A Practical Navigator for the Internet Economy

For Global Competitiveness Governments Still Must Encourage Domestic Economic Investment

The Convergence of Reality and Virtual Reality and Other Thoughts on a Trip to Korea and China

Broadband in Korea, change in China. NLR oppoprtunity. BT Strategy. How to purchase this issue. $350 or $1400 group.

September 30, Ewing, NJ -- The November issue focuses on technology change in Korea.

Executive Summary

Reflections on My Asian Visit

My visit to Korea and China helped to make very clear the importance of government support for science and technology and public infrastructure – support that landed the first man on the moon but that has pretty much vanished in the United States. Both Asian nations are building advanced economies based on principals that regrettably in the United States we have abandoned over the past 30 years. The result is a pervasive broadband Internet infrastructure in these Asian countries that helps their citizens function as strong competitors in the global economy.

 

With the idea that there is such a thing as “public good” and that public infrastructure is not an “evil” to be avoided comes the possibility to cooperate and collaborate.

I also describe the remarkable tele-surgery demo that took place at the APAN meeting over TIEN2. High speed research networks are bringing benefits of shared knowledge and expertise to people in many nations.
Increases in processing capability, storage capacity, network speed and the application of commodity CPUs to high-speed networks in the form of grid computing are creating capability that last mile incumbent monopolies in the US are trying to stifle. Again the key political question becomes on what basis are investments to be made in society and for whose benefit?

My digital archive presentation emphasized improvements in flat panel displays and software like Photosynth used in collection photographs from the web to make the dimensional visual mockups that can be remotely explored. I argue that thes e developments mark the beginnings of the creation of virtual worlds accessible via the internet.

The presentation that followed mine by Katsushi Ikeuch of the University of Tokyo on the Digital Bayon Project was another eye opener. Here a set of fascinating technologies are being used to build a three dimensional virtual model accurate in detail down to a square centimeter of the huge central temple 150 meters by 150 meters by 30 meters at the ruins of Angkor Wat in Cambodia. Combined with projects like the National Digital Archive Program in Taiwan, we are now beginning to see that everything can be digitized and linked to everything else. Thus it was no surprise to me when In Beijing James Lee, Vice Chairman of China Labs said that his projection for the major technology trend of the next five years would be the merging of reality and Virtual Reality.

In this over all context, a central question becomes how does one sift through and connect the vital necessary information to make informed decisions in the midst of this on rushing complexity and change? With this in mind, I close with a summary of some useful insights from Nicholas Taleb’s The Black Swan.

Broadband Success in Korea

This set of two interviews summarizes the history of the development of broadband in Korea. Minho Kang points out how over a period of at least three decades the Korean government developed policies to ensure investment of national resources in science and technology. Its actions include getting the nation’s largest conglomerates to work on technology challenges like the minicomputer and 4 meg DRAM in the 1980s and on opening telecom to competition in the 1990s.

However, the most critical dynamic really occurred in the late 90s when an open market and availability of large sums of capital made it possible for the Hanaro to arise as a competitor to Korea Telecom. The competitive build out that has given Korea the globe’s highest broadband penetration rate began in 1999 and has been marked by Hanaro’s leading the way but also by KT’s catching up to the point where KT now controls nearly half the market.

A discussion with Jin Ho Hur CEO FON Korea and Youngmo Kim of the Korean portal Naver examines the division of the Korean Market between Korea Telecom, Hanaro, PowerCom and cable modem operators. It also looks at interconnection policies among the first three who pee with each other and the countries content and cable industry that must buy transit.

Finally Jin Ho Hur explains his efforts on behalf of FON. His goal is to get tens of thousands of Korean broadband users to attach FON based wi-fi routers to their broadband connections in an effort to create a more ubiquitous wireless infrastructure in Korea.

National Lambda Rail Opportunity

I examine the merger committee technical report that called for the Education and Research Community to keep both networks. Given this conclusion the issue becomes “why merge?” The likely conclusion to a merger is that NLR would be killed off within a year or so of a merger completion. The NLR Board has voted against the merger. Internet2, I am told, is not giving up. Nevertheless the recent announcement of shared infrastructure between CANARIE and NLR that adds Boston to the NLR foot print is a favorable development.

