Archive for the ‘Broadband’ Category

« Older Entries
Newer Entries »

Network Neutrality in Europe and the Ski Lift Line

Tuesday, January 27th, 2009
Source: WIK-Consult, photo courtesy of alexindigo, Flickr.com

Source: WIK-Consult, photo courtesy of alexindigo, Flickr.com

My study for the BNetzA (German telecoms regulator) on Network Neutrality in Europe has finally published.  (Don’t worry, it’s available in English).  In this study, we look at Network Neutrality – the catch-all phrase that emerged in the United States over the past decade to reflect a number of potential behaviors that some consider to be anticompetitive – and what the implications for European regulators might be.

The report reviews the economics that underlies the Network Neutrality debate, including price discrimination, network externalities, transaction costs, switching costs, two-sided markets, and the economics of vertical foreclosure. It also briefly reviews the technical aspects of quality differentiation for IP traffic (including packet delay, jitter and loss). It provides background on a number of alleged deviations in the U.S. (including Madison River and Comcast), and assesses the Network Neutrality concerns that have been raised in Europe (for example, by the BBC’s iPlayer). In the end, we conclude that Network Neutrality manifests itself very differently, and much less problematically, in Europe than it does in the United States.  The report also considers the ways in which the changes proposed to the European regulatory framework as part of the ongoing “2006 review” might strengthen the hand of European regulators, and at what cost.

Insight: Putting aside the regulatory analysis, I think that the two most important and far-reaching aspects of our analysis are the taxonomy of network relationships we created and the way we describe end-to-end latency in IP networks.  In order to describe the nature of relationships in an interconnected-multilateral-all-IP network world, we characterize relationships among network participants and service providers as being one three dimensions: vertical, horizontal, or diagonal. (See Section 2.3 in the report).  I am also very pleased with how we use ski lifts to explain of queuing and link delays in end-to-end latency. (See Figure 1 in the report).  It is my hope that these two approaches will make the debate more objective and approachable, and help to reduce the ever-present hyperbole.

Tags: , ,
Posted in Broadband, Network Neutrality | View Comments

Network Neutrality is Dead. Long live Network Neutrality.

Tuesday, December 30th, 2008

In the past few weeks the Wall Street Journal has posted two opinion pieces online (here and here) basically claiming that Net Neutrality was dead. The blogs exploded, claiming that reports of Net Neutrality’s demise were greatly exaggerated: David Isenberg, Tim Karr, Harold Feld, Gigi Sohn, Google’s Rick Whitt, DSL Reports, and Rob Frieden to name a few. These really smart telecom policy wonks picked apart the numerous errors in the WSJ pieces errors. (I do have to correct one glaring error in the Gordon Crovitz piece. The specter of Net Neutrality regulation has not caused a low level investment in broadband access and the US’s low rankings in the international adoption statistics. I hope that would strike you as obvious.)

The basic thrust of their arguments was a content-cashing-versus-content-transmission distinction. What Google is doing is moving and distributing its content closer to the end recipients in an effort to improve delivery speed and quality. It was not seeking preferential treatment in terms of the transmission of its traffic. From a service perspective, I am not sure there is much of a difference.

What is truly at the core of the debate is common carriage versus private carriage. These are not new ideas. Common Carriage traces its origins to the Roman Empire. As such common and private carriage express competing notions of fairness and economic efficiency. We think it is unfair to give preferential treatment to certain (read wealthy) customers. At the same time, we also think it is economically inefficient to mandate a single (or limited set of) Internet access options for everyone, including those who are willing to pay more for premium services. So, how do I determine which means of achieving differentiated services is economically permissible and socially desirable?

Insight: To my mind this is not so much a question of network practices (i.e., routing versus caching), but of market power and market failure. Don’t get me wrong. I am a proponent of Net Neutrality. However, the most effective way to promote welfare-enhancing differentiation from anti-competitive discrimination is the presence of effective, sustainable competition. This is, by no means, a guarantee. As David Isenberg correctly points out, the US has four major wireless carriers, but no truly open mobile networks. (As I have argued in a previous Cool Stuff that wireless devices are not a perfect analogy to wireline Internet). Nonetheless, in the absence of competition to constrain the behavior network providers, some form of regulation will be required. Once the regulator is required to dictate allowable and unallowable network practices, all of the options are unattractive. In the light of the incoming administration, we should be considering how best to (re)introduce effective, sustainable competition.

