Spiraling Bandwidth Consumption and Flat Rate Pricing on Collision Course? -- Wanted: a Viable Internet Business Model -- Vint Cerf Explains Reasons for MCI Price Increases, pp. 1- 6, 9

Vint Cerf, in an interview with the COOK Report, confirms that MCI will soon institute measured usage pricing on T-1 connections to its backbone. MCI is expected to impose tiered measurement and charge by the average percentage that the T-1 is used every month. The policy will follow what it has done with T-3 pricing since early in 1996. Although MCI has not yet made a formal announcement via a press release, Cerf explained that "we are plainly discussing this with you, Gordon, and your readers." The MCI move is the outcome of what Cerf describes as a crunch between the Internet's flat rate pricing model and usage patterns where both the amount of use and disparity between use by applications has increased dramatically.

We find that the MCI action is evidence of a possible collision course between spiraling bandwidth consumption and flat rate pricing. The apparent free lunch offered by the ability to take first the basic applications of the web, and them such bandwidth hungry applications as audio and video and finally Internet phone has created at least a 500% increase in Internet traffic during 1996.

Consequently, capital investment cycles in network up grades have begun to shorten from 24 months to periods approaching six months. The expense of upgrading from DS3 to OC3 increased as did the expense of moving from OC3 to OC12. The large companies have begun to grumble that the line of income from network growth under the current pricing scheme was now beginning to fall towards the level of money necessary to spend on increasing capacity.

Corporations have begun to notice that they could weave their intranets together via the public Internet for a fraction of the price of using their private frame relay or SMDS network. Such a movement not only placed strains on that expanding architecture but it robbed the big players of the more profitable income from frame relay and SMDS private nets. Hit with a double whammy of the corporate moves and a static all you-can-eat for-a-flat-rate price for the consumer net, the big five now have to find ways of increasing their infrastructure even as their more profitable base of private networks that they could use to fund public Internet infrastructure development begins to erode. Thus the big five are given additional reasons to want to continue their present experimentation with usage based pricing. UUNET already has tiered T-1 charging. BBN Planet has had tiered pricing for T1 and T3 usage called "Flexible T1 or T3" since 10/1/95. BBN offers flat rate pricing for 56K, educational customers. New customers get flat rate but only for the first year. ANS has had tiered T-1 pricing for all "gateway customers" (ISPs) for 2 years. With MCI at about one third ISP market share, if Sprint moves (~1/3 also), the impact on ISPs may be significant. The free lunch is ending.

Right now an ISP can buy a T-3 and resell it ten times, or even more, with no cost penalty from his upstream provider. MCI's changes are likely to end this and, in so doing, end what has been a source of profit for many local ISPs. With considerable competition at the local level, there will be much pressure on ISPs not to raise prices when their costs are increased. Those who have well-capitalized cost-efficient operations will have a margin to hold out with that those ISPs which are highly debt leveraged will not have. There will surely be consolidation. What is not so easy to predict is whether more cost-effective second-tier backbone providers might be able to holdout against the cost increases of the big five and whether they could do so while paying for what will surely be increased connectivity or transit costs from them.

How BBN Planet Handles Private Interconnects & Backbone Capacity Planning -- A Glimpse at How the Majors Keep Their Backbones Afloat, pp. 1, 7 - 9

We interview John Curran, BBN Planet CTO in the aftermath of the 'ungodly packet loss' discussion. Curran underscores the importance of notifying upstream providers when network problems appear. He explains procedures by which another provider wanting to open a private interconnect could approach BBN.

Curran also explains that the industry has just switched to the use of private interconnects. He notes that: the rules have not been fully worked out. For example some of the questions are: whom do I need to talk with at that company to find the person who can sign off on a T-3 circuit request regardless of what their budget says. How do I identify the person at that company who is most expert in its traffic statistics because I am seeing an increase and I need to know whether it is temporary or whether I need to start planning for a new circuit? These issues have been worked out among the major providers during the previous months. This should now make it possible to begin a rigorous processes of managing the interconnect capacity.

The Small Telco as Technology Innovator Northern Arkansas Telephone Company Offers Cheapest ISDN in U.S., SONET, & Internet Access -- We Examine Issues Facing Small Telcos Under Deregulation pp. 10 - 14

Stephen Sanders, owner and President of Northern Arkansas Telephone Company, explains the technology and operational choices facing the 950 small Universal Service Fund eligible telephone companies in the United States. In an interview with the COOK Report we find out how he was able to become one of the first purchasers of a non blocking switching fabric from Nortel. Headquartered in the town of Flippen, (population 1,600) his company offer offers his 5,000 plus subscribers unlimited ISDN service for $17.40 a month, the cheapest in the US. Having a SONET backbone, he also offers dedicated and dial up Internet connectivity. Small telcos who modernize their networks at some point in the 1990s should be well equipped to serve their customers in the deregulated era.

Quality of Service Issues Very Much Unresolved While Technology Questions for Packet Tagging, RSVP and ATM Not Solved, Administrative Barriers May Be Most Serious, pp.15, 24

A look at some of the uncertainties surrounding ATM, and RSVP. As soon as RSVP is technically viable it will have many difficult operational and economic issues, including settlements to overcome.

Appropriate Technology and Public Policy for K-12 Education: Internet As Pork Barrel? -- An Examination of Some Recommendations of Universal Service Board & an Update on MercerNet as an Example of Our Concerns, pp. 16 - 18, 22

We look with great skepticism at some of the rules proposed to the FCC by the Universal Service Board for what will be a $2.25 billion dollar tax on the users of telecommunications services in the United States. K-12 schools and libraries will be able to apply to this fund for payment of up to 80% of the costs of their Internet connection.

We offer an updated look at the TIIAP funded MercerNet project to show why we believe that this ITV project is likely to lead to a great deal of waste, in comparison to the amount of public benefit that can be derived. The policy makers have chosen to provision a complex service. Unfortunately they have done nothing to ensure that those who are to self certify their eligibility for the service will become knowlegable about the purchase process.

Wired for Dollars -- Why is Maine Using its Schools and Libraries to Lure the Technology Giant? by Laura Conaway (Nynex's K-12 Maine Boondoggle), pp 19-22

We reprint Laura Conaway's write up of the mess that ITV has made out of Maine's efforts to install a statewide k-12 net.