A Practical Navigator for the Internet Economy

Presenting a Framework that May Allow us to Understand the Value Derived from a Competitive National Network Economy


How to purchase this issue. $150 or $450 group. The August 2006 issue introduces the analytical framework of Tom Vest's Wealth of Networks.

July 1, 2006 Ewing, NJ -- We live in a world of complexity and rapid change. The problem is that our world is also chaotic. It appears to lack organizing principals on every level. More choices, more change and less understanding – this, despite the availability at a mouse click of a reference library of much of the world’s knowledge. All of it computer searchable in a heartbeat.

As new ideas emerge from ever more sources with ever increasing frequency, the greatest challenge remains to integrate knowledge and personal experience into meaningful patterns or stories that are both "true" to that complexity, while at the same time being relevant, actionable and thus empowering.


However, because knowledge -based expertise tends to force most of us into ever more specialized niches, those who would manipulate their environment in their own self-interest have an easier time. It is very difficult to be a specialist and generalist at the same time. Most us spend our lives in pursuit of a deeper and more specialized knowledge. The average person has no idea how complex technologies work. This is especially true if those technologies are outside the sphere of his personal expertise. It is certainly true of the internet as the debate over Network Neutrality has shown.

The Internet is both a facilitator for these changes and a platform that supports them. We know that it has become a global general purpose technology in record time. We know that it has some impact on our economy – but we argue over that impact and whether it is measurable. Our knowledge is generally anecdotal. Tom Friedman published a best selling book of such anecdotes some eighteen months ago. He called it the World is Flat – he could just have easily called it How the Internet Enables Globalization.

We lack a systematic means of understanding how the Internet does this. Because we lack such an understanding it is far easier for the Bell East and Bell West to promote the deceptive view that blames Google and the other application service providers for not paying their fair share for use of the phone company owned pipes. They can get away with this today because the telephone service model is the only familiar benchmark, and the temptation to assume that the Internet works the same way is difficult to resist if there is no better or more accurate cognitive model.

Very few people who have had experience in both international telecom and global Internet operations have had the time or inclination to synthesize the differences between the two, and translate them into a form that might be accessible to others. Tom's research portrays an Internet that defies the standard analogies to both "silos" and "layers", one that is composed of a complex mix of partially overlapping systems, interests, and institutions. He argues that this more "realistic" view is important because it helps to understand how and why the Internet grows in some places but not in others.

The question still remains, "so what?" And the answer is that because we have no mapping of internet outputs onto any generally understood economic indicators that would enable economists to identify, measure, map over time, and evaluate the impact of some agreed upon internet output(s) as contributors to the GDP of a national economy, we are hard pressed to come up with a reasonable answer. Globally hundreds of billions of dollars are being spent on telecom networks and services that they deliver via IP protocols. The spending flies in the face of a rather large problem. It is done largely in the dark with no agreed on ways to assess the outcome and apply future strategy.

Anecdotal stories abound that would indicate a relationship between the existence of the Internet as an input of some kind and wealth as a resulting output. What has been lacking is “scientific” way of looking at the performance of the Internet over time as a part of the economy of each country in which it functions. Two months ago in these pages I introduced Tom Vest who I explained to readers was endeavoring to measure the Wealth of Networks.

The long interview that makes up the bulk of this issue describes the framework that Tom has developed to study internet operations time series data from 1997 to the present. What Tom proposes is a classical political economy-inspired framework. As explained in the interview Tom uses the framework to present his case for defining and measuring key Internet "deliverables" at the institutional, national, and global levels. Doing this then sets the stage for Tom's effort to explain why some places and times have been more successful in delivering these "goods" than others. We will explore these issues with Tom in September and October COOK Reports.


The goal is to be able to relate Internet operations data in such a way that that it can be overlaid against measurable and empirically verifiable outcomes in national network economies. Having done this, it should be possible to identify feedback loops that are responsible for production growth in one country and stagnation in another. The implications for policy makers of being able to do this should be apparent in terms of what appears to be at stake.

Internet production systems can enable the creation of amazing value for participants, stakeholders, and the general public -- value that vastly exceeds that of the underlying material inputs upon which the Internet itself depends. However this virtuous "increasing returns to innovation" dynamic is rarely sustained (or even emerges at all) in places where important material inputs can be captured and used as levers to exploit dependent systems - such as local telecommunications infrastructure - in unreasonable and capricious ways. Since the impacts of such strategies are often enduring and broad (e.g., national) in scope, and the facilities themselves are often subject to national-level regulation, and situations like this are rightfully matters of great public concern.

But the Internet based revolution is not just restricted to the network operators. It is also the foundation platform for Web Services architecture and what is now being spoken of as WEB 3.0. Bill Coleman delivered the keynote address to the SOA Web Services Edge meeting in NY on June 5: “It took a lot of things to get to the point where the current Web 2.0 era" has come about. "Broadband is a big driver (here)," he said, noting that  "70 percent of homes in the U.S. now have it.  Why did Google take off, for example? Because the moment broadband took off Google had the best model to capitalize on it."

Coleman envisioned a future Web "3.0" era in which operations costs on the margin "start driving toward zero," in which straight-through processing becomes the norm, and transparency rules. The transformation of business and society is based on the ability to do things better, faster, and cheaper. As productivity advances we can do more things for less. (In this environment), the Internet becomes the most powerful transaction machine in the history of the
world. It allows dramatically increased response to customers. And with SOA, businesses
are more flexible, can be more responsive, and this increases effectiveness."