Tags: , ,
Posted in Broadband, Network Neutrality | View Comments

Marketing FFTH

Wednesday, November 26th, 2008

In my last Cool Stuff post, I wrote about FFTH (or fiber from the house).  In the past week, I have had the chance to refine my idea, and I even had a chance to read the very good paper by Slater and Wu, Homes with Tails.  The more I think about the subject, the more I come to the conclusion that main issue is syndication of the risk of stranded investment.  The strategies which deal directly with spreading this risk have the greatest chance of succeeding.

Just to review FFTH, is where the homeowner buys his own Internet connection.  Under the simple scenario, Joe the Fiber Layer comes to Joe the Homeowner and offers to build him his own fiber optic Internet connection.  The cost of this construction is highly sensitive to the number of homes which take the offer in a given area.  Using Slater and Wu’s numbers regarding the Verzion FiOS roll out, the capital cost for a fiber to the home connection is about $7,000 if 20% of homes passed take the service and on the order of $3,000 to $4,000 at a 40% take-up rate.

Insight:  There is a marketing strategy which plays perfectly to this problem.  Suppose Joe the Fiber Layer comes to Joe the homeowner and makes the following offer, “I will build you your own fiber Internet connection for $5,500.  However, if 5 other homes on your line buy FFTH, I will send you a check for $500; if 10 more take it, I will send you a check for $800; 20, $1,500; etc.” I can imagine that in everywhere in America there would be neighbors leaning across the hedges saying, “Dude, we just got our FFTH connection.  It is AAAAAWSOME! You totally have to get one of these!”  Word-of-mouth is the best marketing, but peer pressure is better.

Tags: , , , ,
Posted in Broadband, Cool Stuff | View Comments

FFTH: Fiber From the House

Wednesday, November 19th, 2008

A while back, I was asked by a client how to stimulate the deployment of a fiber to the home infrastructure given the enormous risk of stranded investment and given a potentially capital-constrained incumbent. I suggested FFTH – fiber from the home. I was not being facetious, at least not totally.

When I gave my answer, I was thinking about the Netherlands. One of the major investors in fiber to the home projects in the Netherlands is a real estate developer. The reasoning is simple. Houses with access to broadband Internet services sell for a premium over comparable house without. (Lehr, Osorio, Gillett and Sirbu did an excellent TPRC paper measuring the magnitude of that premium, which I cannot find). In addition to making money as a fiber access provider, the real estate developer could capture the benefit of increased property values created by the availability of broadband Internet access.

I mentioned my FFTH idea to David Isenberg at the recent CITI 25th Anniversary Gala, and to his credit, David mentioned me in his blog posting (thanks, David). In addition, Sascha Meinrath and Michael Calabrese at the New America Foundation have organized an event for this Friday to examine the idea of FFTH. Calling it “Home with Tails”, Tim Wu and Derek Slater examine in a forthcoming paper whether this is a “customer centric” means for driving broadband adoption. Further, FFTH might possess other benefits. Eli Noam has suggested that private ownership of the access potion of the broadband network would help to solve the network neutrality problem.

Insight: When I suggested FFTH, I was not thinking about Network Neutrality and other consumer issues. I was merely thinking about distributing the risk of potentially stranded investment. However, since the idea of FFTH seems to have some merit I wanted to put a finer point on it, examine some of the potential downsides, and the policies which might be necessary to make FFTH possible.

Think about this. Instead of getting a cable modem or FiOS from Comcast or Verizon, Joe the Fiber Layer knocks on your door and offers to build you a fiber loop to the nearest Internet access node. And for less than it would cost to have Joe the Plumber remodel a bathroom (somewhere between $2,000 and $7,000), you would have your own fiber connection which greatly increase the value of the whole house at resale time.

