Communications

The Dumb Pipe Paradox ― How open access networks build shareholder value

On more than one occasion, "natural monopoly" arguments have been used to obtain, and/or hold onto, a government granted monopoly,  This is definitely true of access networks where the physical right-of-way to any specific real estate parcel is a limited resource, but the economics of what you put in it have changed over time.  At one time it made sense to consider telephone service a natural monopoly.  And for most of the twentieth century, telephone service was operated that way (think Bell System in the US and government run PTTs in most of the rest of the world).  In the latter 20th century, cable TV became a second such monopoly.  Today, it's increasingly clear that telephony and television are higher layer services, not inherently tied to the access network.  Yet our laws and regulation have barely evolved ― each access network is still regulated as a different vertically integrated monopoly.  And, managers in each business focus on preserving their historic monopoly even as market forces or government regulations force them to also offer Internet access.

So it's interesting to see solid economic analysis showing that access network shareholders would make more money if management was willing to open up their access networks, i.e. become "dumb pipes."

The first such argument I encountered was by Craig Moffett and Amelia Wong of Bernstein Research who wrote an interesting paper The Dumb Pipe Paradox, early in 2006.  The original paper is not on line but I have some quotes here and there are some other comments here.  Craig and Amelia were looking at Cable TV's hybrid fiber-coax networks and concluded that cable companies could make more return on investment if they were in the pure dumb pipes business.

More recently, I reported on a speech given by Benoît Felten of Yankee Group and Fiberevolution in which he argued that new fiber to the home (FTTH) investments could be paid back more rapidly if the FTTH network were open, i.e. offered to competitors at attractive wholesale rates.

Now Benoît has written a detailed report describing his findings.  Although the report is for Yankee Group subscribers only, Benoît is also giving a webinar on the subject next Tuesday and that's open to all.  Register here.

I particularly liked the polite suggestion near the end of Benoît's report:

Recommendations for Incumbents
• Re-examine your economic fundamentals in light of the FTTH business model. It’s irrational to cling to antiquated business practices if new approaches, no matter how disruptive, deliver better shareholder value.

My coverage of HD Communcations Summit mostly on Twitter

My primary identity on Twitter is "brough" and that's where you'll find most of my comment stream for today's HD Communications Summit.  I also own the Twitter handle "HDVoice" which I started to use this morning, but then lapsed.  There are a few tweets there, but only a few.

I've gotten a number of insights from individual speakers and from discussions during breaks, so this has definitely been worth it.  On the other hand, one complaint is the preponderance of HD VoIP and the lack of coverage of mobile HD.  The most interesting speaker was Benoit de Boursetty, Director FTNA, at France Telecom a.k.a. Orange.  Benoit talked about Orange's fixed (BB VoIP) HD Voice service that was launched in France in 2006 (400K subscribers) and in Spain in 1Q09.

He also mentioned their plan to deploy HD Voice on mobile in Belgium and the UK before the end of 2009.  This is significant!  HD Voice on IP-PBXs is growing slowly because the decision makers are the IT directors and their primary focus is saving money.  Once mobile HD Voice has launched, the adoption decisions will be made by individuals.  Historically, consumers have bought voice quality.  Remember Sprint's "pin drop" or Verizon's "Can you hear me now?"

I'm at HD Comm 09 in New York

Took the early plane from Boston and thus arrived at the HD Communications Summit conference venue at 7:25am, before the registration booth is even open.  Luckily the coffee is out.

The focus is wideband telephony, a.k.a. HD Voice or HD VoIP.  It's a topic I've been promoting at least since the 1997.  Some earlier comments are here, here and here.  If you clicked the 3rd "here" you'll have seen how optimistic I've been at stages in the past.

Today HD Voice is finally getting traction, at least in the IP-PBX space, with actual telephone devices from at least a half dozen companies.

I'll be moderating a panel "HD Broadband Telco" at 2pm with

• Rich Buchanan, CMO, Ooma
• William Bumbernick, CEO, Alteva
• John Hendry, CTO, M5 Networks

More later...

Open Spectrum slide deck is now on-line

Here's the slide deck I used at last Thursday's meeting of the Boston section of the IEEE Communications Society.

