A Practical Navigator for the Internet Economy

Introducing Tom Vest's Wealth of Networks

A Potential Means for Educating Policy Makers in the Economics of Light and By Implication Avoiding the Poverty of Network Monopolies

How to purchase this issue. $150 or $450 group. The May - June 2006 issue introduces Tom Vest and his effort to translate Adam Smith's Wealth of Nations into 21 first century globally understood terms. It also interviews Jerry Michalski and Rob Hall.

May 2, 2006 Ewing, NJ -- This May June issue explores important ongoing changes that affect the global economic impact of the Internet. Part One (May) focuses primarily on the emergence of a new macro economic framework that seeks to develop a set of tools by which an objective measure can be taken of the "health" of the ecology of the internet in some specific region, country or other area of the globe. I refer to the Wealth of Networks analysis developed by Tom Vest. In this issue, by means of a detailed interview with Tom, readers will learn how he came to his analysis of the "economics of light." The interview leads readers into Vest's thinking at a high level of abstraction and points to some further technical resources that will allow readers to continue their exploration. Part Two (June) focuses on the business models at the application layers that the internet has enabled.

 

In the early years of the COOK Report I focused only on the technology and physical network from layer zero (physical support structures) through the TCP/IP stack. Three years ago I went to an O'Reilly Emerging Technologies meeting in San Jose. I looked around and said “this is weird. These guys are focusing only on the Application Layers. They don't have a clue about the infrastructure.” Shaking my head in dismay I went back to my infrastructure.

But starting with SuperNova a year ago I met John Seely Brown, and JP Rangaswami and started a journey that led me to Simon Lin and Jerry Michalski's Retreats. To Google and to grasping what the bloggers are doing and through KC Claffy to Tom Vest and his Wealth of Networks which is an intriguing macro-economic methodology of studying what is actually happening with portions of the global internet ecology by looking at what is happening to actual networks in a region or regions over time. By the way Vest’s work is not to be confused with Yokai Benkler's brand new and very different but less aptly named book of the same name.

The May portion of this issue is largely devoted to Tom Vest's Wealth of Networks research. In this first of two planned interviews, we explored the broad historical and methodological foundations of this new research agenda, which is featured in a newly declassified OECD report on Internet Traffic Exchange: Market Developments and Measurement of Growth (http://www.oecd.org/dataoecd/25/54/36462170.pdf). A closer examination of some of Tom's findings and their technology and policy implications will follow in the August issue, along with an interview with Robert Kjelborg on fiberizing Sweden. July will be devoted to the inspiring story of Loma Linda and the Connected Communities Association plus the Andhra Pradesh fiber build in India,

The June portion in your hands for the first time focuses on what an open access Internet now in grave danger in the USA and else where enables. The duopoly will do everything it can to wrest power from our hands. When you place the tools of production and dissemination of that production in the hand of millions of people in their homes and offices around the globe that changes everything. To understand how I visit the world of the bloggers via list discussion, and via two interviews. One with Jerry Michalksi and the other with Rob Hall, the blogging telco analyst of DrKW.

If one is going to enable a world in which production of services and media and content are done as much if not more by the users of the network, as by the centralized guardians of studio produced content, then one needs a very different kind of network from the ones that the duopolists will deign to build. For a decade we have had that kind of open edge based internet world – one that in their well deserved fear that this means they will either need to get out of the way and transform themselves or die -- the telcos are trying to destroy. Nevertheless the transformation and transposition of power at the periphery means that we have a very fundamental divide that the old style companies find extremely difficult to grasp.

Making Systems Work Rather than Building Empires

In the June issue the interview with Jerry Michalski is a useful guide to understanding the transition in the way work is done as the result of the revolution that was kicked off by the PC. What happened was that, with the emergence of the personal computer in the 1980s, you began to get cross-disciplinary types who, for the first time, were neither pure managers and problem solvers nor technicians but a rather have a foot in each world and, because they do, can build environments that apply technology to problem solving in very different and often more practical ways.

When you move power to the edge you get people who want to make systems work rather than build empires. James Hettrick's Loma Linda and Connected Communities Association to be covered a month from now are further important indicators of the Internet enabled worldview of collaboration and cooperation. The evolving direction of the internet (Michalski's Retraeters and Hettrick's Connected Communities versus the one way video and tightly controlled shopping mall of Ivan and Ed represents a big conflict in ways in which we communicate as individuals or in groups. The new ways are antithetical to the ethos of the hierarchical, top down, controlled corporation of 20th century.

