A Practical Navigator for the Internet Economy


Kerry Hawkins, Vice President of Sales and Marketing at Vienna Systems, a Newbridge subsidiary and maker of Internet telephony gateways, takes us on a survey of the current state of the art of Internet telephony which has advanced enormously from its PC to server days of two years ago.

VocalTec, Micom, and Vienna Systems are the leading makers of IP telephony "gateways.' These devices, costing between $700 and $2000 a port, depending on the features they come with, attach to a corporation's local area network. They communicate with the PBX and do the compression decompression of the the voice necessary as well as provide the signaling that the public switched telephone network (PSTN) expects. Their purpose is to compress and packetize the company's voice traffic, removing it from the PSTN and its measured usage high tariffs to the corporation's intranet where, as long as every corporate office around the world has high speed Internet connectivity, phone calls between those offices travel the Internet for "free".

Such a market world wide is worth several hundreds of billions of dollars, and while the inter office corporate calls travel do require a significant portion of the bandwidth of the corporate network and thus are not really free, the savings that are generated by the use of the technology are so substantial that the economic impetus to use the technology will become increasingly great. While some phone companies may resist the introduction of the gateways, others are introducing them to their internet connected clients as a way to do an end run attack on their competitor's markets.

In addition a new market is springing up for Internet telephone service providers. Here ISPs may invest in gateways that may accept incoming calls from the PSTN and carry them via the Internet to the POP of another service provider. There a receiving gateway accepts the call and dials outward into the local PSTN to deliver the call.

Growth rates in the gateway market are looking to be 400% per year. A few months ago, Deutsche Telecom, the German PTT paid $48 million for a 21% share in VocalTec. As use expands it is thought that corporations will have to turn to a more expensive form of differentiated internet sevice to get their voice packets where the need to go in a timely fashion.

Savings are so great and the operational advantages of a system where the user's phone number can travel with him are so strong that we suspect corporate gateway based IP telephony will be one of the hottest internet technologies of 1998.

Hawkins finds that the traditional phone comapnies have a very starke dillema. For if they drop thier price to remain competitive with IP telephony, the they eat up their margin. But if they don't do it, then their competitor eats up their margin. In either case they loose. We add that we have heard only one starke remedy proposed: that is for the phone companies to set up competitive LECs and use them to cannibalize their incumbent LECs out of existence.


Bill St. Arnaud Director of Network Projects at CANARIE, Inc. in Ottawa Canada describes some recent organizational and technology developments facing the commercial Internet. One of the most important is the GigaPOP. This functions as a regional exchange point that aggregates commercial customer traffic and then multi homes it directly to major internet backbones rather than sending it through the six major and generally overcrowded public exchanges.

Savvis is the first major commercial player to take advantage of this model operating seven GigaPOPs around the country. These seven are linked by an ATM DS3 backbone that connects six smaller cities to the seven Gigapops - each of which is linked by a DS 3 connection to Sprint, MCI and UUNET. The operator of the GigaPOP takes on a new role of cooperative buyer of upstream bandwidth for those linked to the GigaPOP.

If peering is sharply curtailed by the majors this year from the current levels of 40 to 50 peers down to ten or less, the GigaPOP concept may well provide a viable alternative business model for some of the depeered national backbones.

Arnaud finds the Internet in Europe laggin well behind developments in the US. He points out that: NSF, by decommissioning NSFnet, created the business opportunity that is allowing American commercial ISPs to now dominate the Internet business around the world. In Europe the problem is harder. The European PTTs were so committed to OSI and ATM and have always looked down on Internet. Therefore they never took up the challenge, while here in North America when NSFnet was dissolved, you had MCI and Sprint and others ready to take the Internet commercial. Consequently in Europe commercial Internet service comes from spin offs of the research networks or from the American commercial networks. 1998 will mark the first serious entry into the European market via the native PTTs.

Arnaud applauds the idea of a Global Association of IP Registries taking on policy responsibility for the allocation of IP numbers. He warns only against the association taking on Board members from European governmenmts. Such folk, he cautions, would be pro ITU in the orientation.