Open Spectrum - Physics, Engineering, Commerce and Politics

View more presentations from Brough Turner.

Among other things, I debunk the following spectrum myths:

• Spectrum is scarce
• 4G is the future of wireless
• Auctions drive efficient use of spectrum
• Spectrum utilization requires massive investments
• TV spectrum is “beach front” property

The full write up from the IEEE announcement:

Communications Society

7:00 PM, Thursday, May 14

The Open Spectrum Potential for Evolutionary and Revolutionary Technology and Business Solutions

Brough Turner; Founder and CTO at Ashtonbrooke and Chief Strategy Officer at Dialogic

In November 2008, the FCC voted unanimously to permit unlicensed wireless devices that operate in the empty "white space" between TV channels. Their “TV White Spaces” decision was the culmination of many years of proceedings, but it's just one step in a much larger discussion, commonly referred to as “Open Spectrum.”

Our use of radio spectrum is regulated under principles that were established in the 1920s, when radio spectrum appeared to be a scarce resource and frequency was the only reasonable basis for allocation. Today’s wireless technology vastly exceeds anything imagined in the 1920s and from physical principles we know that many, many orders of magnitude further improvement are possible. Already the application of new approaches in just a few slivers of spectrum has fostered new industries – WiFi, Bluetooth and more.

The presentation discusses the predecessors, potentiality, and directions for Open Spectrum, including:

• A brief history spectrum regulation from before the Radio Act of 1927 to today.
• Results from measurements of actual spectrum utilization in New York and Washington DC.
• An overview of "Open Spectrum" experiments to date, including “license exempt sharing” in the 900 MHz, 2.4 GHz and 5 GHz bands and different forms of "secondary use" including UWB, 3650 MHz and now TV White Spaces.
• The physics of propagation and its impact on the range of White Spaces services vs. WiFi, WiMAX, 3GSM and LTE.
• IEEE 802.11y protocols and the prospects for expanding secondary use beyond TV White Spaces.

Brough Turner is founder and CTO at Ashtonbrooke and Chief Strategy Officer at Dialogic. Formerly he was founder and CTO at Natural MicroSystems and NMS Communications. He speaks and writes on a variety of communications topics including 3G and 4G wireless tutorials. He presented most recently at the 4G Wireless Evolution conference in February. Brough is an electrical engineering graduate of MIT and has 25 years experience in telecommunications.

Open Spectrum ― I'm presenting at an IEEE meeting this Thursday

This Thursday evening (May 14th), I'll be discussing Open Spectrum at the May meeting of the Boston chapter of the IEEE Communications Society.  My working title:  Open Spectrum ― Physics, Engineering, Commerce and Politics.  This is a technical audience, so we'll touch the physics of electromagnetic propagation and examine radio engineering solutions as they stood in the 1920s, as they are today and where they're likely to take us in the coming decade.  But we'll also look at the politics of spectrum regulation and the commercial implications of recent developments.

Just to get your attention:

• We'll explain why the TV White Spaces (TVWS) won't be considered  "beach front spectrum" in the future, and
• Why the lasting impact of the FCC's recent TVWS decision may be what it does for "secondary access"

If you're in the greater Boston area and at all interested in spectrum policy or the commercial evolution of WiFi and other unlicensed technologies, please stop by. 

The meeting begins at 7 p.m. and the presentation soon after at the Verizon Labs, 117 West Street, Waltham. The meeting is preceded by an optional dinner at Bertucci's, Winter St, Waltham, at 5:30 p.m.  The meeting is open to all, but please let Paul Zorfass know if you plan to attend the dinner at Bertucci’s. Paul can be contacted at paul.zorfass@embeddedtrade.com.  More directions and details here.

Spectrum Transparency: Can the US catch up with France?

Richard Whitt has a good article, Taking stock of the nations airwaves, on the Google Public Policy Blog.  He focuses on the Radio Spectrum Inventory Act, a bill introduced in the US Senate by Senators John Kerry (D-MA) and Olivia Snowe (R-ME).

It's hard to argue spectrum policy if you can't actually determine who has what rights in which parts of the radio spectrum.  This bill is a start.