The new communications tech enables business to be done in entirely different ways. You may see the groups represented by our mail list, Michalski's retreaters and many other groups as people trying to use the technology of the end-to-end internet to build a new social and business structure to compete against the top down mega corps. One has to wonder as the net is clamped down on in the USA how much of the motivation is reassertion of control that the powerful hierarchies sense is slipping away?

For the moment the forward thinking Entrepreneurial types among us have freedom to continue to innovate. This is good because we have found that, once you start living in this new world, it bifurcates everything else. Education here is vastly different than education in the 20th century. But also note that, for the time being, our world represents maybe 5 or 10 % of the total. Ninety per cent of the citizens are still back there in the old paradigm and they are easily confused by the duopolies talk about the nuances of technologies they don't understand.

There is also a permeability in some of the big companies that are being pulled in the new direction. Some people understand. Some don't. Finding a policy and strategy direction to agree upon is quite difficult.

A list member wrote: Here's a first peak at the savetheinternet.com Web site due to launch Monday. Here are some of the Web site's features: Statement of Principles: http://www.savetheinternet.com/=principles

Fred Goldstien replied: All very nice, but it misses the real point.

Why is there suddenly a push by major providers to limit Internet content, and thus a counter-movement to impose content regulation ("neutrality") in order to prevent it? What has changed? The Bells did not suddenly decide that the market really wanted Deep Packet Inspection and Content Brokerage. They couldn't do it last year; why can they do it this year? What, in other words, is the underlying issue?

The answer is common carriage, and in particular Title II Common Carriage. Last year, Kevin Martin pushed through a momentous change in the underlying concept of telecom regulation. Rather than have common carriers who had to provide *neutral* bit transport to any and all comers, including ISPs, the Bells were explicitly permitted to withdraw common carrier tariffs, cutting off independent ISPs' access to their wires. Under 1982's Computer II rules, Bells could not supply their own unregulated subsidiaries (ISPs) with any service that was not offered, on the same terms, to unaffiliated parties. That rule was cancelled. So now their DSL, built out of the telephone plant that ratepayers have financed over the years, is no longer available to any ISP but the Bells' own.

Mr. Martin's cover theory (if he really believes this, he needs medical help) is that cable provides ample competition, so there is no need for independent ISPs any more. Mr. Martin's legal theory (if he really believes this, he either needs new reading glasses, or should have flunked out of law school, and IANAL) is that the Supreme Court's Brand X Decision called for this change. It didn't, in big black letters.

The Bells assume that in a duopoly situation, collusion will be more desirable for both parties than real competition. So they hope the cable companies will not thwart their plans. Cable, for its part, does not show much interest in hard-core content filtering, perhaps in part because that would require major capital expenditure, but prefers to operate at a higher retail price point.
If common carriage were retained, then hundreds of independent ISPs would offer "neutral" Internet access across Bell wires, paying Bells a fair price for the use of their facilities. Their very existence has, until now, prevented the Bells from selling the inferior, Sinified service that they seem interested in moving to. But Mr. Martin has decided to treat the independent ISP industry to Termination With Extreme Prejudice.

Hence the current Network Neutrality arguments are probably going to be futile, because they're attempting to solve the problem in a very difficult and risky way -- regulate ISP content -- when there's a much simpler answer -- preserve common carriage. I don't see that on the Savetheinternet web site. I didn't hear much of that at the Congressional hearings. A simple, practical answer -- enforce or clarify existing law, not Mr. Martin's distorted interpretation -- would not only ensure continued neutrality, but would also prevent the unintentional consequences of content regulation, and would help preserve the independent ISP industry.

Network neutrality advocates should thus advocate for common carriage. The current debate assumes defeat. It is thus more like arguing about what kind of movies the innocent prisoners are allowed to watch, when the real effort should be about freeing them.

I asked: Doesn't the network neutrality issue come up only because the Greedy fools killed common carriage?

Goldstein: True, how true.

I continued: I continued So what does this leave possible? The only isps that can stand a chance of survival are WISPs who can connect to level 3 or some comparable service that will get them internet transit? IS THIS WHERE WE ARE?

Goldstein: Largely so, it seems. For a somewhat higher (usually business) price point, there are still UNE-L CLECs with DSL in some places. But that's spotty, and getting harder due to loop qualification issues, Bells vandalizing their own copper loops, etc. Many state commissions have always been wholly-owned subsidiaries of their ILECs. Not all, but it varies, and has been trending the wrong way in several places.

Remember, there has been a 3-pronged attack against ISPs going on for at least six years now:
1) Fight dial-up, via the reciprocal comp issue, via the VNXX issue, and by generally tightening up interconnection rules. In those rare places where ILECs provide the dial tone, raise the prices.
2) Take away common carriage from DSL service, so ISPs can't just buy raw DSL. They finally got their wish.
3) Fight CLECs, so they can't easily provide alternative paths. Remove unbundled loops from as many places as plausible, tighten interoffice facility availability, remove entrance facilities, and generally make it harder for CLECs to offer broadband service.