The first thing necessary for the policies which to enable a FFTH business model is full and open interconnection to the nearest feasible Internet access point. This might be a remote terminal, street cabinet, or cable node. Creating effective access at this level is not necessarily an easy task. This may be small engineering spaces with powering and other serious engineering concerns. Thus, it might be able to accommodate every Joe or Jane the Fiber Layer who wants to put their customers’ equipment in those access points. Further, it would be simply impossible for each homeowner to have someone dig up the streets or hang fiber everywhere.

Here in Germany, we have some experience with policies for privately owned access networks. Back about 20 years ago, or so, a political decision was made to separate cable delivery from in-building plant. An artificial classification of access Level 3 and Level 4 was created. Level 4 network providers owned the cable wires inside individual buildings and there are some 700 of these companies still in existence. Level 3 providers were restricted for offering in-building wiring. This arrangement has lead to certain economic inefficiencies and may have some effect in hampering cable deployment in Germany. Thus, any policy designed to enable FFTH should not create artificial classifications and unreasonably prohibit network from providing services further up or down in the network. And who knows, you might someday find a major incumbent seeking unbundled access to your private fiber loop.

Tags: , , ,
Posted in Broadband, Cool Stuff | View Comments

John McCain Claims to have developed the policy creating Wi-Fi and mobile phone

Thursday, September 18th, 2008

It is not often that my work squarely lines up with Presidential politics; however, it seems that work I am currently doing relates to statements made by Sen. John McCain on the campaign trail. I am en route to the 19th European Regional International Telecommunications Society Conference in Rome. Of the two papers I am scheduled to present, one is a paper chronicling the history of the US FCC’s Part 15 rules. These are the set of rules which enable devices such as Wi-Fi in the United States. Based on my research for this paper, Sen. McCain’s recent statements from the campaign trail are demonstrably false.

In a written response to Science Debates 2008′s questionnaire for the two major party’s Presidential candidates, the McCain campaign stated:

I am the former chairman of the Senate Committee on Commerce, Science and Transportation. The Committee plays a major role in the development of technology policy, specifically any legislation affecting communications services, the Internet, cable television and other technologies. Under my guiding hand, Congress developed a wireless spectrum policy that spurred the rapid rise of mobile phones and Wi-Fi technology that enables Americans to surf the web while sitting at a coffee shop, airport lounge, or public park.

While the first two sentences are factually correct, the assertion that Sen. McCain’s “guiding hand” led to these policies is false. The policies which led to the creation of Wi-Fi (the IEEE’s 802.11 suite of standards) were a set of rules originally crafted in a 1985 FCC Report and Order. This rulemaking permitted low power, unlicensed use of spread spectrum radios in the 2.4 GHz band in which the standards 802.11 b & g currently operate.  (The 5.8 GHz band, which 802.11a uses, was opened by the Commission in a 1996 proceeding).  The first commercial spread spectrum product was a radio LAN which was introduced by Telesystems in 1988. The IEEE did not ratify the first 802.11 standard until 1999.

While it is true that the FCC is an independent regulator with delegated rulemaking authority from Congress, it is completely specious for Sen. McCain to claim credit for these rulemakings.  At the time of the 1985 rulemaking Sen. McCain was not Chairman of the Senate Committee on Commerce, Science and Transportation. Indeed, in 1985, Sen. McCain was serving in the House of Representatives.  Further, the 1985 Order was based on a 1979 consultant’s report commissioned by the FCC.  MITRE, the firm which drafted the report, recommended permitting the technologies which Wi-Fi uses in certain spectrum bands (the ISM band).  This was certainly not Sen. McCain’s idea, but Wallace C. Scales, the report’s author.

Similarly, Sen. McCain’s the claim that he guided the Congressional policy making which lead to the widespread adoption of cell phones is equally bogus.  The original cellular telephony spectrum licenses were allocated and assigned by the FCC in the early 1980s.  However, the true stimulus which, “spurred the rapid rise of mobile phones,” was the 1993 Omnibus Spending Act.  This law granted to the FCC the power to assign spectrum licenses by “comparative bidding” – auctions.  Through these first auctions the FCC allocated and assigned Personal Communications Services (PCS).  These licenses were designed to compete with the pre-existing cellular licenses and led to the fantastic success of mobile communications.  While this law was in fact drafted by Congress, it was done so by a Democratically controlled one.  Thus, in 1993 (and 1985) Sen. McCain was not the head of any Senate Committee.  (Just as a historical footnote, Sen. McCain was the only Republican in both the Senate and the House to vote against the 1996 Telecommunications Act).