For a first cut at what we should aspire to, look at this site by the Autorité de Régulation des Communications électroniques et des Postes - the French equivalent of the US FCC.  Try typing in a frequency or a frequency range; then hit "Rechercher."

I haven't figured out how to determine who owns individual licenses to spectrum in France and, of course, that is critical.  The proposed US law, S.649, explicitly calls for such information to be gathered and made available to the public on a website.  Let's hope this passes.

Pouzin Society - organizational meeting, today

The most interesting data networking ideas I've come across in the past N years are in the recent book by John Day, Patterns in Network Architecture: A Return to Fundamentals.  John Day's fundamental insight is that data networking is a distributed version of inter-process communications (IPC).  Those of us who come at this from the computer and computer operating system side of the world are quite familiar with IPC within one computer running one operating system.

The Pouzin Society (named after datagram inventor Louis Pouzin) is a group interested in investigating the implications of John Day's architecture and how it might be used in developing viable solutions to the current Internet architecture crisis.

Here's a top level picture (from a talk by John Day).  If you don't buy the book, there is an interesting summary in a presentation here.

Viewing data networking as a distributed IPC function (DIF) does a number of things.

• It clears up names versus addresses in a fashion that makes sense to me.  The application asks for connection to another named application while node addressing remains internal to the DIF.  Indeed, the point of attachment address for one DIF is a "name" presented to a lower level DIF.
• It makes management explicit.  To even establish an IPC, we must ask the DIF for the other party by name and then get their permission to exchange information (i.e. to establish the IPC session).
• It simplifies layers.  There is only one kind of layer, the DIF, that is used recursively.  Successive levels in the recursion differ in scope, and likely in policies, but architecturally they are the same.

I'm still getting up to speed, but this appears to be a fundamental theoretical breakthrough.  There are a mix of academics and practical networkers in the room for the Pouzin Society kickoff, so hopefully some practical implications for the evolution of the Internet will emerge in time.

Google's Peering and Caching Strategy

This is a followup on yesterday's post about how little Google/YouTube pays for bandwidth. Google wants to promote peering with ISPs, so they give presentations at ISP meetings.  After reading yesterday's post, Alex Benik of Battery Ventures sent me a link to this presentation given by Google at a 2008 meeting of the Latin America and Carribean Internet Addresses Registry (LACNIC).

As expected, Google peers with as many relevant ISPs as possible.  For the ISP, peering with Google eliminates their upstream costs for traffic to Google.  Since Google represents a substantial volume of traffic for most ISPs, this is a big saving.   As of May 2008, Google was present in 33 public Internet exchanges around the globe, so major ISPs already have connections in places where they can peer with Google.  The minimum qualifications are 5 Mbps of Google traffic and the ability to interconnect using Gigabit Ethernet at one of these 33 major Internet exchange points.

Google Global Cache

What's interesting is Google's caching strategy.  Just as Akamai puts servers in ISP's local facilities, Google is providing a distributed cache for their content.  This available to larger ISPs and allows them to serve Google content directly at the edge of their networks, thus reducing traffic on the ISP's backbone network.  Here's a representative rack that Google provides to the ISP.

YouTube's fine - Analysts don't understand Internet peering

As widely reported, Credit Suisse analysts have estimated Google's YouTube may lose $470M in 2009 and more in the future.  However, their estimates say Google will pay $360M for bandwidth in 2009.  I don't know how Google figures their cost of bandwidth, but anyone who understands anything about Internet transit/peering knows Credit is way off base.

Google does not pay for Internet Transit the way most tier 2/3 ISPs or most content providers must.  The economics are simple.  If you are a Tier 2 ISP, you have to purchase Internet Transit services from a Tier 1 network to handle that customer traffic which goes off your network and for which you cannot make other arrangements.  The most notable 'other arrangement' is peering.  If you have significant traffic to/from another specific network, you and the other network can both save Internet Transit costs by exchanging traffic locally, i.e. peering.  Of course an enormous amount of your traffic is directed to Google.  If you have a presence in any data center where Google has a presence, you would love to peer with Google, as that saves an enormous amount on your payments for upstream Internet Transit.