This was an integrated strategy to flout the spirit of the Telecom Act, pursued with vigor and supported by the Powell-Martin cabal. We're just seeing it bear fruit, when the independent ISPs are dropping like flies and the Bells are finally able to start designing their Fat Wasteband WAP-like "broadband" services. And the equipment vendors are salivating over the prospect of selling them costly "IMS" gear.

Yet Chris Savage on April 24 showed the continuing complexity of the corner we have been painted into when he wrote: While I share your admiration for Fred's rant we are confusing two things here. One is connectivity from the end user to "the Internet" -- the "first mile" problem. The other is what you get once you are on the Internet.

As I have understood the "Net Neutrality" concern, it is that the guys who are doing the ISP and/or backbone function (cf. Fred's parsing out of different types of entities in different roles) will do a better/cleaner/faster job shipping the bits of preferred edge sites (Google v. Yahoo, etc.).
The "common carriage" function -- until last fall -- was getting the bits from the end user to the 'net and vice versa.

The "Net Neutrality" problem could indeed by fixed by deeming the relevant activity to be common carriage, but the entities that would be deemed common carriers are ISPs and backbone providers. That may or may not be a good idea -- I've certainly toyed with its pros and cons over time -- but it is a very different idea than simply "undoing" what the FCC did last fall vis-à-vis DSL+Internet Access. It would, instead, be re-thinking the decision that ISPs and related Internet entities are not carriers, which has been the rule since basically forever, concludes Chris Savage.

Some Thoughts on American Character

I point out that cut by cut, the 20th century mercantilists have been destroying our 21st century future while the occupants of the White House and Congress grin smugly from their imperial thrones and the rest of the world laughs. While greed and what Kevin Philips in his powerful American Theocracy refers to as the right wing Christian waiting-for-the-Rapture appears to have leached into Congress and the White House, the fundamental moral principals on which this nation was founded are still alive.

I have recently looked at a 200 page genealogy written by my grandfather. It was written in honor of his father Ossian Cook – my great grandfather who started out as a humble shoemaker in Ohio in the 1840s and who went by covered wagon from there to Colorado in the Pikes Peak or Bust Gold Rush before setting down in Oshkosh Wisconsin in the 1870s where he became a well-respected businessman. I have a signature from Ossians diary hand written on that covered wagon journey to the American Frontier. Those pages reveal the optimism of Thoreau and Emerson. The world view of American Transcendentalism that maintains a faith in settlers who come to a promised land where by dint of hard work and honestly and respect for one's fellow man a better life can be built. Where the watchword is one's personal integrity in building a rock ribbed community and the size of one’s bank account is seen as a measure of reward for what he has put into bettering the lives of his neighbors as well as his own.

I like to imagine that in these parts off the American Midwest there was a basic business integrity that lasted for many years and can still be found in many places away from the mammon of Washington DC. I was impressed by the dignity, openess and self-assurance of Jim Crowe when I met him at Isenberg's F2C in Washington a month ago. I have had numerous conversations inside Level 3 since then. It’s been intriguing to get a sense of the respect in which Crowe as a man from Omaha, friend of Warren Buffet, and son of the same Midwestern American business community, who kept his company’s integrity intact, is held. I have sensed a widely held pride that Level 3 did not engage in the false accounting that brought most of the other American carriers to ruin.

Impressive to say the least. Yet the same dignity and optimism is still well alive and runs strong in the company of Jerry's Retreaters with who I visited in February. I am sure that it is still embedded across this land despite the polarization unleashed by GW Bush and his minions. There are many things worth fighting and dying for other than the goals of the theocrats in power now.

By the way I make the remarks about Crowe and Level 3 not to deify him or his company which certainly has its faults. I am in broad brush stroke and very unscientific terms searching for images of the survival of American business integrity and idealism. I am longing for the an environment in which we can help each other build something better and for a capital system free of the excesses of the financialization of our economy during the past 30 years.

We have a major ongoing struggle in front of us and the way this plays out is going to be one of the most significant forces in determining the direction of the global economy. For in opening decision making to individuals at the edge and connected directly to each other instead of being totally dependent on their huge corporate employer, you are marking the end of many things.
For example the end of the corporate ability to develop products that are some how different and better than those of others in the market because in the effort to have bells and whistles that, to increase profits, are proprietary in design and not available on the products of competitors. As a result you get non interoperate non compatible hardware and software. And he whose salesmen lie the most effectively wins.