Meanwhile NLR is looking at partnerships with the private sector that are possible because NLR is member owned and operated rather than a managed service like Level 3. This issue is strategically very important because NLR is the only national, operator owned, IP infrastructure not under the control of the duopoly. As such it represents an opportunity to stave off LEC control of the Internet. National entities in the public or private sector that choose to invest In NLR can get one or more nation wide light waves in return for their investment on terms that are more favorable than those under which they could acquire from the duopoly.

Speculation on BT’s Business Model

I describe the reasons why BT should be hoping to transition from an incumbent, territorial-based telco monopoly to one that specializes in enterprise service, network -based operations for enterprises on a global basis. Here BT could wind up mimicking the successful transition of IBM of some 20 years ago from a product company to a mainly services based company. With structural separation National Regulators could help to begin to turn the former masters of the PSTN into purveyors of IP -based service on a global level to Enterprises.

Symposium Discussion

The Internet is the Black Swan of
communications

A look at Susan Crawford’s new paper The Radio and the internet. She “suggests that the central problem the Commission should be trying to solve is improving access to the internet. Regulators should choose spectrum policy actions by weighing the benefits to long term improved high speed internet access created by a specific policy against the short-term incentives of particular incumbents.” She gives a detailed policy overview and discussion of the 700 MHz auctions. She is not happy with what is going on. Among other things the parallels between how Herbert Hoover’s Radio commission killed independent and locally controlled radio and the way in which the FCC is giving away our control of the internet are chilling.

P2P Evaluation

Tom Evslin: I've begun a series on P2P and whether they are a great way to provide a cheap Internet service. http://blog.tomevslin.com/2007/08/p2p-boon-boondo.html

John Waclawsky: P2P is not about any particular protocol or technology. It's about edge device and application direct co-operation. I see true P2P at the heart of competition. True P2P has three fundamental behaviors:
1. Applications share resources through direct exchange (no man in the middle).
2. Applications self-organize (no control from the middle)
3. Applications use some technique to deal with intermittent connectivity (no master data base in the middle).

Jaap van Till: There is more to P2P than the information flows between programs it creates on the networks. P2P is also something new that happens between PEOPLE. And it will influence architectures and economies. See for instance the lecture at Swinburne University (Australia) of my friend Professor Michel Bauwens

Net Neutrality Outside the US

Bill St Arnaud points out that Network Neutrality is becoming an issue outside the US. Bit Torrent and the BBC’s streaming video player are under attack. Persuasive argument is made that is not going to be in the future just a US problem. David Isenberg offered the following very useful rply: A regulator simply could not know whether network management is discriminatory or not.

There's a very simple fix -- remove the motive to discriminate. If a network operator has no motive to discriminate, then clearly all network management activities would be for the simple purpose of managing the network. This is precisely why it should be illegal for network operators to have any financial interest in what they're carrying!”

Bandwidth Scarce or Infinite?

Craig Partridge offered the following excellent reply. (basically – it all depends.) Partridge: It all depends on what you are measuring and where.

If you look purely at how many bits we can (in theory) push through a fiber and look at the available fiber base in many first world countries you'd discover that, in theory, we're so under utilizing the fibers that we could, with a small stretch, treat available bandwidth as infinite.

Similarly, if you stood just about anywhere in the world and measured how much of the wireless spectrum was in use at that spot, you would find so little of the spectrum used, you could say the available bandwidth was infinite. Cue the software defined radio theme music :).

Thoughts on Economic Models for Fiber Networks

Hendrik Rood offers a very well reasoned discussion of the varying context of market and marketplace applied to telecommunications.

“The dominant economic school has been Micro-economics with Chicago School. One of the central pieces of that school has become the "Coase Theorem" of Nobel Prize winner Ronald Coase. Coase has argued that many social problems, that people thought before required governmental intervention, such as pollution, or nuissance noise, would be solved efficiently as soon as property rights were well specified and transaction costs are zero. Without regard for any upfront distribution of the property rights itself.

