can be found at:

http://www.ripe.net/ripe/docs/ripe-441.html or http://www.ripe.net/ripe/docs/ipv4-policies.html

Further implementation details of this policy will follow soon. The proposal is now archived and can be found at:


COOK Report - added on January 25 2009 during process of editing for publication:  In one sense what RIPE has done is pushed the allocation decision out to a local Internet registry in other words the ISP.  The ISP uses its assigned numbers to connect its customers.  If an ISP has a bloc of numbers it is not using, it can now transfer them to another ISP within the RIPE region (presumably for money) and that ISP can use the bloc to connect new customers.  The policy pushes the allocation process one level further done and leaves the details of the execution to the decisions of the members giving reallocation power to potentially 11,000  existing local registries that is to say - local ISPs.  To participate in the reallocation market one must already have an assignment and an ASN number.

The RIPE policy goes on to add “LIRs that receive a re-allocation from another LIR cannot re-allocate complete or partial blocks of the same address space to another LIR within 24 months of receiving the re-allocation.

The RIPE NCC will record the change of allocation after the transfer. Please note that the LIR always remains responsible for the entire allocation it receives from the RIPE NCC until the transfer of address space to another LIR is completed or the address space is returned. The LIR must ensure that all policies are applied.

Re-allocated blocks will be signed to establish the current allocation owner.

Re-allocated blocks are no different from the allocations made directly by the RIPE NCC and so they must be used by the receiving LIR according to the policies described in this document.“ 

The policy creates an entirely new level of internet authorities that must administer their routing allocations with the same care as the much larger authority.

Vest: The fundamental break that IPv4 exhaustion/transfers represents will not affect routability or even reliable routability per se -- not immediately anyway. Rather, it will affect who is capable of being/becoming a credible provider of (mostly) reliable routing services for large numbers of customers. If you get IPv4 the old way, you may be able to join that club. If you are not lucky enough to be a member of that group, then you can still become a reliable customer of more-or-less reliable services provided by one of the members of that club.

Editor – Tom points out the attractiveness of the current situation of the exhaustion of IPv4 numbers for “facilities owners” at the national level, when later he says: for those facilities owners who might be interested in (re)establishing a more modest territorial monopoly, the disappearance of an effective bypass technology [routable IPv4 addresses] might not look like a such a bad thing at all. Better still is no particular effort is required to make it happen -- just do nothing different!
Editor – the address exhaustion problem creates a creates two unequal classes of ISP whose economic playing fields are fundamentally different.

Vest: The "increasing cost and uncertainty in obtaining IPv4 addresses" will never -- can never -- materially affect those that inherit IPv4 today from the RIR allocation era in the same way that it will affect everyone that comes after. The former will always enjoy choices about what kind(s) of addresses that they want to use to grow -- use NAT and private IPv4 (or NAT and IPv6) and end users everywhere pay a complexity premium, or use public IPv4 and the provider (and every other provider) pays a IPv4 transfer premium and a routing system cost premium. Non-incumbents won't be choosing between these alternatives; they'll be paying for both.

What I am saying is that once IPv4 becomes a unique, non-substitutable commodity -- the market for which is completely locked up by current incumbents -- the balance of incentives that drive technology development will tip toward advances that preserve IPv4's artificial value as a bottleneck input, and away from advances that would tend to eliminate that value. Multiplexing advances like carrier-grade NAT are a perfect example -- they make ownership of IPv4 even more valuable. Once providers start bankrolling and deploying products like that in earnest, there's no way that they're going to want to reverse course and support steps that eliminate that bottleneck. And so we'll be stuck with a new non-bypassable protocol-level bottleneck forever --- or at least until TCP/IP is supplanted.

Cole Summarizes

Cole: Let me offer a few predictions, mainly to see if I understand.

1. Nothing much happens, as Tom Vest suggests, until we are "out" of free IPv4 addresses (the historical pattern of waiting for rain rather than fixing the roof in advance).

2. Once out, three things start to happen, at varying rates of speed and with various degrees of success:

2.1 a "market" develops in IPv4 addresses, with them that has gets -- the more you have, the more you can both buy and sell

2.2 technology to "extend" the use of those you already have (multi-level NAT et al) now gets really serious, even in areas where it was not favored before.