While, for illustrative purposes, this is written very black and white rather than in shades of grey, with intelligence at the edge you get open source, generic components that are built for collaboration. I suspect that if the Internet and PC hadn't placed the tools of innovation in the hands of people at the edge, these technology trends simply would not be happening. In the new world the future lies at the heart of things like Loma Linda' s 85 page specification for fiber and structured wiring in new homes - an open source alternative for Ed and Ivan's closed silo.
Google would seem I hope to be a major positive source: From the Sunday NY Times Magazine of April 23, 2006

"Lee can sound almost evangelical when he talks about the liberating power of technology. The Internet, he says, will level the playing field for China's enormous rural underclass; once the country's small villages are connected, he says, students thousands of miles from Shanghai or Beijing will be able to access online course materials from M.I.T. or Harvard and fully educate themselves. Lee has been with Google since only last summer, but he wears the company's earnest, utopian ethos on his sleeve: when he was hired away from Microsoft, he published a gushingly emotional open letter on his personal Web site, praising Google's mission to bring information to the masses. He concluded with an exuberant equation that translates as "youth + freedom + equality + bottom-up innovation + user focus + don't be evil = The Miracle of Google." When I visited with Lee, that miracle was being conducted out of a collection of bland offices in downtown Beijing that looked as if they had been hastily rented and occupied. The small rooms were full of eager young Chinese men in hip sweatshirts clustered around enormous flat-panel monitors, debugging code for new Google projects. "The ideals that we uphold here are really just so important and noble," Lee told me. "How to build stuff that users like, and figure out how to make money later. And 'Don't Do Evil' " — he was referring to Google's bold motto, "Don't Be Evil" — "all of those things. I think I've always been an idealist in my heart.""

On April 22 Jeff Sterling commented with regard to savetheinternet.com: My gut
reaction is that we are relegating the Internet to endangered species status (Save the Whales). In my opinion, we're better off focusing on alternative bypass strategies (muni/other) that promotes openness/innovation and let the incumbents slit their own throats by limiting access to consumer content.

While I agree with Jeff I am happy to support those who want to fight against the madness that rules in Washington DC. Personally, however, I don't have the stomach to join them because I have no optimism in any satisfactory outcome. I prefer to cast my lot with the new Connected Communities Association. We must save our own necks, village-by-village in the countryside rebuilding a future one community at a time with faith in our neighbors and in our ability to control our own back yards. Connected communities will grow like beads of light strung off the backbones of Level 3 and Time Warner. They will be connected to and work with the Andhra Pradeshs of the world. The new digital divide will between them and those under the heel of the duopoly. One by one it is my hope that they will be pried free from the duopoly to join the new light of the new century turning out the lights of the old communications cartel.

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

Contents

Strategists Must Learn How to Identify
Talent Enabling Internet Ecologies

Wealth of Networks” Offers New Insights into Internet’s Impact on Economics of Global Business p.1
Don't Fence Me in – or the Walled Fortress Versus the Open Field of Real Time Conversations, Markets, and Mutual Understanding p. 2
Talent Building p. 2
Many Markets Need Challenging and Changing p. 4

Interview

How Tom Vest Came to Construct the
“Wealth of Networks”

Reshaping Adam Smith’s 18th Century Economics Land into a 21st Century Economics of Light p. 8

Editor’s Introduction p. 8
Tom's Bio p. 8
The Wealth of Networks: An Old Formula for Understanding the New Dynamics of the Global Information Economy p. 9
From Rock Band Musician in China, to US Foreign Service, to LA Mayor's Office p. 11
The International Switched Voice Revolution and the 96 Paradigm Shift p. 13
Paradigm Change: Pricing Telecom Service According to the Cost of Delivery p. 14
Call Back Upsets the International Settlement Apple Cart p. 15
The "Great De-Peering" and The Cost-of-Service-Delivery Paradigm p. 16
From Policy to Operations: Going to Work for AOL p. 19
CAIDA p. 20
Multiplexing as a Critical Factor in the Internet Economy p. 22
Understanding What Only a Very Sophisticated Generalist Could Understand p. 22
The Division of Control and the Wealth of Networks p. 23
From Specific Experience to Generalized Conclusions p. 24
An Empirical Discipline of Network Economics p. 25

Infrastructure Held Hostage February 4 ­ March 14 2006

What Is To Be the Ownership
Model Local for Infrastructure?

