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Re: peering charges?
by Paul J. Zawada 27 Jan '97

27 Jan '97

At 09:52 AM 1/27/97 -0800, you wrote: >> [...] say your MCI and you have a smaller provider that wants to peer with >> you, you had rather have them buy a pipe than let the peer and ride your >> network for free. It's all about market share, plain and simple. > >That's the conventional thinking. (I won't say "conventional wisdom" since >this is not a wise practice.) The trouble with this is called the Sherman >Act, which has a provision for something like "collusion in restraint of >trade." I'm not pointing at MCI -- I have no idea whether they have ever >thought as you ascribed above. But in your example, MCI does not know who >the nonpeer will ultimately buy transit from -- all it knows is that if MCI >refuses to peer, the nonpeer will have to buy transit from someone who *does* >peer with MCI. If reasonable suspicion can be raised that this is occurring, >then everybody in the "first tier" peering club can be investigated by the >feds. > >This isn't a "big" deal, Microsoft has been investigated by the feds and >they're still in business. In fact, it didn't even hurt their reputation, >let alone their bottom line. When the big nets started demanding private >peering and refusing to peer with little guys, I had to just shrug and think, >"well, they are now big enough that they do not fear gov't intervention." While I agree with 99.999% of what Paul is saying, I'd like to point out that whether or not the Government presses a case (and utimately wins or loses it) against a giant corporation has little to do with the actual infractions involved. Ultimately what matters is a complex web of ego, the desire to make money, and politics. The fact that a group of major carriers are doing such-and-such won't cause the DoJ to investigate. The fact that it totally pisses off one or more of the correct people will. Once that happens, the fate the companies involved is based on such a complicated interplay of the components of the forementioned web, it is impossible to predict ahead of time what the ultimate outcome will be. --zawada Paul J. Zawada, RCDD | Senior Network Engineer zawada(a)ncsa.uiuc.edu | National Center for Supercomputing Applications +1 217 244 4728 | http://www.ncsa.uiuc.edu/People/zawada

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RE: Italian Sportscars
by Danny Stroud 27 Jan '97

27 Jan '97

You missed the point. It's a figure of speech (a saying) used in business to make a point. I myself drive an expensive sports car. The comment was not about sportscars-it was a metaphor. des ---------- From: Deepak Jain Sent: Monday, January 27, 1997 10:52 AM To: Danny Stroud Subject: Italian Sportscars > I have seen people buy things that I never really understood the basic > motivations--- ultra expensive sports cars, for example. Have you ever heard > the question, "Why do they charge so much for Italian sports cars?" Answer: > Because they can. I am guessing you haven't driven an ultra expensive Italian sports car (ala Ferrari). If you did, you might feel that they spend an inordinate amount of time on even the slightest details of comfort and quality of leather, etc. The salespeople are extremely good at what it is they do, and generally run a much more expensive (high overhead) outfit. I have always found it amazing that large (volume) automobile manufacturers don't come close to the same level of design integrity even thoguh their research budgets are far higher than those of the exclusive manufacturers. A Ferrari and (even) a Dodge Viper are not even in the same league [both in terms of price or feel, or quality, let alone performance]. This is just my opinion, and not really on topic with what you were bringing it up with earlier. [Hence the private email and new title]. Regards, -Deepak.

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RE: peering charges?
by David Whipple 27 Jan '97

27 Jan '97

Paul, Yes, that is exactly what we do..;-) Any other providers want to give me a free DS3?????? David Whipple. >-----Original Message----- >From: Paul A Vixie [SMTP:paul@vix.com] >Sent: Sunday, January 26, 1997 1:25 PM >To: nanog(a)merit.edu >Subject: Re: peering charges? > >> Well, my guess would be that if you don't have a DS3 backbone, why >> would the big guys want to peer with you anyway? If you don't need >> that much bandwidth (or don't have it) odds are you don't have enough >> customers for the big guys to want to peer with you. > >Chances are that the big guys all have POPs in the little guys' areas, >and that there is or could be an exchange point in each such area, and >that the big guys' customers will have better access to the little guys' >customers if peering is done. > >The reasons we don't do this aren't related to network size. There are >three reasons: (a) big guy thinks their excrement is odorless and that >everybody else ought to have to pay to get access to their perfect network >and their spamless customers; (b) big guy wants little guy to pay fair share >of WAN costs; and (c) it's a tiny bit harder to "peer" if you're only >sending local area routes rather than sending all of them everywhere. > >I agree with with the information provider model. Ultimately, entities >with attractive content will be selling access to wide area providers, who >will sell it to local area providers, who will sell it to customers. This >is the old "gatekeeper.dec.com" model extended to fee-based content. I >heard that Microsoft was letting providers terminate T3's with them since >good access to Microsoft's content is a selling point for an access >provider's customer base. Why should such a content provider have to buy >peering, or pay wide area telecom costs? On the other hand, right now >Microsoft is still effectively buying transit, and at some point they will >just charge for access to their content and let other people charge each >other for indirect access to that content. > >And Microsoft is just the first/largest. >