2.3 technology to "get around" the limit (IPv6, something Tom might like <grin>, et al.) begin to receive serious attention, but may or may not begin to be used

3. the whole system is much more chaotic for a while, perhaps a very long while, until and unless a less chaotic system begins to gain traction

4. Although collectively we might have the technology "smarts" to reduce the time spent in steps 2 and 3, we lack the institutional/social "wisdom" to employ it. (This appears to me to be the crux of Tom's point, but I am happy to be corrected.)

- To Rollie Cole:: Very well summarized.

The only thing missing are the interconnections -- i.e., 2.1 leads to 2.2 lock-in, and as 2.2 continues, 2.3 becomes increasingly impossible -- at least any version based on any form of TCP/IP that is currently available or under development (AFAIK). So what might look like a natural, evolutionary process is really a giant leap of faith -- not into the unknown, but rather into a known bear trap, but with faith that it won't bite, this time, maybe...

Finally Harold Feld (a List member) on his blog wrote a provocative summary: http://www.wetmachine.com/item/1428

RIPE Makes Me Vaguely Uneasy By Creating Legal Market For IP Addresses.

I suppose my real problem is that I just haven't dug into this area enough to really have an opinion. But then again, so few people have - which is part of what makes me uneasy. Few things rival IP address allocation in both importance and breathtaking, mind-numbing technical snooze-inducing power. This makes it either the ideal laboratory of exciting new ideas or a veritable Devil's playground of possible mischief.

I do know that the longer the transition from IPv4 to IPv6 goes on, the harder it will be to do. Creating a class of actors invested in IPv4 as a valuable asset rather than simply as a question of cost avoidance will not help.

Does what happens in Europe stay in Europe: I'm glad only one RIR has decided to take the plunge. But how long will the other RIRs wait before opting for this approach? We had credit default options and subprime loans for many years before the collapse. Countries and institutions that initially rejected these instruments and investment vehicles as too risky succumbed to the constant pressure from investors eager to "get in on the action." Until last year, countries with conservative investment laws looked like fuddy-duddy dinosaurs preventing their citizens from getting in on the good times. This year, not so much.

I am worried that we will see a huge rush to declare RIPE's policy shift a "success" before we even know what success would mean here. I expect that "success" will be measured in something really stupid and irrelevant, like total number of transactions as compared to assignments. I also anticipate that as parties begin to make money from the sale of address blocks, similar parties in other regions will begin to lobby for these changes.

Without having some framework to figure out what the Hell would constitute "success" or "failure" of RIPE's market experiment, we will almost certainly see it become the dominant model. Why? Because it is the only model, and its supporters will loudly proclaim its success. With no metrics to define success, this will look very convincing.

Bandwidth Pricing and the FCC

Hendrick Rood: When I went searching for some international bandwidth figures I bounced into this nice presentation by Telegeography


Alongside this Executive Summary it provides a nice overview


But it also gives you one pause:

Why is actual Purchased Capacity on lit cable systems (see slide 23 for Transatlantic) more than twice the amount of Used Capacity? It does not make economic sense in a market rife with overcapacity and with falling lease prices for 10G wavelengths to purchase capacity two years in advance and leave it unused.

The answer is, Purchased Capacity on lit cable systems isn't more than twice Used Capacity, but Used Capacity, in particular the International Private Line part is carefully underreported.

The cause of this is the FCC, who thinks it is smart to levy a regulatory cost recovery fee based on a LINEAR count of 64 kbit/s circuit equivalents in use.

Telcos Invading Each Other’s Turf

Goldstein: North Texas is a kind of interesting market, though. SBC/ATT has downtown Dallas and Fort Worth. GTE had a band of outer suburbs north of the city, with SBC turf farther north. That area has seen explosive growth, mostly upscale. So the GTE->VZ turf was one of the first to get FiOS. ATT is trying to milk its old copper plant with DSL Lightspeed, which is probably a harder sell. So VZ is setting the non aggression pact aside and slipping across the border into the subdivisions on the SBC side. It doesn't cost any more to pull new FiOS plant on SBC's side of the line, after all; it's still near enough to the head end/CO, and this way they're cannibalizing somebody else's "access line" count, not their own.
What's really supposed to be odd about the story, then, is not that it's taking place, but that it's taking place on such a small scale, and took this long to happen. [snip]

COOK Report: Is there a well marked dividing line between residential and business services?