But In the Internet Era Just What is Local? p. 27
Some Different Ways of Looking at Local p. 28
Protocols for Policy Makers p. 31

An Infrastructure Held Hostage Report
to Congress? p. 33

Internet Production Seen as Publicly Routed IP Numbers p. 34

Make the Current Greedy “Conversion Of Abundance into Scarcity” Into an Opportunity p. 35

Cost of Service Rate Case by the Telcos Against the Internet p. 37
Peering and the Infrastructure of the ASPs p. 39
The Real Truth of the Wealth of Networks p. 43
It Is Not Just Broadband But Rather the Diversity of
the Provider Market p. 44
Trans-Oceanic Bandwidth p. 45
Issues Regarding Transoceanic Cables p. 48
Endogenous Growth Theory p. 50
The Bells: A “Zen” Meditation p. 52
Reaction to ATT/SBC Merging with Bell South p. 53

The COOK Report Ventures into NJ State Politics Where the Fix Is Plainly In  

A Meeting with the Senator From Verizon p. 56

Interview

Exploring the Decentralized, Edge-Based, Internet Enabled, Relationship Economy A Conversation with Jerry Michalski p. 61

A Rate Clerk at Mobil Oil in the Pre-PC Age p. 61
Social Systems Science at Wharton p. 62
Neural Networks at New Science p. 63
Meeting Esther Dyson and Trading Research p. 65
The Word "Consumer" as a Litmus Test p. 66
Tools to Manage Flows p. 67
Impact of Group Process on How We Share Knowledge p. 68
Trust and Making the User the Owner of the Process p. 69
Working In a Condition of Vulnerability in an Open World -
Robert Scoble p. 70
Blogs: What They Are and Are Not Good For p. 71
The Battle Between the Walled Gardens and Open Fields and
Learning How to Profit from Dynamics of Openness p. 73
Enabling Talent to Thrive in Open Communities p. 74

Interview

The Role of an Investment Bank's
Telecoms Analyst
Rob Hall Describes His Function at DrKW and Discusses
the Evolution of 3GPP p. 77


IMS at the 3GSM Conference of January 2005 p.79
The 3rd Generation Partnership Project (3GPP) p. 81
My DrKW Blog p. 84

Book Review

Google Advertising Tools
by Harold Davis, O'Reilly 2006 p. 85

Symposium Discussion February 19 - April 6, 2006

Understanding What Your Customers Want

Customers Who Won't Pay For Infrastructure May Pay for
Delivery of Mobile Financial Services p. 87
Social Software in India and China p. 90
Programming Tools for the Internet p. 91
Views on linux in business Net neutrality vs. Net
neutering--by Doc Searls, Senior Editor of Linux
Journal p. 93
Google's Power Point Blooper p. 94
We Transition from Infrastructure Held Hostage Back
to Economics of IP Networks p. 97
Network Economics and Options Theory p. 103
A Sensible Video Deployment Strategy p. 104
User Charging Schemes p. 105
The Role of Hedy Lamar - Her Patent and What Happened to It p. 109

Introduction and Executive Summary

Tools for Global Synthesis of Open Communities
Building Connected Communities for Mutual Collaboration
and Cooperation
An Exploration in What the Internet Enables Both at the Level of
Networks and Individual Business p. 113

Symposium & Interview Contributors to this Issue

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

Carlis Baldwin, Professor of Economic Harvard Business School

Erik Cecil, Regulatory Counsel for Level 3 Communications

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

Roland Cole, Director of Technology Policy for the Sagamore Institute for Policy Research

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

Sean Donelan, security analyst Cisco

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

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

Rob Hall, Telecoms Analyst Dresdner Kleinwort Wasserstein

Dave Hughes, owner Old Colorado City Communications and wireless advocate

David Isenberg, author of the Stupid Network and proprietor of Isen.com

Bruce Kushnick, Founder Teletruth and author 200 Billion Broadband Scandal

Eric Lee, Washington Telecom Attorney

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

Franscois Menard, Canadian policy expert and municipal fiber network architect

Jerry Michalski, Founder and President of Sociate, a technology consulting firm

Andrew Odlyzko, Director Digital Technology Center, University of Minnesota

Andy Oram, Editor at O’Reilly knowledgeable about telcom and specializing in Open Source

JP Rangaswamy, Global CIO Dresdner Kleinwort Wasserstein

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

Jere Retzer, Network Analyst Oregon Health Sciences University Portland, Or.

Chris Savage, attorney CRB, Washington, DC

Tim Shepard, Consultan in wireless

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

Jeff Sterling, Founder Interconnected Associates

Steve Stroh, Editor of FOCUS On Broadband Wireless Internet Access

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

Don Weightman, Attorney Wshington DC

John Wilson, UK activist and Founder Access to Broadband Campaign