A similar effect plays out among Tier 1 providers.  If one tier 1 network cuts a special deal with Google, Google routes all their traffic through this provider and suddenly the other tier 1 networks have large asymmetries in their tier 1 peering arrangements.  Either they also cut deals with Google or they have to renegotiate their tier 1 peering arrangements to pay for the traffic asymmetry (something that's highly unlikely!).  Google is the one with leverage here!

I don't know what, if anything, Google pays for bandwidth, but it's not paying $360M for Internet transit.  Sorry Credit Suisse, you better go back to analyzing derivatives, credit swaps and other purely financial plays.

Google does have costs.  They have data centers in many parts of the world and they have a private fiber backbone that interconnects their sites and connects their private network to many, many potential peering points.  Operating their private backbone is a real cost to them and I haven't examined their financial reports to see if there is any way (from public data) of estimating their costs for this private network.

But until someone does this analysis, forget what you've read from Credit Suisse.

40th anniversary of RFC 1

April 7, 1969 was the day a graduate student at UCLA, Steve Crocker, published RFC 1 to the somewhat informal Network Working Group associated with the ARPA Network project.  I have heard Steve Crocker speaking informally about those days and my understanding is he created what became the "Request for Comments" series because anything more formal would have brought down several layers of governement bureaucracy.

It's interesting that the Internet owes its origins to a government project, but a lot of what happened was done by individuals and groups working around and/or in spite of government processes.

Highlights from eComm 2009

This year's Emerging Communications conference, eComm 2009, was the best telecom conference I've been to in ages (ever?).  Now presentations and videos from the conference are becoming available on the web.  The presentations are on SlideShare; search by speaker name or for the tag "eComm."  Here's my presentation, Structural Bypass - A simple proven path to "Real Broadband."

Brough Turner's Presentation at eComm 2009

View more presentations from eCommConf.

Videos and transcripts are also coming, although not as rapidly as I'd like (a matter of resources - one person editting and releasing 2-4 videos per week).  Here's a transcript of the Spectrum 2.0 panel that I moderated.

Videos will show up on Fora.tv, for example, here is the really cool keynote address by Ge Wang entitled "New Expressive Social Mediums on the iPhone."

For more information and pointers, subscribe to the eComm blog.

More bandwidth ― less delay, less latency

I was a little sloppy yesterday and several people have questioned my comment about latency.  I was reacting to slide by Herman Wagter of Amsterdam's Citynet in his presentation at F2C 2009.  His slide said:

Latency is the cause, bandwidth is the effect.

From his discussion it was clear he meant "Latency is the cause, bandwidth is the cure."  At the time he was talking about real-time person-to-person communications and illustrating it with a housebound person in Amsterdam who wanted to play cards with friends in other places (not nearby).  Verbally he mentioned the issue of sending large files.  In short he was addressing the real reason for high capacity Internet access links.

Why people want more "bandwidth"

It's not because they need or want to send and receive 100 Mbps of data all the time or even a significant part of the time.  The issue is delay, specifically serialization delay.  If I have a 1 Mbps upstream Internet connection and I want to send an email with a 5 MB Powerpoint file attached, it will take more than 40 seconds (5 MB ~= 40 Mbits).  On a 100 Mbps link, the same email is delayed only a fraction of a second.

Serialization delay also effects media streams, although much less.  If I want to send 500 Kbps of continuous video over that 1 Mbps uplink, serialization delay will cause added latency.  IP is a packet protocol and the 500 Kbps video stream will be broken into a stream of packets, typically ~1500 bytes (12 Kbits) each. While the serialization delay is only 12 ms on the first link, there is serialization delay on every link.  If there is another 1 mbps link at the other end, that's another 12 ms of delay.  And here, 12 ms is significant.  For a natural interaction between two people, you'd like to keep the round trip delay below 200 ms.  Nothing goes faster than the speed of light so transoceanic links introduce many 10s of ms of delay, each way.  It is very easy to eat up a 200 ms budget, so saving 12 ms at each end is significant.

Burst rate versus continuous

For me and for most people, the issue that drives demand for high speed access links is delay, not the amount of information that is to be sent or received.  Indeed, I'd love a service offered only a few Mbps average over a month, if I could be guaranteed 1 Gbps on a burst rate basis whenever I wanted.

