Re: OPEC 2.0 -- Barrels vs Bandwidth

[David Farber <dave () farber net>]

________________________________________
From: Patrick W. Gilmore [patrick () ianai net]
Sent: Wednesday, July 30, 2008 2:01 PM
To: Bob Frankston
Cc: Patrick W. Gilmore; David Farber
Subject: Re: [IP] Re:   OPEC 2.0 -- Barrels vs Bandwidth

On Jul 30, 2008, at 1:45 PM, Bob Frankston wrote:

> Of course there is maintenance. While I can argue that those costs
> are minimal and far lower than roads the more important point,
> however, is that bandwidth is the wrong measure.

Again, I agree with part of your statement, but not the other part.
The costs are _not_ minimal.  The actual %-age ranges depending on the
network and how it is run, but for some networks, CapEx is < 50% of
their budget.

That said, I (probably) agree that raw bits are not the way things
should be billed in a perfect world.  Until then, though, charging for
bits is a convenient proxy, much like toll-booths are sub-optimal, but
the best we have right now.  (Then again, have you see the toll roads
in Los Angeles?  They bill different amounts based on the congestion
seen on the non-toll roads.)


> Like roads we should pay for it as infrastructure – we don’t expect
> road operators to run the roads through each town as profit centers.
> That’s one reason why the interstates were so valuable – they
> reduced the cost of passing through each burb. They might have tolls
> and speed traps to make a profit but more often the cost was
> implicit in Main St being congested.

See my last parenthetical. :-)

But this is where the analogy breaks down.  Perhaps if we separated
physical plant from IP transit, we could make a better comparison.
Unfortunately, in the US, that is not possible due to the telcos &
cable-cos have such a horrifically bad stranglehold on just about
every governing body (PUCs, FCC, congress, etc.). :(


Anyway, I guess we are mostly in agreement.  We both agree the current
system is probably broken.  (Although I am not certain a pure cost-
recovery for physical plant is the way to go.)  I'm just trying to
point out that running a network (including IP, not just fiber) is far
more costly than spending CapEx or digging trenches.