Coleman also spoke of what he termed the "disintegration of applications into services," and he termed open source "the accelerator, the world's first viable model of reusable code" as a primary driver of this process. This disintegration means companies will literally be able to swap in modules in the future in a way that they cannot in the typical environment of vendor lock-in experienced today. All of these factors means that "This is the perfect storm for IT, the end of IT as we know it,"

He said: “The Internet as the most powerful transaction machine in the history of the world.” And “This is the perfect storm for IT, the end of IT as we know it.”

In view of these breathless assertions it would seem imperative to have an empirical system for defining and measuring the international internet economy. Tom Vest is offering a very well-though-out system that sheds light into many obscure areas of the global internet system. In view of the increasingly high global stakes it deserves exploration and tentative evaluation.

Ideas that bind many different facts, and events together into a chain of apparent causality.
Ideas that provide an organizing framework.
Ideas that will allow exploration, tests, experimentation.
We have had none of these ideas expressed with the global Internet economy – a least not in any systemic way. It would be healthy to acquire them.
Let’s begin with a detailed examination of what Tom has to offer.

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


The Internet Need No Longer Be Seen as an Impenetrable “Black Box”

Presenting a Framework that May Enable an Understanding of Where, Why and How Improvements in the Internet’s Function as a Global General Purpose Technology Can Be Attained p. 1


Tom Vest Examines Internet Operations Data to
Ascertain How Regional Economic Policies Enhance or Inhibit Associated Internet Growth

Connecting the Dots between Public Economic Policy
Interests and the Internet’s Logical Layer

Introduction p. 3
An Overview of WoN Methodology p. 5
A Spotlight on the Regional Internet Registries (RIR) p. 7
Users, Uses, Usage: The Measures of Good in Network Economics p. 10
Vest’s Core Metric: Internet Production Defined p. 13
Autonomous Systems as the Sovereign Administrative Units of the
Internet's Logical Layer p. 16
AS’s as Economic Bellwether of Network Operating Conditions p. 16
The Larger Role of ASes and How AS Life Cycles Reflect
Changing Market Conditions p. 20
Moving an AS p. 21
Problems in a National Network Economy When Providers Don’t Cooperate p. 22
Natural Monopolies or Irrelevant Middlemen? p. 24
How to Compare National Network Economies in Order to Draw Valid Interpretations of Internet Production Data and ITU Data Measured Against GDP p. 25
Comparing Teledensity to Internet Resource Production Density p. 27
Weighted Internet Production by Country Used to Statistically Validate ITU Data Sets p. 31

How Open Source and Open Internet are Changing the Global Economy - Blogs as the Open Sourcing of Ideas p. 35

Open Source and Open Internet p. 35
Telecommunications Commoditization as the Interface Between Private Commerce and Open Infrastructure p. 39


Symposium Discussion May 10 to June 16

Routing Versus Switching in the Core p. 42


Common Carriage and Legality of Deep Packet Inspection in Context of
Pretended Competition p. 45


IMS Update -- Still Moving Forward, Still Hard to Assess p. 48

Investors Hate Eurotelecom p. 53Facilities Based Competition Working in Europe p. 54
But Muni-Nets Cause Investor Anxiety p. 54

Whittacre Tiering p. 56

The Internet Exists Because of the Generosity of Others p. 57

The Organization of Internet Infrastructure - Each Network Must Have an Operator p. 58

But What Is the Overall Problem? p. 62

Hot Time in the Big Internet Data Center - Cooling, Power, and the Data Center p. 65

Data Center Problems as a Business Opportunity for the Incumbents p. 67
Wireless Access Unlikely to Mitigate Problems in the Near Term p. 68
The Emergence of National Network Monocultures: A Case Study p. 70

Autonomous Systems and the Multi-homing Process: Power and Privilege p. 72

Data Foundry Filing with Texas PUC a Scathing Indictment of ATT/SBC Arrogance p. 75

Executive Summary p. 76

Symposium & Interview Contributors to this Issue

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

Mike Bookey, author America at the Internet Crossroads, Principal Pachen Light Consulting

Vint Cerf, Co-author TCP/IP and Chief Internet Evangelist Google

Frank Coluccio, President DTI Consulting Inc., New York City

Sean Donelan, Security analyst Cisco

James Enck, London based telecom Analyst and Proprietor of Eurotelco Blog

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

Jim Forster, Distinguished Engineer, Cisco

Vijay Gill, Director Peering, America on Line

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

Rob Hall, Telecoms Analyst Dresdner Kleinwort Wasserstein

Dave Meyer, Director Internet Technologies, Cisco and Member Internet Architecture Board

Scott McCollough, Texas attorney and friend of ISPs, CLECs and the Internet

JP Rangaswami, Global CIO Dresdner Kleinwort Wasserstein

Chris Savage, Attorney CRB, Washington, DC

Doc Searls, Editor Linux Journal and Doc’s IT Garage blog, Clue Train Co-author

Richard Stastny, Senior Analyst, OeFEG/Telekom Austria

Jeff Sterling, Founder Interconnected Associates

Bill St. Arnaud, Director Ca*Net4 Canada’s high speed research network

Tom Vest,, Senior Analyst, Internet Economics & Policy CAIDA: Cooperative Assn. for Internet Data Analysis

Damien Wetzel, Engineer, Atanar Technologies, Paris France