Coluccio: There was a time when I would have speculated that the "well marked dividing line" might be found only in the headers of packets, leaving the job of differentiation to upper layer functions found in the optical line terminals and central office routers and switches. However, after a rather interesting discussion that I had with a friend not too long ago I'm now inclined to think there may in some locales, at least, actually be separate overlays, if not entirely physical, then partially physical and entirely logical. snip

[Editor: the answer seems to be that there are so many shades of gradation as to say the answer is “no.”]

Cowen: One thing that is critical to understand in competition for enterprise customers is that competition takes place for multiple sites. It usually takes place against a tender that is issued by an enterprise for its requirements and the enterprise usually has a very good understanding of its requirements.

Typical requirements for enterprise networks supplying voice and (private data) involve router based services (voice and data). These can be supplied by a number of different suppliers: IT players may tender on the basis of integration with the existing IT estate, systems integrated and telcos supply the communications infrastructure and combine WAN with LAN.

The critical point is that competition is for multiple locations. Those with level 1 underlying fibre or other infrastructure use that as part of the offering. Those that do not own such facilities have to lease them from those that do.

This is where a badly regulated monopoly incumbent such as AT+T and Verizon gain huge opportunity. In their ability to offer more coverage over more sites from their own resources they have an economy of scale, scope and network externality advantage. This is well understood and the basis for the need to regulate.

Map the Fiber

Pages 77 through 80 above cover efforts to map the existence of fiber as a guide to the feasibility of doing cooperative builds as in Canada a decade ago or at least determining whether and how other customer might be brought into existing plans and make those plans more viable,


Building a New Communications System for America at the Grassroots Level

A Vibrant, 21st Century Community Communications Ecology Requires Physical Infrastructure, Human Skills and Social Tools

Editor's Introduction                                    p. 1
Building a New Communications
System for America                                        p. 2
Discussion                                            p. 3
The Policy Process and Canadian Examples                        p. 8
The Winds of Change Are Blowing                                p. 12

IPv4 Numbers to Become Transferable and Consequently Property

A Introductory and Interpretive Essay for the Symposium Discussion on Pages 30-63 of This Issue

A Tipping Point for the Internet?                           p. 15
The Context                                                        p. 15
The Tectonic Shift                                                p. 16

Symposium Discussion  November 18 2008 - January 18 2009

Who Should Provision
Telecommunications Infrastructure?
Government or Private Entities?

Thinking About  Infrastructure                                    p. 19

Fiber Unbundling in the Netherlands 
KPN/Reggefiber Offer Fiber for
Twelve Euros per Month                                       p. 23


Bit Torrent Changes to Use of UDP in P2P    p. 26

RIPE Approves Private Market for
IP v4 Numbers

A Discussion of the Operational and Economicimplications of the Depletion of the Internet’s Currency

Economics of IPv4 Numbers

Editor’s Introduction                                                p. 30
A Plea for Help in Understanding the Problem                        p. 30
IP Numbers Different from Domain Names                            p. 31
RIPE Adopts Allocation Policy December 16, 2008                    p. 38
Economic Consequences                                        p. 41
The Internet Under this New Policy Becomes the New PSTN            p. 44
If the Alternatives Are Bad Enough – Build Something New          p. 48
A Market Will Come  - Only Question is What Kind?                 p. 49
Rollie Cole Summarizes                                            p. 52
A Different IPv6 Alternative                                        p. 54
And So Does Harold Feld (Independent and Parallel Summary)         p. 56
Lengthy But Necessary Background                                p. 57
So What's the Problem?                                            p. 58
So Whatever Happened to IPv6?                                    p. 59
Enough Background! What Did RIPE
Actually Do? And Why Does It Make You Uneasy?                    p. 60
So What's Your Bright Idea Oh Wise One?                          p. 62
Editor’s Concluding Summary                                    p. 62

International Bandwidth, Pricing and the FCC Deliberately Suppressing Demand?   p. 64

Telcos Invade Each Other’s Turf?                  p. 70

The Innovator's Battle Plan                                        p. 71

Coming Changes in the Infrastructure Model?                      p. 74

Map the Fiber                                                    p. 82

BOOK Reviews                                        p. 85

Executive Summary                                      p. 87