Rethinking the Role of Networks in the Global Economy

Nico Baken's Trans-Sectoral Economic Analysis May Be a Break Through in the Policy of Allocation of Investment in Technology


How to purchase this issue. $150 or $450 group.

January 30, 2007 Ewing, NJ -- The March issue contains an introduction to Nico Braken's vision of 21st century telecom and interview with Nico that further eleaborates his infrastructure strategy for KPN. An interview with Lars Hedberg summarizes the state of fiber in Sweden.

Executive Summary

Thinking about Life as a Series of Networks

pp. 1-20

This issue looks at the work of Nico Baken, a mathematician with a broad ranging classical education. Nico is Senior Strategist at KPN the Dutch incumbent. He also teaches at Delft University. Between 1992 and 1996 he designed and implemented a fiber strategy for KPN that included the building of fiber rings in all Dutch metropolitan areas.

Nico has always wanted to bring fiber to the home in The Netherlands. He had promoted the idea of a public private partnership with the cable TV industry and KPN as private sector investors in partnership with the Dutch government. The heady days of the 1990s boom the idea did not fly because the parties were too concerned about protecting their own operational silos.


However, during the past few years, the parties have been able to beginning to understand that networks as a part of the ICT sector in the global economy demand special treatment because rather than a business which was there to perform in splendid isolation the network sector was there to act as an infrastructural foundation for the smooth functioning of the other 15 sectors of a modern economy.

Here is how Nico puts the trans-sectoral dilemma that KPN faces. KPN cannot build a classical business case for fiber to the home because the pay off from FTTH lies in the future and falls into different sectors in terms of savings and in terms of new revenue streams. In a traditional case the Capex requirement is now for KPN but the payback lies in the future. However in a trans-sectoral way the business case already fits. If you look at the government that can spend a certain amount every year investing in the different economic sectors that make up society, you may ask what kind of investment and where will give the largest payoff?

In a siloed world of government ministries that each exist to deal with a specialized sector getting action that cuts across sectors is very difficult. Therefore, we are left with classical triple play architectures of voice video and internet as commercial networks fight with each other over their ability to deliver content.

The reason that we cannot make progress in the United States is that political leadership is mired in the old ideological view that prohibits government investment that crosses sector boundaries. The concept of private good has driven out understanding of networks as infrastructure that should exist to perform a public purpose. Graham Richard's implementation in Fort Wayne Indiana and James Hettrick's in Loma Linda California are among the very few efforts in the US that cross sectoral boundaries. The mix is economic development, education, health care, government services and public safety education - all things that a network infrastructure that has a public as well as private purpose can facilitate. As Nico Baken puts it: Fiber to the home, when considered from a trans-sectoral point of view, makes absolute sense. But if the cost has to fall all on a single sector, it makes no sense and won't fly.

Baken's work is summarized in a new paper published in the 100th anniversary issue of The Journal of the Communications Network. In the introduction to this issue and the interview we see how his thought encourages readers to think of the continuing evolution of modern civilization as dependent on networks. He develops a valuable analysis that encourages policy makers to take a networked view of society rather than what he calls a nodal view where the owner of the node practices a zero sum view of business by advantaging his node at the expense of those whom he deals with. The nodal versus networked point of view is also similar to the equilibrium state economics versus complexity economic cited by Beinhocker, in his book The Origins of Wealth

. As digital IP networks have enabled a horizontal deconstruction of what used to be bound together by vertical silos, they have established a rich possibility for enabling collaboration that changes the way business is done and enables people to work and think for the first time in a trans-sectoral way rather than in a way in which they cooperate to keep income locked up in a vertical fiefdom. Baken's thought shows yet another point of view regarding an economic philosophy that seeks to enable customers at the edges of networks to do business with each other rather than be controlled by the center.

Nico also wants to build an infrastructure of street lights that will serve as an interface been high speed wireless above ground and fiber below. The potential interactivity of this architecture is quite breath taking. One of most intriguing aspects of his work is that according to Vincent Dekker telecom reporter for the daily paper Trouw is that the new Dutch Government is being formed with the hope of adopting a trans-sectoral point of view in making its decisions in how to invest in the Dutch economy.