In reality of course transaction costs are non-zero and upfront distribution of property rights does matter a lot.”

“In the economic field of Industrial Organization, since around 2002/2003 it began to surface that so-called two-or multi-sided platforms are fundamentally non-Coasian markets. That means you cannot approach them with Chicago School economics and leave the market operating under general rule of law in a simple way. An operating system is a multi-sided platform (groups of users on one side, several application developers on the other side), a local loop network is a multi-sided platform, a credit card system is a multi-sided platform.”

“It is also the very reason why Net Neutrality debates linger on. Because most people are still in the 'mood' of thinking about a network as a platform owned by a supplier, selling wholesale services to ISPs or retail services to residential and corporate end users. Economic theory on Multi-sided platforms however sees the platform as a facilitator of transactions between various groups of users (the multiple sides).”

“Credit Card companies, Operating Systems or Social Clubs can still exist in parallel and compete. It is not that risky for society when such a platform fails. Local loop networks are however such capital intensive that it is very difficult to establish more than one platform in many areas and more than two competing platforms evolves rapidly into a quite inefficient arrangement upheld for the sake of infrastructure competition by regulators who think competition itself is an end instead of a means to reach societal goals.”

COOK Report: Here in the somewhat abstract language of economic theory Rood is reminding us that networks are critical infrastructural elements necessary to a prosperous modern economy. After long discussion with Fred Goldstein and Bob Frankston, Hendrik concludes: I am an engineer and a professional consultant. From an engineering point of view, I just want to see a number of these networks be installed and see them working first. So I think religious ex-ante "appropriate model discussions", as some on these list often seem to enjoy, are a huge distraction from the real goal, getting some of these FTTH networks operational first and defining what should be considered a sound and efficient business model second.”

This only touches on a long somewhat abstract but basically well reason discussion with a good contribution by Jim Thompson that says pragmatic building is better that than repeated cries about how bankrupt the concepts of telecom are.

Cable Ship Shortage?

In answer to a question by a list member, Hendrik Rood gives a thorough summary of the active global players. Key conclusion – “As the major ships have to organize repair duty rescheduling around the industry before they can engage several weeks in cable laying activities, I guesstimate that the entire industry is able to effectively construct at scheduling peak 60 thousand km pro year. The issue is not cable construction capacity as such, but the number of ships that must be held in ports for emergency repairs.

One of the 'strokes of luck' is that one of the few wharfs that built this type of ship, Van der Giessen - de Noord, has reopened after a shut down briefly on the delivery one of the last new cable ships built [to Global Marine].” Snip “I do expect for the forthcoming years a rise in pricing for international bandwidth. Your announcement by a Global Marine executive effectively signals to the entire industry that they can start to push up prices.

I mainly see a normal healthy industry cycle (the so-called Juglar).”

Japan’s Internet Traffic

A short discussion on reports of Internet traffic in Japan reaching 700 gigabits per second.

Iliad’s Free in France

A discussion of the economics of different fiber architectures in France. Benoit Felten has good things to say about Free: “Free's choice of architecture is P2P Ethernet, which makes it comparatively "easy" for them to offer 100/50. Orange and Numéricable will have trouble following that since they have deployed G-PON exclusively. That means that if they offer 100/50 they limit themselves to a 2.5% customer uptake after which they can't ensure the bandwidth. Neuf deploys either G-PON or Homerun depending on the projects, so they may follow, but not uniformly.”

“I suspect this is only the first strike from Free though. Their deployment is late, they didn't want to shoot all their ammunition with such a limited addressable customer base. Once they reach the 100.000s addressable customers, they'll most likely shoot with 1Gb/s downstream and no-one will be able to follow for a good long while...”

Is Voice Passé?

Bob Frankston today initiated a very good discussion: "I was visiting friends for dinner and they were talking about their son who just went off to college. Apparently he doesn't like his mother calling him because when is friends see him talking on the phone they know it's his mother because they don't do voice - just text.