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RE: peering charges?
by Danny Stroud 27 Jan '97

27 Jan '97

I am encouraged (not that any of you care what I feel) that there is so much dialogue about the market dynamics surrounding this subject. It seems to be a new focus (versus a more esoteric, technical focus) that I believe will drive the industry to making itself a better place for customers. We, the operators, have a challenge to make the 'net an economically viable industry. Right now it is not, but we seem to be headed in the right direction. des ---------- From: owner-nanog(a)merit.edu on behalf of Eric D. Madison Sent: Monday, January 27, 1997 8:09 AM To: Vadim Antonov Cc: davec(a)ziplink.net; nanog(a)merit.edu Subject: Re: peering charges? Your right on that last comment about market share.. say your MCI and you have a smaller provider that wants to peer with you, you had rather have them buy a pipe than let the peer and ride your network for free. It's all about market share, plain and simple. Eric _______________________________________________________ Eric D. Madison - Senior Network Engineer - ACSI - Advanced Data Services - ATM/IP Backbone Group 24 Hour NMC/NOC (800)291-7889 Email: noc(a)acsi.net On Sat, 25 Jan 1997, Vadim Antonov wrote: > Eric D. Madison wrote: > > >Since some of the larger vendors (Cisco mostly) has introduced accounting > >features into their software settlements could start any time. > > a) the accounting was there for years, so what > > b) a 100-byte packet travelled from provider A to provider B. Should A pay > to B or vice versa? > > So far nobody gave any useful answer to that question. > > There are no settlements because traffic has little relevance to relative > worth of connectivity from one provider to another. The large ISPs are > generally interested in market share or peers, not in volume of mutual traffic. > > --vadim >

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RE: peering charges?
by Danny Stroud 27 Jan '97

27 Jan '97

Fine. But when pricing models get complicated I do what Pushpendra Mohta said, "follow the money." That usually clears things up and makes it easy to discern who is the seller and who is the buyer. Refer back to my original message. I have seen people buy things that I never really understood the basic motivations--- ultra expensive sports cars, for example. Have you ever heard the question, "Why do they charge so much for Italian sports cars?" Answer: Because they can. des ---------- From: Mike Leber Sent: Monday, January 27, 1997 1:28 AM To: Danny Stroud Cc: Vadim Antonov; davec(a)ziplink.net; madison(a)queber.acsi.n.et; nanog(a)merit.edu Subject: RE: peering charges? On Mon, 27 Jan 1997, Danny Stroud wrote: > I empathize with your angst over the charging issues. But the answer is in > microeconomics. Those that have something that others want can charge for it. Yes, however things are more complicated than that. The Internet ecomony is particulary bizzare in that the activity of a vistor visiting a web site (the majority of Internet traffic) is not a simple zero sum economic transaction. This is because the visitor wants to visit the site and the site owner typically wants them to visit (both get value). Assume you have a network A (which only does dialup) serving 100,000 dialup customers, and network B (which only does hosting) hosting 10,000 virtual hosts. By directly peering they create new value for their respective (and different) customer bases. Unlike consumable hardgoods, you can create more of your product (external connectivity) by selectively giving it away. The selection process, amoung other things, aims to reduce lost sales by not giving peering to potential customers. Mike. ps. Some may say networks A and B are enduser networks, but most of the largest networks now offer one or both of these services directly. +------------------- H U R R I C A N E - E L E C T R I C -------------------+ | Mike Leber Direct Internet Connections Voice 408 282 1540 | | Hurricane Electric Web Hosting & Co-location Fax 408 971 3340 | | mleber(a)he.net http://www.he.net | +---------------------------------------------------------------------------+