Fiber and Community Networks in Sweden

pp. 21 - 33

Lars Hedberg is the Director General of the Swedish National Network Federation.

Lars points out that community networks began in Sweden about 1994 when Telia the incumbent provider was deregulated. Some municipalities started to look at what it cost them to provide communications services for schools and libraries and administration, and health care. Municipalites that had their own electric utility were quick to string fiber from their electric poles,

The Swedish National Network Federation was formed in 1998 when 25 city networks wanted to get together and form an organization to share information and prevent each other from making the same mistake. SSNf now has 300 members including universities and technical organizations. More than half the members are city networks owned either by the cities or by the local power line companies. The other half is made up of organizations like Cisco, Alcatel Nortel, Ericson. It has five Dutch cites as associate member because they all share the goal of building open networks, They also find it useful to have an organization representing some 155 city networks when presenting lobbying positions to the national government.

They are hard at work in bringing fiber to the small villages in the north of the country in order to give the inhabitants the ability to be economically viable and therefore have reason to stay and rather than migrate to the cities. People are eager to connect their houses there because they find that it adds greatly to the value of the home. Wireless is not a major player in connectivity.

Lars gives an update on Stokab which is owned by the city of Stockholm and runs fiber in deep tunnel underneath the city extending it into 15,000 buildings which means virtually every building with in the city limits is fiber connected. Stokab has also extended its network a few hundred kilometers reaching Vasteras to the west and covering key onshore islands in the Baltic to the East. Outside Stockholm itself Stokab's network is used to link schools and hospitals and government centers. On the Baltic islands in the summer it provided vacationer connectivity and is used for video monitoring bylaw enforcement.

Lars describes a large network in Skane to the south west of Stockholm. Skanet fiber passes many houses but connects only those who pay to be put on Net. Connection densities greatly vary by area while current estimates are that of 1.3 million homes passed about 60% are connected. Houses that do connect can get a tax rebate amounting to about one third the cost of the connection.

Skane is also the location of the Oresund bridge to Denmark. Lars explains how that bridge carries a fiber cable with an estimated 50% of all Russian internet traffic. The bridge is now part of a fiber route that reaches from Hong Kong, through Beijing connecting with the trans-Siberian railroad and running to Moscow, St Petersberg and Stockholm-ending only at the Amsterdam internet exchange.

For the rest of the issue you will have to subscribe.


Rethinking the Role of Networks in the Global Economy

Nico Baken's Trans-Sectoral Economic Analysis May Be a Break Through in the Policy of Allocation of Investment in Technology

The Nodal Network Scenario versus the Trans Sectoral Approach p. 2
Sectoral Dissatisfaction - We Don't Live by Products Alone p. 3
Trans Sectoral Thinking in the Formation of the New Dutch Government p. 6
KPN Also Begins to Think Across Sectors p. 7
Summary for the paper “Unravelling 21st Century Riddles, Universal Network Visions from a Human Perspective” p. 8

Shaping ICT Sector's Future Course Via a Horizontal Networked Point-of-View Rather Than Vertically Integrated Silos

A Conversation with Nico Baken, Fiber Architect and KPN Network Strategist

A Vision for a Trans-Sectoral Approach to the ICT Sector in the 21st century p. 9
Finding Insights that Are Both Trans-Network and Trans-Sectoral p. 11
Streetlights as the Interface Between Wireless and Fiber p. 14
Streetlights Make an Intelligent Mesh p. 18
The Trans-Sectoral Point of View p. 20

Swedish Communities Choose Differing Fiber Roads

Lars Hedberg Explains the Approach on a National Level as the Swedish Urban Network Association Coordinates Development Between Communities

The Function of SSNf in the Context of the Geography of Sweden p. 21
Muni-Nets in the Far North p. 23 Government Funding for Small Municipalities p. 27
The Economics of the Bridge to Denmark p. 29
On Going Political and Economic Issues p. 32