Insight: Most candidates stretch the truth, embellishing their records or being one of the many fathers to success.  However, the absence of penalties for a candidate’s false statements distorts the electoral process – even those little tiny deceptions which go unnoticed by except by the wonkiest of policy wonks, like me.  The highest office comes with it the fiduciary duty.  Thus, we must hold candidates, “not to mere honesty alone, but a punctilio the honor most sensitive,” as Justice Cardozo admonishes us.   Allowing our candidates even the most minor of misstatements and misrepresentations creates a giant incentive for politicians to try to con us.  This leads to the “adverse election” of unqualified candidates who, once in office, establish bad policies.  We deserve better from our political process and should hold our candidates for elected office to the highest standards of “truthiness”.

Tags: , , , ,
Posted in Broadband, Wireless Communications | View Comments

The Bandwidth Dipstick

Thursday, July 31st, 2008

Yesterday, Prof. Tim Wu of Columbia Law School published an Op-Ed in the New York Times on the subject of bandwidth.  In the article, he compares bandwidth to oil in terms of its percentage of the average household’s expenditures and in terms of the cartels which produce it.  He says:

Like energy, bandwidth is an essential economic input. You can’t run an engine without gas, or a cellphone without bandwidth. Both are also resources controlled by a tight group of producers, whether oil companies and Middle Eastern nations or communications companies like AT&T, Comcast and Vodafone. That’s why, as with energy, we need to develop alternative sources of bandwidth.

While Prof. Wu’s might be right in his conclusions, I have to take exception to some of the points he makes along the way, particularly regarding cost of bandwidth.

To begin with, the price of oil is based, to some large measure, on the cost of its production and not necessarily the cost of its consumption.  The cost of production includes the cost to pump the oil out of the ground, refine it, and distribute it.  The cost of consumption would include the societal cost of pollution such as global warming caused by greenhouse gasses.  Here in Europe where a gallon of gasoline exceeds $9, most of which is tax, the retail price may better reflect the cost to society not only production but consumption as well.  The cost of the production of bandwidth includes both network CapEx and OpEx.  The cost of its consumption includes the negative effects of congestion felt by competing would-be users at times of peak use.  It is effectively zero, when use is non-rivalrous.  The price of bandwidth, as well as other resources subject to high negative externalities, should reflect the cost its production and consumption.  This maximizes the benefits which society obtains from the resource.

This is precisely why, contrary to Prof. Wu’s assertions, the FCC is working on such ideas.  FCC: OSP Working Papers #41, #42, and #43, on which I am a proud coauthor/collaborator, look at precisely these issues.  We designed and tested a system which instead of assigning spectrum in static blocks, would co-ordinate use of the spectrum to an efficient optimum.  Beyond the overly simplistic bandwidth dipstick, the FCC work also modeled other dimensions of performance, such as latency, and could be extended to include jitter, reliability, robustness, etc.  Nonetheless, the economic congestion protocols we developed would allocate bandwidth in real-time based on willingness to pay when there is congestion and it would be free otherwise.

To be fair, a business model which relies solely on congestion-based prices for its economic logic would not be sustainable.  Imagine an airline which would allow its passengers to fly for free, unless more passengers show up than there are seats, in which case it will charge all the passengers based on their willingness to pay.  One would expect such an airline to have very small planes, or, more likely, very large seats in its planes.  Without a way to ensure rivalry among its passengers for its capacity (i.e., seats), such an airline would surely go out of business.  Thus, a sustainable price for bandwidth must reflect the cost of both production and consumption of the resource.

Insight: I continue to tout these papers in my blog because they are important, cutting-edge work.  We sought to lay the groundwork for a better system which incorporates the best of the licensed and unlicensed approaches to spectrum access.  This system would be, to use Eli Noam’s words, would be “open, but not necessarily free.” As such, it would maintain sufficiently low barriers to entry, which would make it sufficiently difficult to obtain monopoly rents.  It would be nice if Prof. Wu would put forward some of the available solutions to “alternative supplies of bandwidth” in addition to pointing out the problems.