Finally he talks about what some are calling Internet 3: new networks designed totally for IP from the TCP layer downward. He talks about Qwests alliance with Cisco in these terms as well as Project Oxygen. He maintains that IP only networks will use bandwidth much more efficiently than the connection oriented networks of the phone companies.

STATE OF THE INTERNET 97, pp. 16 - 18

We reflect on develoments in 1997 in the context of David Isenberg's paradigm shift to the triumph of the stupid network. general issues covered: peering; QoS; IP telephony, IP everywhere; governance.


We survey the demise of CORE plans to get its gTLDs into the root servers. OSTP finally answered our FOIA directed at Brian Kahin. The answer was an absurdity. It stated that the meetings that we wanted documentation on never took place and then identified nearly 900 responsive documents - half of which it sent and the other half of which it parcelled out to 13 other federal agencies to decide whether or not to send us. We explain why, despite OSTP denials, we believe the meetings did indeed occur. We also show why none of the 900 document were responsive to our request. In a fresh FOIA we sharpen our original request seeking to find what the Kahin Burr group did to bring DEC, AT&T and IBM into an apparent alliance with CORE. The ITU's Shaw, in reponse to our querry admitted that this group was helping CORE complete its database.

We show how after Kahin and Burr's fumbling, Ira Magaziner has been doing a credible job of building broad consensus for a resolution. The first public posting of Magaziner's draft is expected on the White House Web pages on January 23. (This was as of last week. The schedule to meet the 23rd deadline has slipped perhaps 48 hours since then.)

Here is what we believe will happen. A Global Internet Policy Council (our name for it) would be set up. For IP policy there will be one member from each IP registry: ARIN, RIPE and APNIC. There will be one member from the IAB and one from the IETF for protocol, RFC, and port assignment policy, and there will likely be two members from the DNS community who will be chosen to represent DNS policy interests. The government will not do the choosing for any of the positions. It will be up to the DNS warring factions to come together into a Confederation and choose their two representatives to the Global Internet Policy Council. The seven members of this council will be responsible to the constituencies beneath them for the articulation and implementation of policy that was formerly the sole provence of IANA.

We hopeful that a way can be found to insulate the Council from lawsuit and to transfer to the Policy Council the $40 million dollars of the Infrastructure fund that is not yet grabbed by the US Congress. If this is not done, the remainder of the money will also be taken by Congress and we will have the disaster of the Fund becoming the first tax on the Internet. On the other hand, if the money is used properly, it will be a very important enabler for the Policy Council to accomplish critical tasks that are now going undone.

According to reports we are getting, Jon Postel has been floating the idea of a 9 member council to contain only 2 IP number registry represenatives, 2 from DNS, two from the protocol community and three from an "Industry and User Committee." Corporations would be invited to join that committee at $5000 per corporation, per year. Only by joining the committee could they have a chance their people onto the new top 9 member IANA. One wonders what there is to be gained by this move? The creation of a new venue for the largest corporations that would like to exert control beyond what they could attain by work on the IETF to throw money into?

Perhaps it is not too much to ask that the charter of yet another new industry sponsored "users" group to go along side of ones like IOPs, ISOC, ILPF be examined very carefully and in public - not in negotiations between Jon and Ira. First the idea that three people could be found who can adequately represent 50 to 100 million Internet users seems strange. Second, the idea that the average end user has something to offer the body that will hash out the TECHNICAL policy for the Internet also strikes us as impractical.

It seems likely that legal and political rather than technical constraints will prevent any new gTLDs from going into the root servers before October 1, 1998. At that point they will likely be added slowly and one at a time as the new system shakes itself out.

We have been observing the process of the formation of a new DNS Conferederation and have considerable confidence in the outcome. (If it is successful, it could also move our October 1 estimate forward in time. Some involved with the new confederation believe that new gTLDs could begin to go in the rootservers one-at-a-time soon after April 1. It seems likely that the CORE domains will not have the highest priority.


Views of US toward the Bangemann group on Internet commerce and DNS. Book Reviews of several new O'Reilly java-oriented volumes.