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Re: peering charges?
by Vadim Antonov 27 Jan '97

27 Jan '97

Dirk Harms-Merbitz <dirk(a)power.net> wrote: >The big problem is the current incentive to cripple network connections. The incentive to reduce quality down to the minimal level accepted by the target customer base is the prominent feature of any market. >Why should it cost more to connect at 100MB/sec vs. 56KB/sec? If the same >amount of packets are transfered? Why should I pay more beyond the >one-time cost of buying interface electronics? Because there is a real cost for long-haul packet transport. Why people pay higher rent for houses than for studio apartments? "Connection costs" is rent on transmission facilities, plus overhead (upkeep of the property, insurance, administration, etc). >Many real-time problems with packet switching (out of order arrival of >packets, need to re-order packets) essentially go away when speed >increases, i.e. things move out of perceptible ranges into in-perceptible >time variations. That does not parse. Internet as is does not reorder packets. Increasing speed does not change anything in this respect. It only shrinks time scale. And, i never suspected that reordering is a problem in real-time world. 0.5 sec variance (a lot!) with 1.5Mbps MPEG-2 video stream (better-than cable TV quality) requires stunning 100 kilobytes worth of buffers. The only reason reordering is a problem is because TCP has no reasonable selective ACKs (the existing SACK options are close to useless), so kludges like VJ's fast retransmit are necessary on high delay-bandwidth networks. >Settlement based on whoever takes more traffic would be nice. Would you please describe any useful mechanism of traffic-based inter-backbone settelemts? >It gives a very direct incentive to build better networks. Nah. It is like saying that "usage-based" pricing at McDonalds gives a very direct incentive to sell something better resembling food. >Lets say MAE's >and NAP's are run in a cost-recovery mode and my only monthly cost as a >network is the cost of my circuits, i.e. having a connection to the >MAE/NAP. They do it now. >As soon as my network takes more traffic than my circuit costs >I'm making money. I assume "my network takes more traffic" means "there are more packets (bytes, etc) going into my network", right? So, you want to charge others for your customers browsing their customer's servers? >Money that can be used directly to build a better >network which will take even more traffic, i.e. generate more money. In a >sense, this would provide best case capitalism with routers deciding from >whom to buy. I love it. Do you really think you discovered a fount of money? Any settlement game is zero-sum by definition. When ISP A pays ISP B some sum, A has less resources to invest into infrastructure. On average, customers do not win. >All energy would go into building better networks... neither >advertising, nor salespeople are necessary in this scenario! Ah, i'd like to live in that world of yours. --vadim

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RE: peering charges?
by Vadim Antonov 27 Jan '97

27 Jan '97

Danny Stroud <dannystroud(a)msn.com> wrote: >I suspect that the ease of anointing bandwidth as a surrogate >for value will make it so until someone is able to measure the economic value >of an individual packet or web page hit. Until then I predict that the >networks with the biggest infrastructure will be in the best position to >extract peering charges. The computational cost of any microeconomical tweaking (such as resource reservation) by far exceeds the cost of delivering the service. Ergo: those who don't do that will be able to offer comparable quality of service at lower prices. The exception is static priorities. I think what will happen is that providers will be offering different "mixes" of priorities, or charge separately for priority traffic. Reservation is a non-issue. It is a bunch of B.S. I won't go into detalied explanation why, i did that many times already (i can point to a relevant paper). >Batten the hatches, the onslaught of change is upon us. I suspect that this >is the first of many economic model changes in the Internet. des I do not think there's going to be any large change. After all, the present economical model is as old as the modern civilization. In fact, the only significant change in 90s was demise of "reseller" surcharges -- which was something i was instrumental in transplanting from Russia to US (an ISP in Russia i founded with friends in 1990 created an enormous infrastructure by _subsidizing_ local ISPs by means of "wholesale" pricing and technology transfer; in effect we reinvented franchise business). The lack of the high entry barrier for small ISPs was what got Sprint into big league, and made it possible and practical for mom-and-pop ISPs to bloom (which they did immediately). Technology was available for years before the ISP boom. Ultimately, Sprint's tactics forced incumbent backbone ISPs to reevaluate the reseller surcharges (or lose the small ISP market completely). --vadim

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Re: peering charges?
by Sean Donelan 27 Jan '97