Tags: , ,
Posted in Broadband, Wireless Communications | View Comments

TV White Spaces and the Tragedy of the Commons

Tuesday, July 29th, 2008

For more than nine decades, lawyers, engineers, and economists have argued that radio spectrum regulation is needed due to the fact that without some form of intervention, it is impossible to exclude or limit the use of a common resource such as spectrum.  Without exclusion, users consume the spectrum without regard to their usage’s impact on the benefits obtained by other would-be users.  They, therefore, tend to overuse the spectrum, causing interference to other users.  This reduction in social welfare due to overuse is referred to as the Tragedy of the Commons.However, we can now observe from the debate surrounding the TV White Spaces that the ability to exclude certain users is not sufficient to remedy the Tragedy of the Commons. A relatively small number of over-the-air TV households are able to use these spectrum bands without regard to the costs their use imposes on the rest of Americans.  Indeed, according to the most recent FCC statistics, in 2005 only about 14% (See Appendix B, Table B-1) of US TV households receive their TV over-the-air. The remaining 86% get no direct benefit from this spectrum.

The National Association of Broadcasters is now opposing tests the FCC is currently conducting which will measure the impact of unlicensed use of the White Spaces on digital TV reception. In order to protect digital TV receivers, potential White Space users must be excluded, and the NAB is throwing its weight around to ensure that outcome.  According to a quote from NAB spokesman Dennis Wharton, “We’re not going to be engaging in threats or anything, but about 70 members of Congress have already sent letters in expressing concern.” Well, as I wrote in a previous entry on Cool Stuff, at least one of those 70 letters is total bunk. Nonetheless, the cost to all of society of affording interference protection to this minority must also be considered.

Insight: If the NAB’s argument is accepted without scrutiny, the 14% of TV households will prevent the other 86% of US TV households (plus the TV-less households) from using those radio frequencies for broadband Internet, baby monitors, new forms of low-power broadcast, and other RCS (really cool stuff).  This lost benefit will not be compensated.  The exclusion of certain competing uses is necessary but not sufficient to ensure that society reaps the maximum benefit from the radio spectrum.  A means through which spectrum users can bear the costs they impose on others by excluding them is also necessary.

Tags: , , ,
Posted in Broadband, Cool Stuff, TV White Spaces, Wireless Communications | View Comments

European Parliament urges coordinated approach “digital dividend” spectrum, including public safety

Friday, June 27th, 2008

In a previous Cool Stuff, I wrote about the study which I completed demonstrating the social value from reallocating some of the Digital Dividend spectrum for broadband mission critical public safety communications. The European Parliament seems to agree.

Yesterday, the European Parliament’s Industry Committee adopted a report urging that the EU should ensure a set of harmonized, EU-wide rules on how to allocate radio frequencies that will be freed up when analog terrestrial television broadcasting ends in 2012. The report was an own-initiative report authored by Italian liberal MEP, Patrizia Toia and was adopted in Committee with 41 votes in favor, 1 against, and 1 abstention. A plenary vote is scheduled for September. Further, the amendments to the report argue that approximately 100 MHz of the Digital Dividend could be reallocated to mobile broadband and other services such as public safety services, radio frequency identification (RFID), and road safety applications, without preventing broadcasting services from flourishing.

Insight:  While the transition from analog to digital terrestrial television should be complete in Europe by the end of 2012 (nearly 4 years after the U.S. is scheduled to complete its transition), decisions on how to reallocate the approximately 75% of the highest quality spectrum which will be released cannot come fast enough. Mission critical broadband communications networks require long lead-times to plan and deploy, and the services they enable are nothing short of lifesaving.  Public safety and security users urgently need an additional allocation of a approximately 30 MHz for these purposes.  The Industry Committee correctly urges Member States to release their Digital Dividend spectrum as quickly as possible, follow a common methodology, and develop national Digital Dividend strategies by the end of 2009.