Is this a widespread trend or even the norm?” [snip]

Norman Lewis: "This discussion is very interesting for two reasons: first, it definitely highlights a generational change where texting has become a medium of choice for very particular reasons (part of which is that it is more intimate, private and thus can be used by younger people to evade adult monitoring); and second (and more interesting) because it highlights many of the social pitfalls of telephony which not many people recognize let alone understand. By this I mean the intrusion of telephone calls where caller hegemony interrupts/dictates the receivers time and behavior."

_

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Contents

To Create Globally Competitive Nations
Governments Still Must Encourage Domestic Economic Investment

The Convergence of Reality and Virtual Reality and Other Thoughts on a Trip to Korea and China

Korea p. 1
China p. 2
Teinet Tele-surgery Demonstration p. 3
The Convergence of Virtual Reality with Reality p. 3
The Black Swan p. 6

Broadband Success in Korea

From Early Government investment in Hi- Technology, to Hanaro - KT Competition, to FON Based WiFi

Government Role in the Sponsorship of Science and Technology p. 9
KT and the Early Rise of Broadband in Korea p. 10
How Broadband Growth Developed in Korea p. 11
Korea Telecom Makes Late Market Entry p. 13
An Overview of the Broadband Residential Internet Market p. 14
FON in Korea - Bottom up Versus Top Down p. 15
KT’s Future Outlook p. 17

The Evolution of National Lambda Rail Offers a Major Opportunity

Why the Proposed Merger Must Not Happen p. 19
Enterprise or Public Sector Investment in NLR Presents a Unique Opportunity p. 19

Thoughts on British Telecom’s Global Strategy p.22

Symposium Discussion: August 10 - September 15 2007

The Internet is the Black Swan of Communications p. 24

Peer to Peer ­ An Evaluation p.25

Network Neutrality Outside the USA p.27

Is Bandwidth “Scarce” or “Infinite”? p.31

Thoughts on Economic Models for Fiber Networks p.34

What Kind of Networks? Telco versus Cable versus Frankstonian Absolutes p. 39
Needed: Organic Growth of Neighborhood Area Networks p. 41

Cable Ship Shortage? p.46

Japan’s Internet Traffic p.49

Iliad’s Free in France p.50

Voice Is Passé? p.54

Executive Summary p.55

Symposium & Interview Contributors to this Issue

Affiliation given for purposes of identification - views expressed are those of the contributors alone

 

Kenjiro Cho, Senior Researcher Internet Industries Japan Research Laboratory
Roland Cole, Director of Technology Policy at Sagamore Institute for Policy Research
Frank Coluccio, President DTI Consulting Inc., New York City
Lee Dryburgh, SS7 specialist, Doctoral Candidate University College London
Tom Evslin, Novelist, Blogger and Retired Former CEO of ITXC
Bennoit Felton, Senior Analyst Yankee Group Paris and proprietor of the Fiber revolution blog
Bob Frankston developed Visicalc and Lotus and later home networking at Microsoft
Fred Goldstein, Principal of Ionary Consulting, author of The Great Telecom Meltdown
Jin Ho Hur is CEO FON, Korea and has a long history in the development of the Korean Internet
David Isenberg, author of the Stupid Network and proprietor of ISEN.com
Minho Kang is Chairman Korea Optical Internet Forum and Professor at ICU
Youngmoo Kim is Team Leader, ITF, at Naver the Korean “Google”
Dean Landsman, Media specialist, 30+ years in broadcasting, blogger
Norman Lewis, former Director of Research Technology at Orange ­ now involved in new start up
Tim Nulty, CEO Burlington Telecom, in Burlington Vermont
Andrew Odlyzko, Director Digital Technology Center, University of Minnesota
Craig Partridge, Chief Scientist at BBN Technologies and works in the Internetwork Research Department
Ed Pimentel, CTO AgileCo, Alpharetta Georgia
JP Rangaswami, CIO BT Global Services
Hendrick Rood, Principal Stratix Consulting and Faculty Delft University
Bill St Arnaud, Director Ca*Net4, Canada's high speed research network
Jim Thompson, wireless expert, Vivarto, Wayport etc currently in Hawaii
Jaap van Till, Principal Consultant and Partner with Stratix Consulting Group BV Professor ICT Infrastructures Delft University
john Waclawsky, Chief Software Architect, Motorola