David Weinberger is blogging F2C rather completely

And David is a expert blogger!  i.e., really good coverage.
  http://www.hyperorg.com/blogger/

The first Freedom to Connect conference entry is here. 

Latency is the cause; bandwidth is the solution

Actually, what Herman Wagter of Amsterdam's Citynet said at F2C 2009 was:  latency is the cause, bandwidth is the effect.  But his explanation matched my title above.

If you are attempting to interact with other people, whether by VoIP or just playing cards together (with video) you need less than 200 milliseconds of end-to-end delay.  If it's playing cards together, with video, and you need to exchange 500 Kbps in less than 200 ms, you need a 100 Mbps pipe!

It's latency that drives the need for high bandwidth.  Most people won't fill that pipe most of the time, but they need the pipe to guarentee that what they do send gets through rapidly.

Highlights from Day 1 of F2C

Shamelessly ranked by my areas of interest...

Tim Nulty of East Central Vermont Community Fiber.  Tim is a veteran network builder and a forceful speaker, so he's happy to tell it like is.  He's also got that Yankee mix of liberal politics with extreme fiscal conservatism.  He's building fiber networks, in rural Vermont, which pay for themselves.

Ken Biba of Novarum has been measuring actual wireless networks in buildings and in cities for years.  While the detail is in a report available for purchase, the summary is that WiFi-based Muni WiFi yields significantly better performance than 3G cellular.  Interestingly coverage and reliability is right up there in selected cities, as well.  The take-away - 802.11n really rocks. I.e., the next cycle of WiFi is going to be vastly better than what he's been measuring over the past 3 years.

Ellen Miller of Sunlight Foundation was low key by comparison with Tim or Ken, but her stories were compelling - multiple instances of Internet community feedback creating the kind of information that the "open government" initiatives aspire to.

Finally, Dewayne Hendricks is always interesting.  This year he seemed more optimistic than last, presumably the result of the recent election.  In any event, here's another speaker with deep experience in building networks.

Freedom to Connect 2009 and Municipal Fiber

I'm attending F2C 2009 in Silver Spring Maryland. If you are here, please say hello.

Things are just getting started with a panel on Municipal Networks, led by Joanne Hovis, President of Columbia Telecommunications Corporation (CTC).  Panelists are:

Tim Nulty, formerly of Burlington Telecom and now running East Central Vermont Community Fiber, has tons of experience building fiber networks in low density areas (Vermont).

Dirk van der Woude, from Amsterdam's CitiNet, to talk about the Amsterdam's municipal fiber to the home project..

Lev Gonick, CIO Case Western Reserve, who was a key player in creating a 4000 mile fiber network for Cleveland and northeast Ohio under a community organization called OneCommunity.

Bill Schrier, CTO for Seattle, which is starting a fiber project, but already has it's own electric power utility.  (Although Bill implies they have had to drag their utility brethren into this).

What's interesting is the discussion on the chat backchannel is not about muni vs. commercial, but wireless versus fiber.

Tim Nulty has a strong argument that wireless is excellent for mobility, but not economical for fixed access.  In rural Vermont, a WiMAX network would cost $35M if you could get access to the spectrum (which is being horded by others).  Fiber would cost $70M but has 50 times the capacity and several times the revenue potential versus the wireless approach.  Further, if you deploy wireless as an addon after you have the fiber network (and the customer support infrastructure), the incremental cost is dramitcally less (perhaps $10M) and you get enough incremental revenue to get a good return on investment.  IN other words, you make more money if you do fiber first.  Tim's key to success is to get as near complete deployment as possible - something that is possible in areas where the incumbents are going.  Second, he goes for community ventures as a way to qualify for muncipal bonds.

Shareholders should demand phone companies open their fiber networks

A few weeks ago, Benoît Felten of Yankee Group and Fiberevolution gave a speech at a New Zealand Commerce Commission event which included a fascinating argument.

He points out that receiving a return on the substantial capital investments that a fiber to the home (FTTH) project requires is much more dependent on takeup rates than on the average revenue per user.  

Single player large scale deployments usually achive only 20%-25% initial adoption after which growth is exceedly slow.  On the other hand, systems which are open to competitors, i.e. with viable wholesale services, attract many more players who market, sell and deliver new services thus dramatically increasing adoption and accelerating the wholesaler's return on investment.