--
TTFN,
patrick


> -----Original Message-----
> From: Patrick W. Gilmore [mailto:patrick () ianai net]
> Sent: Wednesday, July 30, 2008 13:13
> To: Dave Farber; Bob Frankston
> Cc: Patrick W. Gilmore
> Subject: Re: [IP] Re: OPEC 2.0 -- Barrels vs Bandwidth
>
> > From: Bob Frankston [bob37-2 () bobf frankston com]
> > Sent: Wednesday, July 30, 2008 12:27 PM
> > To: David Farber; 'ip'
> > Cc: Tim Wu
> > Subject: RE: [IP] OPEC 2.0 -- Barrels vs Bandwidth
> >
> > I agree that we have abundant capacity available but we need to be
> > careful on terminology. A barrel of oil is something we consume and
> > it is distributed form sources. Tim’s essential point is correct
> > though the argument is even stronger if we challenge the concept of
> > "bandwidth". Why are we paying so much for something that isn’t
> > consumed?
> >
> > The basic problem is the billing model – once we treat the
> > infrastructure as a profit center and charge for services we create
> > costs. While the efforts in Amsterdam and Utah are laudable they
> > need to go another step to escape the idea of charging for services
> > and usage.
> >
> > The particular price of bandwidth isn’t as important as the very
> > idea of pricing by bandwidth rather than paying once for the
> > physical infrastructure. It’s even starker when we observe that
> > technology increases the capacity of what we already -- a learning
> > experience for those who bet on scarcity of “bandwidth” for first
> > fiber bubble.
>
> There is more to running a network than laying fiber and buying
> routers, and those additional costs are not trivial.
>
>
> > Bandwidth is simply a measure and it isn't meaningful in isolation.
> > You can't really talk about the bandwidth of an inch of wire in
> > isolation. Bandwidth is only a meaningful measure when we deploy a
> > particular technology. But it becomes a billable unit only when we
> > take the next step and a service provider puts a meter on the wire.
> > Nothing is being consumed but billable events are being created.
>
> We agree on the first part.  Bandwidth should not be considered in
> isolation.  But an argument could be made against the last sentence.
>
> Using a road analogy, once a road has been built, does that mean it
> costs nothing from then on?  Rolling over it 'consumes' nothing, but
> does that mean it does not incur a cost?
>
> --
> TTFN,
> patrick
>
>
>
> > Even if we argue there are constrictions at various points in the
> > infrastructure it doesn’t make to use those constrictions as a
> > reason to create false scarcity in every segment of wire.
> > Fortunately I managed to exempt the wires within the home form this
> > form of billing by making sure that home networking was DIY and not
> > a service.
> >
> > This applies to airwaves also. As Tim observes spectrum allocation
> > is an artificial construct based on the technology available in the
> > 1920’s and the lack of a corresponding wired infrastructure to relay
> > the traffic. So we adopted the idea of single hop signaling over
> > long distances and wired for local connections. Nicholas Negroponte
> > observed that with the Internet and digital connectivity this has
> > been turned on its head. Wireless is increasingly used for local
> > connectivity in place of phone wires and network wires. Fiber and
> > other digital paths work far better for distance – a milliwatt radio
> > now reaches the world. If we convert existing access points to
> > transfer points the issue of whitespace may be moot.
> >
> >
> >
> >
> > -----Original Message-----
> > From: David Farber [mailto:dave () farber net]
> > Sent: Wednesday, July 30, 2008 11:21
> > To: ip
> > Subject: [IP] OPEC 2.0
> >
> >
> >
> >
> >
> > ________________________________________
> >
> > From: Ted Dolotta [Ted () Dolotta ORG]
> >
> > Sent: Wednesday, July 30, 2008 10:57 AM
> >
> > To: David Farber
> >
> > Subject: OPEC 2.0
> >
> >
> >
> > Dave,
> >
> >
> >
> > Interesting analogy.
> >
> >
> >
> > For IP?
> >
> >
> >
> > Ted Dolotta
> >
> > =============================================================
> >
> > By TIM WU
> >
> >
> >
> > Published: July 30, 2008
> >
> >
> >
> > AMERICANS today spend almost as much on bandwidth - the capacity
> >
> > to move information - as we do on energy. A family of four
> >
> > likely spends several hundred dollars a month on cellphones,
> >
> > cable television and Internet connections, which is about what
> >
> > we spend on gas and heating oil.
> >
> >
> >
> > Just as the industrial revolution depended on oil and other
> >
> > energy sources, the information revolution is fueled by
> >
> > bandwidth. If we aren't careful, we're going to repeat the
> >
> > history of the oil industry by creating a bandwidth cartel.
> >
> >
> >
> > 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.
> >
> >
> >
> > Wired connections to the home - cable and telephone lines - are
> >
> > the major way that Americans move information. In the United
> >
> > States and in most of the world, a monopoly or duopoly controls
> >
> > the pipes that supply homes with information. These companies,
> >
> > primarily phone and cable companies, have a natural interest in
> >
> > controlling supply to maintain price levels and extract maximum
> >
> > profit from their investments - similar to how OPEC sets
> >
> > production quotas to guarantee high prices.
> >
> >
> >
> > But just as with oil, there are alternatives. Amsterdam and some
> >
> > cities in Utah have deployed their own fiber to carry bandwidth
> >
> > as a public utility. A future possibility is to buy your own
> >
> > fiber, the way you might buy a solar panel for your home.
> >
> >
> >
> > Encouraging competition is another path, though not an easy one:
> >
> > most of the much-hyped competitors from earlier this decade,
> >
> > like businesses that would provide broadband Internet over power
> >
> > lines, are dead or moribund. But alternatives are important.
> >
> > Relying on monopoly producers for the transmission of
> >
> > information is a dangerous path.
> >
> >
> >
> > After physical wires, the other major way to move information is
> >
> > through the airwaves, a natural resource with enormous
> >
> > potential. But that potential is untapped because of a false
> >
> > scarcity created by bad government policy.
> >
> >
> >
> > Our current approach is a command and control system dating from
> >
> > the 1920s. The federal government dictates exactly what
> >
> > licensees of the airwaves may do with their part of the
> >
> > spectrum. These Soviet-style rules create waste that is worthy
> >
> > of Brezhnev.
> >
> >
> >
> > Many "owners" of spectrum either hardly use the stuff or use it
> >
> > in highly inefficient ways. At any given moment, more than 90
> >
> > percent of the nation's airwaves are empty.
> >
> >
> >
> > The solution is to relax the overregulation of the airwaves and
> >
> > allow use of the wasted spaces. Anyone, so long as he or she
> >
> > complies with a few basic rules to avoid interference, could try
> >
> > to build a better Wi-Fi and become a broadband billionaire.
> >
> > These wireless entrepreneurs could one day liberate us from
> >
> > wires, cables and rising prices.
> >
> >
> >
> > Such technologies would not work perfectly right away, but over
> >
> > time clever entrepreneurs would find a way, if we gave them the
> >
> > chance. The Federal Communications Commission promised this kind
> >
> > of reform nearly a decade ago, but it continues to drag its
> >
> > heels.
> >
> >
> >
> > In an information economy, the supply and price of bandwidth
> >
> > matters, in the way that oil prices matter: not just for gas
> >
> > stations, but for the whole economy.
> >
> >
> >
> > And that's why there is a pressing need to explore all
> >
> > alternative supplies of bandwidth before it is too late.
> >
> > Americans are as addicted to bandwidth as they are to oil. The
> >
> > first step is facing the problem.
> >
> >
> >
> > Tim Wu is a professor at Columbia Law School and the co-author
> >
> > of "Who Controls the Internet?"
> >
> >
> >
> > Copyright 2008 The New York Times Company
> >
> >
> >
> >
> >
> >
> >
> >
> >
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