27 Jan '97

>What do you think the final outcome will be ? If TCI cant find a way to >recoup these costs from subscriber or advertising fees, the costs will >trickle down to the users. Just because FoxSports went after TCI for >what would seem like convenience of billing and collection doesnt mean >that the end user wont end up with the tab for the distribution of this >Compelling Content. And I am sure if TCI subscribers want that content, >they would mind paying the extra 8c. Depending on how competitive the market is, TCI may pass the cost on to either their customers (higher rates) or on to their shareholders (lower earnings). But instead, I expect TCI will choose to drop some other channel that has a smaller, less vocal following. If it is for convience of billing and collection, why wouldn't an IAP get dragged into paying for MTV? I'm sure it would be more convient for VIACOM to charge InternetXYZ one invoice for $1 million, rather than billing each of XYZ's IAP customers. Follow the money always works. In the pipeline example, the pipeline company only collects money from the shipper. If the pipeline company sold the pipeline contents itself at the delivery point, I'd expect the shipper would want a cut of the money. As long as IAPs are charging money on both ends, expect producers of compelling content to want lower prices from the sending IAP side, and a cut of the money on the receiving IAP side. In any case, I don't see how the IAPs expect to be left out of it. As soon as they have a functioning system for transfering funds between themselves, aka settlements, I expect IAPs to become ground zero for the money scramble.

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Re: peering charges?
by Sean Donelan 27 Jan '97

27 Jan '97

>[How the Content Distributors split these fees among themselves >(for example peering vs. transit) should have no conceptual bearing on >the economics of content distribution costs between Provider and >Consumer. In other worlds, leave the IAPs out of this debate of who >pays for the content distribution. Treat this as a cost of doing >business and pay the IAP] You are forgetting your first rule, follow the money. As long as IAPs have money, they won't be left out of the debate. FoxSports-Midwest recently announced they were going to start charging cable companies 8 cents per subscriber to carry NHL hockey games. TCI balked, and was going to drop FoxSports. FoxSports ran a crawl-line across the bottom of the last NHL hockey game saying TCI customers would no longer be able to watch NHL hockey. What do you think the final outcome was? Did TCI end up paying FoxSports, or did FoxSports end up paying TCI? Things get more interesting when content is available via one IAP, and not available (or greatly degraded) through another IAP in the same market. If IAPs abandon the current universal connectivity model for the Internet, expect a huge bidding war for content to break out. Universal connectivity was the one advantage the Internet had over private online services. It also let IAPs avoid paying content producers. -- Sean Donelan, Data Research Associates, Inc, St. Louis, MO Affiliation given for identification not representation

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RE: peering charges?
by Danny Stroud 27 Jan '97

27 Jan '97

I empathize with your angst over the charging issues. But the answer is in microeconomics. Those that have something that others want can charge for it. Those that want it pay. If you want to get to a network bad enough you will pay for it-one way or another. The concept of transit is not very different from what people are now referring to as settlement charges. The magic is in making your network a more desirable destination than the other guys. In many industries there are often "surrogates" for value that are used to set pricing. Per minute charges in wireless (cellular, PCS, etc.) is and example. Not all minutes are of equal economic value but for the most part you pay the same rate whether you are talking to your mother or closing a billion dollar business deal. I suspect that the ease of anointing bandwidth as a surrogate for value will make it so until someone is able to measure the economic value of an individual packet or web page hit. Until then I predict that the networks with the biggest infrastructure will be in the best position to extract peering charges. Batten the hatches, the onslaught of change is upon us. I suspect that this is the first of many economic model changes in the Internet. des Danny E. Stroud President GES Internet ---------- From: owner-nanog(a)merit.edu on behalf of Vadim Antonov Sent: Sunday, January 26, 1997 12:54 AM To: davec(a)ziplink.net; madison(a)queber.acsi.net Cc: nanog(a)merit.edu Subject: Re: peering charges? Eric D. Madison wrote: >Since some of the larger vendors (Cisco mostly) has introduced accounting >features into their software settlements could start any time. a) the accounting was there for years, so what b) a 100-byte packet travelled from provider A to provider B. Should A pay to B or vice versa? So far nobody gave any useful answer to that question. There are no settlements because traffic has little relevance to relative worth of connectivity from one provider to another. The large ISPs are generally interested in market share or peers, not in volume of mutual traffic. --vadim

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