In short, obtaining a regulatory holiday so you can run your new fiber network as a monopoly is actually bad for your shareholders!

Benoît's speech was filmed.  For the full presentation (in four segments of < 10 minutes each on YouTube) see Benoît's post.

If you want just the essence, listen to the first three minutes of this:

Here is an enlarged version of the chart that Benoît is using while he speaks:

Skype wideband codec now open to all developers

At eComm 2009 this afternoon,Jonathan Christensen, Skype General Manager for Audio and Video announced that Skype will open their wideband audio algorithms for public use.  The blogsphere was pre-briefed under embargo, so multiple people have already written this up.  But it's a pleasure to see Jonathan presenting things live.

Skype was the first significant company to deploy wideband audio telephony.  As a result, with Skype it feels like you are in the same room as the person you are talking to.  The algorithm they are releasing is called Silk.  It reproduces 50 Hz to 12,500 Hz audio signals versus traditional telephony at 300 Hz to 3000 Hz.

Skype is making this codec available to third parties royalty free.  That's important as many (most) audio codecs are encumbered with all sorts of patent royalties.  The Silk codec is what's currently used in Skype v4 and it appears there will be a string of related announcements from partners, today and tomorrow.

In response to a question from the audience, Jonathan makes it clear that Skype's direction is to open up as much as they can, in order to seed the market and accelerate the spread of Skype.

Note:  this is binary distribution, not source code or a description of the algorithm.  On the other hand, Skype is hoping to get this algorithm on as many processors and chip sets as possible.  As a result, they are open to working with anyone that has a business case for a port.

More cloud-based telephony services

One thing (of many) that struck me during this morning's session at eComm 2009 was multiple companies going after cloud-based communications platform services.  Three which had their public launch announcements today were Grid.com, Tropo.com from Voxeo and Mobivox.  They're not the first to tackle this area and they each have a somewhat different focus, but there's a clear interest in producing Web 2.0 service platforms that developers can use to access communications services without hassle.

Grid.com is from a couple of developers who were frustrated that they could mash up an application quickly but then had to spend months getting SMS short codes and other communications services.

 

Tropo.com is an offshoot of Voxeo and makes the underlying Voxeo platform services available to Web 2.0 developers.

 

Similarly, Mobivox has launched a cloud services platform based on the platform they build for the Mobivox service.

There is certainly room for someone to get this right.  On the other hand, there must be a dozen companies going after portions of this space.  The first round were telephony calling platforms like CallFire, Angel.com and five9.com focused on allowing developers to access traditional calling, switching and IVR platforms - call centers and business process automation were early targets.  It will be interesting to watch the evolving focus of this new round of entrants.

I'm off to the Emerging Communications Conference in San Francisco

It's snowing in Boston and my American flight has been cancelled but Virgin America claims their 8:35am flight is going to leave on time.  So here I am in the Virgin gate area.  Wish me luck.

At this point there are a ton of people I'm hoping to hook up with at eComm 2009.  The agenda looks really good.  And, of course I'm looking forward to good discussions around two favorite policy topics: broadband access and wireless spectrum.

My talk on Wednesday is: Structural Bypass: A simple, proven path to “Real Broadband.”

While the US struggles to define "broadband," high speed Internet access (100 Mbps & above) is widely available at modest cost in several countries and quite a few more cities. So far, US political discussion has largely neglected these successes. Brough will point out what's common among diverse international success stories and propose a path for the US that has proven to work elsewhere, despite established monopolies and political processes dominated by vested interests.

On Thursday, I've organized a panel entitled:  Spectrum 2.0 - What's really happening?

WiFi, UltraWideBand and now TV White Spaces represent new commons-based approaches to radio spectrum regulation. While some advocate commons-based approaches for all wireless spectrum, that's hardly acceptable to broadcasters or the mobile phone industry. By questioning a diverse panel of industry experts, we will expose the roots of today's controversy - technical, commercial and political - and see what's likely to occur over the next two to five years and in the long term.

The panelists are top notch:  Richard Bennett, Maura Corbett, Peter Ecclesine, Darrin Mylet and Richard Whitt.

If you're attending, please say hello.