Tags: , , ,
Posted in Broadband, Wireless Communications | View Comments

Observations from Supernova2008

Wednesday, June 18th, 2008

I have been listening to a bunch of excellent presentations for the first two days of Supernova2008. Rather than rehashing what each speaker has said, I have been trying to formulate a theme. Not an easy task. I have noticed a few reoccurring themes: social activity, intellectual property, management of information, and marketing; all good network-related themes. I spent most of the second day at the Open Flow Track. Much of what was discussed was is integrating systems: Connecting the connections. That is to say that the internet has provided connectivity and access to persons and applications. The essence of Web 3.0 is making sure that your Flickr works with your Dopplr, with your, dare I say, Napstr.

Insight: The rich and lively discussion in the Open Flow Track seemed to focus more on engineering and business practice questions in terms of getting APIs to work together and making sure that privacy, security, and trust are respected according to applicable law and good business practices. I still found myself searching for more a fundamental concept. A more fundamental question which was present but perhaps not fully articulated was how to describe this continuum of “openness” vs. “closedness” (not a real word). So, here I get to like to wax poetic for a second. Eric Raymond, a pioneer of Linux and the open source movement, gives us a particularly literary book title and syllogism, “The Cathedral and the Bazaar”. Raymond sees the cathedral as representing a system of architecture which is, “carefully crafted by individual wizards or small bands of mages working in splendid isolation – no beta version.” It is a centralized, coordinated approach. Open source architecture he likens to “a babbling bazaar of different agendas and approaches.” It is decentralized with varying standards and rules, but is not anarchy. Both approaches seem to work in creating stable systems, though they may be suit to different types of applications.

It was widely agreed that there should be a general preference for openness. I agree, but to my mind that there is a choice between openness and closedness. This choice implies a tradeoff. And, if there is a tradeoff, there is by necessity some optimization. What the optimum is will depend largely on your point of view and social optimum does not necessarily equate one-to-one with a private optimum. At the very least we can have a rational discussion as to what the relative merits of the tradeoff are and where the different optima may lie. In sum, do we want a world that looks more like the Cathedra or the Bazaar, or is there an entirely new form of architecture that we should consider?

Tags: , ,
Posted in Broadband, Cool Stuff | View Comments

It says “handsets”

Wednesday, June 4th, 2008

I finally just had a chance to read the FNPRM for the rules governing the C Block in FCC’s recently concluded 700 MHz Auction and it says “handsets”! Why is this significant?

For the C Block, comprising 22 MHz in the upper 700 MHz band, the FCC created special open access provisions. The FCC will require licensees to provide a platform that is open to third party devices and applications. Specifically, licensees must allow customers, device manufacturers, third-party application developers, and others to use any device or application of their choice on their networks in this band, subject to certain limited conditions. Licensees may not “lock” handsets to prevent their transfer from one system to another, or to other services that compete with wireless service providers’ own offerings. The FCC concluded that these rules were justified because it did not find “that competition in the [mobile] marketplace is ensuring that consumers drive handset and application choices, especially in the emerging wireless broadband market…. it is easy for consumers to differentiate among providers by price, most consumers are unaware when carriers block or degrade applications and of the implications of such actions, thus making it difficult for providers to differentiate themselves on this score.”

Insight: Beware the law of unintended consequences. Here it is not the proverbial monkey wrench, but a pair of bolts, literally, which could bring the FCC’s policy to a grinding halt. Implicit in the service rules is the assumption that the band will evolve to resemble the next generation of the current mobile market in the US. But assumptions like this never last. I wonder if it is possible for clever operator could escape the open handset requirement by providing fixed services. The 700 MHz spectrum is particularly well suited to a variety of applications, one of which might be fixed broadband. In rural and suburban areas fixed wireless broadband could be an effective competitor to wireline. Presumably these areas would be sufficiently competitive that the FCC’s finding would not hold (remember it is limited to handsets, and not even service plans). Thus, if the licensee is bolting “pizza boxes” to the side of homes, would this type of network not be subject to the open access provisions? It’s unclear, but something to think about.

Tags: , , , , ,
Posted in Broadband, Network Neutrality, Wireless Communications | View Comments

« Older Entries
Newer Entries »